Annie Donovan, an accomplished leader in the community investment field, has joined CCI as a Senior Fellow. In this interview, she reflects on her 30 years of experience connecting capital investment to underestimated communities and shares her hopes for the field’s future.
We’re excited to have you join us as a Senior Fellow! You most recently served as the Director of the CDFI Fund. What are you proudest of regarding your tenure there?
I’m proud that we were able to not only survive, but to grow amidst the bombardment of existential threats thrown at us over the past several years. We were able to do that because the work on the ground is compelling, defensible—it has an impact that is tangible and CDFIs know how to tell that story on Capitol Hill. I’m also proud that we were able to improve the CDFI Fund’s technological capacity so that we could become more efficient and reduce some of the burdens on CDFIs who use the programs. And I’m very proud of the organizational culture we created that made the CDFI Fund an exemplar of high performance within government. I’m very excited about Jodie Harris’ leadership of the CDFI Fund going forward.
What drew you to community investment?
The community part of it.
I grew up in a family of eleven children in a working-class neighborhood on the Northside of Pittsburgh. I didn’t have a super comfortable middle-class upbringing, but I also wasn’t raised in poverty. I was intensely curious about poverty though: why it existed, how it could be eliminated. This drew me to the Peace Corps after college. While I was serving in Jamaica, a major hurricane (Gilbert) hit the island and wiped out the fishing village where I lived. To restore the life of the community, the fishermen needed resources to patch up their simple boats and fishing nets, and shopkeepers along the main road needed to replace their inventory and repair their roofs. Of course, friends and family had seen news coverage of the mega-storm and wanted to know how they could help. I asked them to send me money. I created a revolving loan fund using a peer lending and governance model. This was 1988 and I don’t know if I was familiar with the Grameen Bank at the time. I don’t think I was. It was a model that just made sense and peer lending was actually already practiced in social groups in rural Jamaica, so it wasn’t foreign. I also worked with a group of women to start a small business making jams to sell to tourists from fruits abundant in their community. So, that’s how I got turned on to the idea of community finance and entrepreneurship. There was a dignity inherent in those strategies for the people involved. I guess you can say my community investment origin story was Hurricane Gilbert. After that, I never looked back.
How has the community investment field changed since you started?
It has changed tremendously. I must preface what I say next by noting that my early history was in the loan fund world. I emphasize this because often the narrative of community loan funds dominates the CDFI story, and I recognize that it’s not the only story. One could argue that community development banks started with the creation of Freedman’s Bank, an African-American-owned bank, after emancipation in 1865. And the community development credit unions were born out of the Great Depression and fueled again in the 1970s. Loan funds emerged as a result of the decrease in federal funding for community development as the War on Poverty wound down. CDFIs were created to fill gaps in the wake of that. This meant that CDFIs had to be attuned to private sector investment from the very start. Once the Clinton administration created the CDFI Fund, it changed everything: CDFIs now had the equivalent of equity investment that could be used to grow their balance sheets. This attracted leverage from other investors, especially banks.
During my time in the field, CDFI loan funds have grown from sourcing small bits of capital from socially motivated investors, to (for some) becoming rated by the rating agencies and raising bond funds on the capital markets. One of the criticisms that people have leveled on community investors is that as they have professionalized and gotten more sophisticated, they have lost the connection to the social justice agenda that spawned the field in the first place. It’s tough to balance community engagement with having to appeal to investors, who are concerned about risk management capability, the strength of your internal systems, and your facility with complex deal structures. However, I still see a lot of commitment to mission and I think professionalization was inevitable—we couldn’t have grown without becoming more professionalized. CDFIs are still doing the deals that other, more conventional financial institution, won’t, or won’t do alone. Of course, there’s still a need for vigilance around the social justice mission. And vigilance comes by engaging at the community level and respecting and encouraging community voice. The word justice is an important one not to lose sight of: our roots are in social justice and we have to keep that top of mind.
How do you see the field evolving?
I think the field is heading in a positive direction, but we have to grow to a greater scale. CDFIs currently round up to 1% of the financial services sector if you’re looking at regulated institutions. We used to not even register—we would round out to 0%. Some people find growth and staying true to mission to be in conflict, but I find that to be an important challenge that has always been present in our work. I think it is our job to tolerate the tension between those two things and to push through that tension to have greater impact on the communities we care about.
What is a change you would like to see?
As a field, we are sometimes so focused on the little picture, the daily battles — How can we do our job better? How can we raise more capital? — that we forget about the war. What just happened in our tax code has set us back a long way in terms of economic inequality, and we have to remember that fighting against those kinds of changes is part of our work too. It’s part of our job to effect policy change.
What will you be working on during your fellowship with the CCI?
I am working on several things, including a racial equity learning lab for CDFI executives and advising CCI on climate adaptation finance and a few other strategic initiatives.
What about the Center’s work most excites you?
I’m most excited about the thoughtful way in which CCI is creating stronger systems for community finance to grow and scale. I like how CCI frames an investment deal as an opportunity to see and improve the larger community investment system. At the CDFI Fund, I often talked about the need to be focused on transformation and not just transactions. CCI is illuminating a pathway for that.
It’s exciting to be working on the demand side of capital access because there aren’t that many organizations thinking as deeply about how to do this part. Capital follows capacity, and right now money goes to those communities that are best organized to receive it. We know what that means for communities that can’t, though it doesn’t mean they need it any less. When we look at the big picture, there are still too many communities suffering from disinvestment, but there’s also still a lot of capital in the market. CCI is trying to disrupt the status quo that has built up about where capital flows.
When you’re not at work, you are…
Spending time with family and friends. I also like to exercise, read, and travel. The most fabulous trip I’ve taken is to the Galapagos Islands. I really want to go see the Great Barrier Reef before it’s totally bleached.
People would be surprised to know…
People who have worked closely with me know that I swear a lot. Rahm Emanuel has nothing on me. As I said, I come from a big family, so I blame the swearing on my brothers.
What is your media diet—a few things you always read/listen to/watch?
I love public radio and TV. I read The New Yorker, though I’m never caught up. The New York Times. The Washington Post. My favorite podcasts are On Being with Krista Tippett and Invisibilia.
Anything else?
I’m excited for the next phase of my work. I feel like we are poised to break more barriers in the community investment field. I learned and saw so much while in government, and I developed muscles I didn’t know I had. I’m ready to put those to use.
