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The term opportunity finance encompasses concepts such as microfinance and low-income lending, such as through a community development financial institution (CDFI).

The Opportunity Finance Network defines the term as "a category of financing that helps people and communities just outside the margins of conventional, mainstream finance join the economic mainstream—and helps the economic mainstream enter emerging opportunity markets." Opportunity finance can refer to almost any socially-responsible investing by an institution.

Usage of the term

The concept of opportunity finance has gained increased traction in recent years, both from political movements and economic necessity. The current economic climate in the United States has raised the demand for creative financing, as traditional bank loans for nonprofits and small businesses became harder to come by after the market crashed in the autumn of 2008.

Although the concept of opportunity finance is applicable worldwide, the entrepreneurial connotations of the term make it most commonly applied to initiatives within the United States. The Opportunity Finance Network, itself a U.S. organization, connects the concept to individualism and "the bedrock of U.S. policy."

Opportunity finance and CDFIs

Main article: Community development financial institution

Community Development Financial Institutions (CDFIs) are nongovernmental financing entities (such as banks and loan funds) with the primary mission of community development, serving a target market, providing development services, and remaining accountable to their communities.. CDFIs may be the most well-known practitioners of opportunity finance in the United States, because they comprise a group of government-accredited institutions. For example, the Wachovia NEXT Awards for Opportunity Finance are available to CDFIs only.

While there are numerous organizations certified as CDFIs by the CDFI Fund, it is believed that there are thousands of financial institutions serving the needs of low-income people or communities in the U.S., but either have not applied for CDFI status or have otherwise not been able to fulfill all of the requirements for formal CDFI certification. All of these organizations can be said to be engaged in opportunity finance, despite their lack of U.S. governmental recognition.

Examples of opportunity finance organizations

In the United States

• Accion USA
• Community loan funds, such as:
  • Chicago Community Loan Fund
  • Media Development Loan Fund

Worldwide

• Kiva

See Also

• Community development financial institution
• Socially-responsible investing
• Ethical banking

External links

• Opportunity Finance Network website
• CDFI Fund
• Wachovia NEXT Awards for Opportunity Finance
• "Money for SBA initiatives may loosen credit for small firms to grow," Chicago Tribune, March 23, 2009

References

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