Self-Help Credit Union of Durham, N.C., these credit unions also provide financing for cooperative businesses and community development projects, though federal regulations often make it difficult to do so. The National Federation of CDCUs in New York City serves as an information clearinghouse and also maintains a central fund that invests exclusively in its member credit unions. In principle, neighborhood banks should serve their communities in a similar manner, but sadly, in this era of deregulation, mergers, and acquisitions, fewer and fewer do so. In fact, control of more and more local financial institutions is passing into the distant hands of people who have little concern for these communities. One very important exception in the banking industry is the South Shore Bank of Chicago (see "Socially Responsible Banking," page 18), which has had a dramatic positive effect on a previously deteriorating neighborhood. South Shore Bank has been very successful in its own efforts, but unfortunately, few banks are following its example, although groups have organized in Austin, Texas, and Brooklyn, New York, to try to replicate the South Shore Bank model. Perhaps the most significant, innovative, and rapidly-growing initiative in the field of community development finance is the emergence in recent years of community development loan funds. CDLFs are nonprofit corporations that typically receive loans from a variety of individual and institutional investors, on terms set by the investor (interest rates usually range from 0% to the prevailing money market rates, at the discretion of the investor). CDLFs lend these funds to community-based housing, business, and service projects—with priority given to those projects that address the needs of very low-income people, balance the immediate needs of individuals with the long-term needs of their communities, and strike at the root causes of poverty. CDLFs combine traditional financial skills with first-hand knowledge of low-income communities and development projects, low overhead, and the ability to provide or locate the technical assistance required to help their borrowers make effective use of loan funds. This combination gives them a unique ability to meet and match the needs of concerned investors and community development organizations. In July of 1986, the National Association of Community Development Loan Funds (NACDLF) was incorporated, and currently has a membership of 28 active CDLFs, with an additional 26 associate members, seven of which are developing funds that will become full members when they commence operations. Some of these CDLFs are national lenders; most serve particular regions. Some lend exclusively to housing projects, some to cooperative businesses; most lend to a broad range of community development efforts. Together, the NACDLF member funds currently manage $31 million—but the median growth rate of member funds is currently 40% per year, many funds have only recently begun capitalization, and the potential is tremendous. The Revolving Loan Fund (RLF) of the Institute for Community Economics (ICE) provides a good example of the potential inherent in the CDLF movement. The RLF was established by ICE in 1979, to complement its program of technical assistance to community land trusts and other development organizations. To date, the RLF has received approximately $5 million from approximately 200 investors. Eighty percent of these investors are individuals; the balance are religious organizations, foundations, and other nonprofit groups. With these funds, the RLF has placed 130 loans with projects in 20 states (example on page 17). Sixty percent of ICE's loans have gone to community land trusts, limited- equity cooperatives, emergency shelters, and other housing projects; 30% to cooperative businesses; and the remainder to community services such as a nonprofit health center, soup kitchens, and a cultural center in a low-income neighborhood. The financial performance of the RLF over these past seven years has been excellent. The loan loss rate has been .05% and the RLF has built a loss reserve and endowment of permanent capital totalling Chuck Matthei (far right) Page 15
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