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Opportunity finance refers to socially responsible investing by an institution in an organization or group of individuals.
The Opportunity Finance Network, a Philadelphia-based [1] national umbrella group of 213 [1] community development financial institution (CDFIs) founded in 1995, [2] 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." [3] It is closely related to microfinance, but tends to occur on a larger scale and be more explicitly concerned with social benefit.
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 even for established businesses, as traditional bank loans for nonprofits and small businesses became harder to come by after the market crashed in the autumn of 2008. [4]
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." [5]
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. [6] CDFIs may be the most well-known practitioners of opportunity finance in the United States, because they comprise a group of government-accredited institutions. Some awards for opportunity finance are available to CDFIs only. [7]
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.
Working Capital for Community Needs (WCCN) is a 501(c)3 charitable nonprofit organization with headquarters in Madison, WI, whose mission is to create opportunities for access to microfinance, services and markets to improve the lives and communities of the working poor in Latin America. WCCN works with partner Microfinance Institutions (MFIs) and Fair Trade Cooperatives in Ecuador, El Salvador, Honduras, Guatemala, Nicaragua and Peru.
Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment, or a verifiable credit history. It is designed to support entrepreneurship and alleviate poverty. Many recipients are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009 an estimated 74 million people held microloans that totaled US$38 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent.
Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems, among other branches. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient.
Accion is an international nonprofit. Founded as a community development initiative serving the poor in Venezuela, Accion is known as a pioneer in the fields of microfinance and fintech impact investing.
Community development bank (CDB) or Community Development Financial Institution (CDFI) is a development bank or credit union that focus on serving people who have been locked out of the traditional financial systems such as the unbanked or underbanked in deprived local communities. They emphasize the long term development of communities and provide loans such as micro-finance or venture capital.
The Community Development Financial Institutions Fund promotes economic revitalization in distressed communities throughout the United States by providing financial assistance and information to community development financial institutions (CDFI). An agency of the United States Department of the Treasury, it was established through the Riegle Community Development and Regulatory Improvement Act of 1994. Financial institutions, which may include banks, credit unions, loan funds, and community development venture capital funds, can apply to the CDFI Fund for formal certification as a CDFI. As of September 1, 2005, there were 747 certified CDFIs in the U.S. The CDFI Fund offers a variety of financial programs to provide capital to CDFIs, such as the Financial Assistance Program, Technical Assistance Program, Bank Enterprise Award Program, and the New Markets Tax Credit Program.
A community development financial institution (US) or community development finance institution (UK) - abbreviated in both cases to CDFI - is a financial institution that provides credit and financial services to underserved markets and populations, primarily in the USA but also in the UK. A CDFI may be a community development bank, a community development credit union (CDCU), a community development loan fund (CDLF), a community development venture capital fund (CDVC), a microenterprise development loan fund, or a community development corporation.
A micro-enterprise is generally defined as a small business employing nine people or fewer, and having a balance sheet or turnover less than a certain amount. The terms microenterprise and microbusiness have the same meaning, though traditionally when referring to a small business financed by microcredit the term microenterprise is often used. Similarly, when referring to a small, usually legal business that is not financed by microcredit, the term microbusiness is often used. Internationally, most microenterprises are family businesses employing one or two persons. Most microenterprise owners are primarily interested in earning a living to support themselves and their families. They only grow the business when something in their lives changes and they need to generate a larger income. According to information found on the Census.gov website, microenterprises make up 95% of the 28 million US companies tracked by the census.
Chicago Community Loan Fund (CCLF) is a certified community development financial institution (CDFI) that provides loans and grants to community development organizations engaged in affordable housing, social service and economic development initiatives in Chicago.
Opportunity International is a 501(c)(3) nonprofit organization that is working to end global poverty by creating and sustaining jobs. Through a network of 47 program and support partners, Opportunity provides small business loans, savings, insurance and training to more than 14 million people in the developing world. It has clients in more than 20 countries and works with fundraising partners in the United States, Australia, Canada, Germany, Switzerland, Singapore, Hong Kong and the United Kingdom. Opportunity International has 501(c)(3) status as a tax-exempt charitable organization in the United States of America under the US Internal Revenue Code.
Aga Khan Agency for Microfinance (AKAM) is a microfinancing agency of the Aga Khan Development Network.
Kiva is a 501(c)(3) non-profit organization that allows people to lend money via the Internet to low-income entrepreneurs and students in 77 countries. Kiva's mission is "to expand financial access to help underserved communities thrive."
FINCA International is a non-profit, microfinance organization, founded by John Hatch in 1984. Sometimes referred to as the "World Bank for the Poor", FINCA is the innovator of the village banking methodology in microcredit and is widely regarded as one of the pioneers of modern-day microfinance. With its headquarters in Washington, D.C., FINCA has 20 affiliated host-country institutions (affiliates), in Latin America and the Caribbean, Africa, Eurasia and the Middle East and South Asia. Along with Grameen Bank and Accion International, FINCA is considered to be one of the most influential microfinance organizations in the world.
The New Markets Tax Credit (NMTC) Program incentivizes business and real estate investment in low-income communities of the United States via a federal tax credit. The program is administered by the US Treasury Department's Community Development Financial Institutions (CDFI) Fund and allocated by local Community Development Entities (CDEs) across the United States.
RSF Social Finance, located in San Francisco, California, is one of very few orgs actively seeking to and investing towards, a transformation of how we view and use money.
Financial inclusion is where individuals and businesses have access to useful and affordable financial products and services that meet their needs that are delivered in a responsible and sustainable way. Financial inclusion is defined as the availability and equality of opportunities to access financial services. Those that promote financial inclusion argue that financial services can be viewed as having significant positive externalities when more people and firms participate. One of its aims is to get the unbanked and underbanked to have better access to financial services. The availability of financial services that meet the specific needs of users without discrimination is a key objective of financial inclusion. For example, In the United States this condition represents a third of the Hispanic community born in America and half the foreign Hispanic community living in the United States remain unbanked. For this example, giving financial services is key in order to grow as a society.
The Accion U.S. Network is an American nonprofit microfinance organization headquartered in New York, NY. It is the largest and only nationwide nonprofit microfinance network in the U.S.
Women's World Banking is a nonprofit organization that provides strategic support, technical assistance and information to a global network of 55 independent microfinance institutions (MFIs) and banks that offer credit and other financial services to low-income entrepreneurs in the developing world, with a particular focus on women. The Women's World Banking network serves 24 million micro-entrepreneurs in 32 countries worldwide, of which 80 percent are women. It is the largest global network of microfinance institutions and banks in terms of number of clients, and the only one that explicitly designates poor women as the focus of its mission.
The Support Center is a not-for-profit organization and a community development financial institution(CDFI), based in Raleigh, North Carolina. It is a statewide nonprofit that partners with Community Development Credit Unions (CDCUs) and community-based organizations to provide small business and mortgage lending services to its members; and to provide training, grants, and loans to create economic opportunities for individuals, families, and communities in underserved markets.
Kashf Foundation is a non-profit, microfinance and wealth management organization, founded by Roshaneh Zafar in 1996. Kashf is regarded as the first microfinance institution (MFI) of Pakistan that uses village banking methodology in microcredit to alleviate poverty by providing affordable financial and non-financial services to low income households - particularly for women, to build their capacity and enhance their economic role. With headquarters in Lahore, Punjab, Kashf has regional offices in five major cities and over 200 branches across the Pakistan.