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Lending to Entrepreneurs of Color: Strategies & Tactics

Scaling Lending to Entrepreneurs of Color, Part II: Strategies and Tactics for High-Volume Originations

The Aspen Institute’s Business Ownership Initiative

First published March 14, 2023

Historically, business ownership has been one of the important ways Americans have generated income and wealth. But the opportunity to start and grow a business has never been equally available to all. Community development financial institutions (CDFIs) have long been a source of support for business owners of color who have lacked access to traditional sources of capital and small business support. In light of the challenge to CDFIs to scale the deployment of capital to meet existing needs and new expectations, the Aspen Institute’s Business Ownership Initiative has been taking stock of its learnings from decades of studying and partnering with CDFIs that have sought to serve just these small businesses.

In this paper, we share lessons in six key areas related to microloan origination, including specific practices of CDFIs that are currently originating many hundreds or thousands of microloans annually. The findings are drawn from the members of BOI’s Microfinance Impact Collaborative (MIC), which has been convening and collaborating since 2015 and whose members collectively originated 11,978 loans totaling just under $310 million in 2022. This paper follows a prior one that described the critical role that microloans — loans less than $50,000 — play in meeting the needs of Black and Latinx borrowers and the challenges that CDFIs face in scaling microlending.

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