Citigroup Reinvents Banking Wheel With Communities At Work Fund

On May 5, 2010 Citi announced creation of the $200 Million Communities at Work Fund that will provide financing to both nonprofit and for profit Community Development Financial Institution (CDFI) Loan Funds that will then lend to local businesses in low income communities. Citi will provide $199 Million to Communities at Work as limited partner, with general partners Calvert Foundation,and Opportunity Finance Network contributing the balance.  Calvert will manage lending and fund administration, OFN will handle marketing and compliance.

“Citi’s investment in the Communities at Work Fund is driven by our commitment to providing funding to small businesses and microenterprises, which are a primary source of job creation and opportunity for underserved communities.”said Bob Annibale, Global Director Citi Microfinance and Community Development. “This is not philanthropy, but an investment in the CDFI sector,which is rooted in local communities and provides innovative financing for community development and economic growth.”

“Citi is delighted to partner with Calvert Foundation and Opportunity Finance Network to deliver new liquidity for CDFIs,” said Andrew Ditton, Co-Head of Citi Community Capital. “They are leaders in the field of community development finance with a proven expertise in responsible and profitable lending to those communities most in need of capital.”

Three very genuine cheers for Citi, Calvert and OFN. Citi is not kidding about the fact that it's not philanthropy either, these should be performing loans.  CDFI Loan Funds’ net charge-offs were lower than those of FDIC-insured institutions in 2008 and in 2009.

Genuine cheers notwithstanding, hold on a minute.  In order to do neighborhood level lending, Citi now needs  to set up a special fund, in which it is a limited partner with two general partners who  do all the work.  This special fund then lends only to other funds.  The other funds then actually make loans to real small businesses and charitable organizations.  This seems like a fairly complex reinvention of an ancient wheel once known as banking.  Remember institutions like Farmers Loan & Trust, Citizens Building & Loan, Bowery National Bank, Richmond Borrough National Bank.  They all sound like the bank manager was George Bailey from a It's a Wonderful Life, don't they.  Bet these banks knew how to “make loans...rooted in local communities..”  They have something else in common too, all these banks, by acquisition, merger, etc. are part of today's Citi.

Photo Credit: SqueakyMarmot