John Lucero
CDFIs and the Private Sector: Sustainable Subsidy through Strategic Philanthropy
Introduction
“ Most of today's development banks operate with varying levels of external subsidies
from investors, members, donors, or volunteers” (Parzen & Kieschnick, 1992). High operating
costs, small scales of operation, high levels of risk, increasing need for patient money, and other
characteristics of Community Development Finance Institutions (CDFIs) suggest that
dependence on external subsidy will persist, especially in the face of growing competition for
low cost, socially-responsible capital.
This paper examines the potential for CDFIs to utilize private-sector philanthropy as a
sustainable source of subsidy. It begins with a review of literature relating to corporate and
business philanthropy and illustrates the emergence of a new trend: strategic philanthropy.
Strategic philanthropy is the notion that private sector goodwill should improve the giver’s
profitability as well as fulfill a social need. In light of this growing trend, the author suggests
ways in which CDFIs can utilize their defining and common attributes to fit into the strategic
philanthropy objectives of private businesses and access private-sector capital. The examination
focuses, but is not limited to, three main areas: 1) the ability for CDFIs to incorporate volunteer
labor and pro bono services into their operating structure; 2) CDFIs as a point of access to
underserved but profitable inner city consumer markets; and 3) community and economic
development as a common objective of both CDFIs and private businesses. In addition, the
author offers additional information useful to the CDFI attempting to access philanthropy capital
and concludes that the field is ripe for further inquiry.
Overview of Philanthropy
The number of non-profit institutions in the U.S. has escalated significantly in recent
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years. According to a 1997 Urban Institute report, there are more than one million groups
recognized by the IRS as non-profit organizations, 600,000 of which had charitable, tax-exempt
status under Section 501(c)(3) of the IRS Code as of 1994. “Between 1989 and 1994, the number
of public charities reporting to the IRS grew by 6.3 percent annually, compared with national
population growth of 1.1 percent” (DeVita, 1997). As a result, competition for capital from
traditional sources--foundations and socially-minded investors, for instance--is growing more
intense. At the same time, many non-profits and their causes face cutbacks in funding from the
federal government as well as umbrella organizations such as the United Way (Mckenna, 1995).
It follows that the capital necessary to fund the operations and mission of CDFIs will have to
increasingly come from the private sector. “‘Many community and civic groups, reeling from
cutbacks in federal and state programs, are looking to local companies to fill the gap.....budget
cuts are creating a lot of uncertainty among community organizations. ÔThey expect us to be
part of the solution’” (Miller, 1997a).
The private sector represents a significant source of financial capital for CDFIs,
particularly when capital is sought through charitable giving and sustainable philanthropic
partnerships. According to the American Association of Fund Raising Counsel, the 1995 level of
charitable gifts by companies and corporate foundations was $7.4 billion. Even after adjusting
for inflation, this number, which represents a 7.5% increase over 1994 levels, exceeds the
previous record for annual giving of $7.32 billion set in 1986. Since 1995 the number has
continued to grow, and 1996 levels increased another 7.6% to $7.9 billion (Counsel, 1997;
Miller, 1997a). “The trend will likely escalate as corporations continue to search for ways to
stretch their promotional dollars. In fact, most major corporations now have sponsorship
programs representing 10 to 25 percent of their marketing budgets” (Johnson, 1994).1
These statistics illustrate the potential of private businesses and corporations as sources of
It is important to note that the level of charitable giving for a given year does not equate to an amount of cash made
available to charitable organizations for operating expenses. Corporate donations are sometimes made in the form
of stock or earmarked for particular uses such as capital improvements.
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cash and in-kind resources for CDFIs. To actually access this capital, however, it is not enough
simply to recognize how much funding is available from the private sector. Tends in business
giving must also be examined. For example, corporations are increasingly emphasizing noncash
contributions such as property, equipment, and company products (Miller, 1997a). Survey
results published by The Conference Board--a business research organization located in New
York City--indicate that, although 95% of their respondents donate cash, two-thirds also
participate in in-kind giving, 53% make product donations, and noncash giving accounts for 17%
of respondents’ total giving (Miller, 1997a). Such information can give a CDFI insight on how
to attract donations. For instance, CDFIs interested in sustaining giving levels with a particular
corporation may ask for noncash contributions which enable corporations to “keep giving levels
up when their cash coffers are low” (Miller, 1997a).
Finally, an investigation of private-sector giving does more than indicate that
corporations are taking their social responsibility seriously or reveal trends such as an increase in
in-kind giving. Most importantly, inquiry into private-sector philanthropy explains why business
give the way they do and uncovers a new type of private-sector giving--strategic philanthropy.
For the CDFI which relies so heavily on external subsidy, an understanding of the motivations
behind private-sector giving is key to tapping the private sector as a capital resource. The most
fundamental piece of knowledge for the CDFI, as recognized by Keith E. Ferrazzi, a national
director at Deloitte & Touche Consulting Group, is that “companies are realizing that
philanthropy is simply good business” (Miller, 1997a).
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Strategic Philanthropy
“Strategic philanthropy” is a term that has developed from the realization that an
effective corporate philanthropy program can benefit society while also serving business
interests (Riggan, 1997). Any grant can be a source of good will, but strategic philanthropy is
meant to improve company profits through targeted giving that corresponds to company interests
(Riggan, 1997). Instead of simply donating resources to worthy causes, corporations now look
for giving opportunities that are “newsworthy or reach specific constituencies such as elected
officials, and create specific positive impressions” (Riggan, 1997). For a business engaged in
strategic philanthropy, success is measured as much by social benefit as it is by improvements to
the bottom line.
With a strategic approach, companies invest in philanthropy for a number of
social and business reasons, fostering pivotal relationships, burnishing images
and generating positive impressions useful to business development, including
newly developing markets. It also establishes connections between corporations
and institutions with complementary missions, such as the universities that
supply the field with ideas and talent, or community organizations which
provide legitimacy to the utility's expansion plans. Frequently, working
partnerships are developed with these players. Finally, strategic philanthropy
can help companies indirectly market products and services, often to clearly
defined market segments (Riggan, 1997 emphasis added).
The move towards strategic philanthropy suggests that businesses will be interested in
establishing meaningful and sustainable relationships with socially-committed entities. Some
corporations, for example, “want to Ôown’ a cause. Whether it be Avon with breast cancer or
McDonald's with Ronald McDonald Houses, companies are making a long-term commitment to
one cause and trying to make a difference...” (Cooper, 1997). Long term relationships lead to
strong bonds of identity between businesses and non-profits and help develop an ethical and
caring reputation for a company. According to Carey Raymond, principal at Boston-based The
Image Development & Public Relations Group, “Long-term commitment offers ongoing media
attention and makes consumers, employees, shareholders, and the community embrace the
company. This positive perception has an impact on profitability" (Cooper, 1997).
[C]ompanies are responding to a growing insistence by customers to deal only
with businesses that have a good image--an image that philanthropy can build.
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Firms also feel a need to help fill the gap created by cutbacks in federal and state
aid to nonprofit groups, as well as to polish their own tarnished images when
they, too, have downsized. And finally, corporations now often are run by baby
boomers who grew up with a sense that philanthropy is an important corporate
responsibility (Miller, 1997a).
Strategic philanthropy is not just for major corporations. Local business can profit from
it, also--especially when the sustainability of the business depends on the impact of its giving. In
Green Bay, Dan Bollom, CEO of Wisconsin Public Service Corp, after realizing that there was a
shortage of qualified job applicants in the community where his company is located, played a
key leadership role in a business-education partnership which aims to transform 10 school
districts in the Green Bay Area (Riggan, 1997).
In light of the growing competition for private-sector contributions and the popularity of
strategic philanthropy, socially-oriented entities that hope to secure contributions or establish
sustainable relationships with businesses must develop their approaches wisely.
Being a
successful donation-seeker entails more than emphasizing the benefit that a contribution or
partnership holds for the company. One must first identify opportunities for mutual benefit.
Identification requires thoughtful consideration of the qualities and strengths unique to the
recipient that can be put to work to fulfill the needs and desires of the giver.
The following sections further examine the phenomenon of strategic philanthropy in light
of the many common operating characteristics and human and financial capital needs of CDFIs.
It is hoped that this investigation will be useful in suggesting ways for CDFIs to take advantage
of the changing trends in private-sector giving as well as identify opportunities for CDFIs to add
value to their own operations and those of private-sector entities through strategic philanthropy.
The next section focuses on three key attributes of CDFIs: their need for volunteer and pro bono
services; their access to underserved and profitable consumer markets; and their role in
community and economic development
Volunteerism and Pro Bono services
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Most, if not all, development banks derive critical benefit from the participation of
volunteers. In fact, even mainstream financial intermediaries rely on the contribution of donated
labor. In contrast to commercial banks, for example, “credit unions usually include a board of
five to nine volunteers who together donate fifty hours per month, a supervisory committee of
three to five volunteers who together donate twenty hours per month, and a credit committee of
four volunteers who together donate fifty hours per month” (Parzen & Kieschnick, 1992). For
the CDFI, volunteer labor is instrumental in reducing staff compensation which can be a major
percentage of operating expenses. According to Parzen and Kieschnick, employee compensation
comprises 45% of operating expenses and staffing costs are 35% higher than the average
financial institution (Parzen & Kieschnick, 1992).
Volunteers can reduce operating costs for the CDFI in other ways. Technical assistance,
for instance, represents a large financial burden for development banks since it is costly to
provide and often too expensive for borrowers to pay for.
Shifting the cost of technical
assistance elsewhere is another common way in which development bankers improve their cost
structure (Parzen & Kieschnick, 1992).
Lincoln National “loans” executives to non-profit
groups; the objective is to lend the executives' financial and organizational skills to the nonprofits' projects (Mckenna, 1995). Venture Fund, a $1.25 million venture-capital fund in San
Francisco, partners with an investment-banking firm which accepts the costs of identifying,
reviewing, and underwriting the deals in which the venture fund invests (Parzen & Kieschnick,
1992). The provision of technical assistance further benefits CDFIs by reducing lending risk. In
Los Angeles, Merril Lynch provides business management and development services to
borrowers of CDFI funds (Lynch, 1997; Seiberg, 1996).
To summarize, committed volunteers contribute greatly to the sustainability of CDFIs by:
lowering costs and allowing these entities to focus their financial resources on lending and
economic development; bringing in professional expertise from the private sector; and
facilitating long-term relationships and reducing staff turnover . Volunteers can also play a role
in reducing a CDFI’s exposure to risk by offering technical assistance and business advisory
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services. Obtaining long-term and valuable volunteer service, then, will continue to be an
important goal for the CDFI.
Happily, volunteering programs are also valuable to corporations and private businesses.
A joint survey performed by IBM and the School of Business at Columbia University showed a
positive correlation between community involvement and return on assets, return on investment,
and employee productivity (Caudron, 1994a; Caudron, 1994b).
Private-sector entities are
becoming aware of the returns that volunteer programs and charitable service provision bring to
their bottom line.
In a recent poll by Boston College's Center for Corporate Community
Relations, “of some 181 community-relations executives surveyed 79% indicated their
companies conduct volunteer programs; 51% loan executives to community causes; 33% have
formal policies providing paid time off for volunteer work; [and] 73% offer awards or other
recognition for volunteer service....” [Miller, 1997 #62].
The emerging corporate trend of encouraging volunteerism also improves employee
morale, strengthens employee loyalty to their company, and provides opportunities for
employees to learn new skills useful in their work (Caudron, 1994b; Deady, 1994; Flynn, 1994;
Mullen, 1997; Svendsen, 1997; Yafie, 1996).
Volunteerism “improve[s] workers' sense of
identity with their firms, which in turn can translate to lower turnover and absenteeism” (Miller,
1997a).
It helps companies improve their images within certain communities.
As Geoff
Gephard, executive director of Arts United, the umbrella fund-raiser for arts puts it, “People give
to people" (Mckenna, 1995).
Moreover, because volunteerism and service provision does not represent a cash outlay,
businesses may prefer it over cash donations and find it easier to sustain during hard times. This
also allows small and young businesses to reap the benefits of corporate philanthropy. In Fort
Wayne, Indiana, Don Wood, president of a local business called 80/20, donated materials to be
used in the creation of a children’s exhibit at a local museum. “Science Central got materials for
an exhibit; Wood contributed to an educational cause that appealed to him and gave his small,
young company exposure. And he got the pleasure of watching his grandchildren climb all over
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the exhibit on opening day” (Mckenna, 1995). Small businesses represent an important source of
private sector capital for urban CDFIs since in some cities they account for an increasing amount
of employment (Mckenna, 1995). The donation of materials can also help CDFIs overcome the
burden that fixed costs often pose to their small-scale operations.
As we have seen, the provision of volunteer and pro bono services can be beneficial to
both CDFIs and private-sector entities. Considering the value of volunteer labor and pro bono
service provision to CDFIs, these institutions will want further develop strategies to attract inkind services.
Market exposure
There are other attributes of CDFIs that make them desirable targets for the strategic
philanthropy efforts of private businesses. CDFIs and private businesses share common ground
in that they are both entities which can fulfill their respective missions by targeting underserved,
often minority, inner-city populations.
Notable individuals such as Michael Porter of the
Harvard Business School and John McIlwain, President and CFO of Fannie Mae, have long
touted the untapped wealth of the inner-city consumer market (McIlwain, 1997; Porter, 1995).
According to Market Segment Research & Consulting Inc., Miami, disposable income totals
approximately $244 billion for Hispanics, $341 billion for African Americans and $107 billion
for Asians (Theodore, 1996). One of Blockbuster Video’s most profitable stores nationally is
located in Harlem, while some of the most successful McDonalds franchises are located in inner
cities (McIlwain, 1997). “Strategic philanthropy can help companies indirectly market products
and services, often to clearly defined market segments” (Riggan, 1997).
Thus, CDFIs can be
useful vehicles for corporations wishing to improve exposure and image within urban markets
and among minorities. Corporations are finally taking note of this market and use giving
programs to initiate new business--one of the top three motivators for strategic philanthropy
(Yafie, 1996).
CDFIs can initiate sponsorships and partnerships with private companies to increase
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operating revenues and improve accessibility to financial capital by targeting sponsors with
similar goals and demographic audiences (Allen, 1996; Johnson, 1994; Mullen, 1997). Essence
Magazine and Anheiser Busch are examples of just two companies that are focusing their
sponsorship efforts on minority populations in order to create cross-promotional, public relations
and other marketing possibilities (Theodore, 1996; Walters, 1997).
Recently, Merril Lynch announced a $77 million, three-year pilot partnership with The
Greenlining Institute and The Orange County Alliance, two organizations that represent CDFIs
and other entities involved with economic development among minorities in urban Southern
California. “Designed to tap the enormous entrepreneurial energy and economic potential of
Southern California's culturally diverse communities,” the program will include $20 million in
lending to small businesses in historically underserved markets; $5 million in small business
equity investments; $250,000 in complimentary business advisory services to established small
businesses in target communities; and $150,000 in advisory services through a regional multiethnic business association to provide planning services to very small businesses (Lynch, 1997;
Seiberg, 1996). Besides being consonant with the objectives of CDFIs, the partnership serves
the interests of Merril Lynch. According to Merrill Lynch Chairman and Chief Executive
Officer Daniel P. Tully and President and Chief Operating Officer David H. Komansky,
"This partnership makes plain good business sense. One of our strategic
objectives is to expand our relationships in markets in and out of the U.S. where
we expect significant wealth creation over the next decade. We are also pleased
because this program is entirely consistent with our Merrill Lynch Principle of
Responsible Citizenship" (Lynch, 1997; Seiberg, 1996).
Other examples of sponsorships and partnerships read similarly. Chase Manhattan bank
has identified the untapped wealth of the low- and moderate-income homebuyer of inner-city
Los Angeles. In September the company entered into a partnership with the Urban League to
promote home ownership among minority populations. In return for providing $50 million in
capital for home loans and $60,000 in funds for homeownership and borrowing seminars, the
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Urban League will provide Chase with potential applicants from its computer database. As Pazel
Jackson, senior vice president in the Community Development Group at Chase, puts it, “We feel
very fortunate to work as partners with the Urban League and Operation Hope. Our partnership
is an enormous benefit to us because it simplifies the recruitment process" (Simons, 1997).
Sumitomo Bank recently granted $25,000 to a revolving loan fund in Oakland, California.
According to the loan fund’s director, “We trust that this will be the beginning of a long and
mutually beneficial relationship” (Sumitomo, 1997).
It seems, then, that partnerships that take advantage of CDFIs’ strategic positions in
underserved markets represent a growing vehicle for much-needed lending and operating capital.
Moreover, the above relationships are part of sustainable, long-term strategies. The Chase
partnership, for instance, comprises only a small portion of the $18.1 billion Chase intends to
invest in low- and moderate-income communities (Simons, 1997). Partnerships can be initiated
by something as simple as offering selective access to a depositor database or mailing list or be
part of a multi-entity alliance. The bottom line, however, is that the people served by CDFIs are
a vital resource for attracting private dollars.
Community and Economic Development
There is a synergy between the function of CDFIs and the needs of local businesses and
corporations which can give CDFIs an important edge in competing for the philanthropic
contribution. CDFIs foster economic development and provide other financial services within a
specific geographic area--a neighborhood, for instance. Thus, to the extent that businesses rely
on the health of a particular neighborhood or geographic area for income, businesses have a
survival interest in the impact of the CDFI. The Utility Business Education Coalition, for
example, recognizes that “wires and pipes that deliver their products keep them firmly rooted in
their communities,” and that the health of local businesses--their base customers--is an essential
objective of an economic development and strategic philanthropy program (Riggan, 1997). In
light of the symbiotic relationship between the economic health of neighborhoods and private
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business (Reder, 1995), it is no wonder that for the past five years, a GTE committee handling its
philanthropic budget has determined that the number one funding priority is economic
development (Mckenna, 1995).
“The most effective sponsorships are local” (Ukman, 1995). Philanthropic funds are
often administered by local offices of companies that have an interest in increasing local
exposure or seeing local impact. “...[T]o position itself locally in markets visited by the Searssponsored Phil Collins tour, the retailer ensured that funds raised...in conjunction with each stop
went not to some large, national organization, but directly into those communities” (Ukman,
1995).
Small and mid-sized local businesses, which often prefer spending funds on
sponsorships, represent an untapped sector of the business community (Kahan, 1997; Mckenna,
1995). Even though sponsorships are traditionally associated with a particular event or function,
CDFIs could modify the concept to apply them to special lending programs or funds and name
them in honor of the appropriate sponsor. Finally, psychological ties to a community play a role
(Caudron, 1994b; Pearson, 1996).
...STEELCASE Inc., an office-furniture manufacturer, continues to target its
gifts to local organizations in its headquarters city of Grand Rapids, Mich., and
four other U.S. plant communities--as it has for 45 years. ÔWhen you're a
privately held company as we are and grow up in a community, you feel strong
ties to that community,’ explains Kate Pew Wolters, executive director of the
Steelcase Foundation. To her, Ôgiving back to the community’ provides
Steelcase the most bang for its philanthropic buck--a strategic decision in itself.
ÔStrategic giving,’ she insists, Ôis different than market-based giving’ (Miller,
1997a).
The geographic and community focus of CDFIs may be valuable in perpetuating strategic
philanthropy funding (Barnett, 1997). According to Marilyn Moran Townsend, CEO of Custom
Video and chairwoman of the United Way of Allen County, corporate donors now take “a harder
look at what happens to their money. Non-profits expect to be under greater scrutiny not only as
to how they spend money, but what their results are” (McKenna, 1995). Donors also expect to
see how their philanthropy meets community needs (Dendiger, 1995; Dillon, 1996; Mckenna,
11
1995; Miles, 1995; Reder, 1995; Svendsen, 1997). Fortunately for CDFIs, the effects of their
business efforts are highly tangible. Lending figures from a CDFI financial statement allow
donors to track funds while a tour of a new business itself could become a powerful
psychological way to perpetuate giving.
The scrupulous accounting that CDFIs perform as
financial institutions also helps reassure would-be donors.
According to Ladonna Huntley
James, corporate public involvement officer of Lincoln National, “We try to investigate each
agency we fund” (Mckenna, 1995).
Making the connection
Having identified the benefits of strategic philanthropy, it seems appropriate to offer
insight as to how CDFIs might approach private businesses to initiate and nurture mutually
beneficial relationships. Perhaps the least burdensome way for CDFI to establish contact with
private businesses is through a national, regional, or local community service clearinghouse. The
United Way, for example, supports an 800 number which can connect companies interested in
becoming involved with non-profits to a local action center (Greco, 1997). Businesses for Social
Responsibility, a group of civic-minded entrepreneurs, has 11 networks across the country
(Greco, 1997). Local and regional organizations, such as the Donors Forum of Ohio, work with
companies interested in starting up or strengthening volunteering programs with their employees
(Caudron, 1994b). Because of their established exposure and the fact that businesses often
utilize such organizations, it is important for CDFIs to advertise opportunities through them.
The more entrepreneurial CDFI will want to contact companies directly, however, in
order to more effectively compete for private-sector attention. One way is to work through the
formal volunteer programs of larger companies.
A survey conducted by Boston College's
Corporate Community shows that almost 80% of companies have a formal volunteer program
(McCafferty, 1997), many of which serve a specific purpose. For instance, Equifax, a credit
reporting company, has a program meant to ease the transition into retirement which allows older
employees to “sign on” with a non-profit agency for up to two years while remaining on the
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Equifax payroll (Flynn, 1994). Some law firms expect new hirees to perform pro bono and
volunteer work to gain professional experience while other businesses see volunteer
opportunities as ways to gain new business contacts, experience in strategic planning, experience
in working with different constituencies, better understanding of social patterns and of
government policies and regulations, and the opportunity to work with leaders in the community
(Cannella, 1997; Caudron, 1994b). This suggests that CDFIs do background research to identify
company goals and present volunteer opportunities that fit within company volunteer objectives
and programs.
To take advantage of existing volunteer programs, CDFIs should contact the Human
Resources or personnel departments of businesses. Recently, 11% of companies surveyed by the
Conference Board reported that they manage their volunteer efforts through the personnel or
human resources departments (Caudron, 1994a). CDFIs should be ready to answer the types of
questions companies are likely to ask when selecting a volunteer partner.
Before she says yes or no to any board assignment, [one] should ask herself a
few questions such as: Will service on this board help me grow, learn and serve
in the most effective way possible? What does the organization expect in terms
of a financial and fund raising commitment? Are board members expected to
serve on working committees, and if so, how much actual work do they do?
What do other board members think of the organization? Does the board offer
visibility or networking opportunities? (Sirinek, 1996)
Some business intend to participate in community service, but have not yet committed.
According to a survey of 454 U.S. corporations by the Points of Life Foundation and the
Conference Board, 50% make community service part of their company mission statement and
68% allow employees to take time off with pay during working hours for volunteer activity
(Miller, 1997b). Many businesses are actively looking to initiate employee volunteer programs.
A useful strategy for the CDFI can be research directed at identifying businesses that have not
fulfilled community service goals which may be articulated in mission statements.
Such
documents are often readily made available to the public for public relations purposes.
Whether the program is existing or new, companies give year-round to causes because
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they touch the hearts of their top executives (Mckenna, 1995). According to Al Zacher, owner of
the Zacher Co, “Personal contacts and interests play an important role. Giving comes more
readily when there is a personal relationship between the person asking and the potential donor”
(Mckenna, 1995).
This suggests that CDFIs should approach businesses through current
volunteers, perform research to find out to what causes executives have donated in the past, or
focus on businesses whose employees provide services which can be of value to CDFIs (Dean,
1996). CDFIs might establish contacts with a key corporate executive as part of a longer-term
strategy (Dean, 1996; McCafferty, 1997). Since many companies develop volunteer programs
according to employee feedback, it may be helpful even to contact employees of a company and
familiarize them with a CDFI’s cause (Greco, 1997).
Once a CDFI has established a volunteer/personal relationship with a business, it can
look to cultivate the relationship to include other types of giving. This can also be done through
existing volunteers. For example, employee volunteers often recommend organizations they're
involved with for corporate grants and keep working with those organizations to assure the
investment is well spent (Sirinek, 1996). The Conference Board survey also revealed that 49%
run incentive programs, such as "dollars for doers" programs in which they donate money to
charitable organizations for which employees volunteer (Miller, 1997b). Furthermore, many
companies also have programs that match employee-initiated contributions to charitable
organizations (Sirinek, 1996).
“There was a time when commercial companies viewed charities as teams of slightly
dippy do-gooders. Now they see effective advertising, successful direct marketing campaigns
and highly persuasive corporate donor programmes” (Bond, 1996). Community service entities
are crying out for marketing expertise. “The development of strong relationships remains one of
the greatest challenges faced by volunteer and staff leadership” (Dean, 1996). Where possible,
CDFIs may want to organize a staff or position committed to initiating and maintaining
relationships with the private-sector (Parzen & Kieschnick, 1992). The specialized knowledge
and contacts developed through such efforts would become an invaluable asset to the CDFI. “If
14
you read both the current and earlier literature on volunteers you will discern that key concerns
are their demographic characteristics, techniques for their recruitment, training and recognition”
(Pearson, 1996). Besides cultivating certain skills, a CDFI “philanthropy coordinator” would
offer a competitive edge when approaching businesses. “How can you argue with people who
put their money where their hearts are, and who give more than lip service?” (Dean, 1996).
Finally, common sense is an important asset when building and maintaining useful
relationships.
“Avoid shortcuts and take time because each prospect must be individually
assessed and an individual plan designed (Dean, 1996)” Sustainable partnerships should start
small and grow after a few examples of success. Doing this helps create a personal touch and
shows how the relationship can be of value to the business (Sirinek, 1996). CDFIs should also
remember to appropriately acknowledge their benefactors beyond improvements to the bottom
line. At Blue Cross and Blue Shield of Arizona, employees who volunteer 100 or more hours to
a cause in a year receive a sky-blue acrylic trophy (Cannella, 1997).
Further investigation of strategic philanthropy reveals even more changes in the way
business go about their charitable giving. One study notes that large employers are more likely
than small businesses to have a formal process for giving (Mckenna, 1995). Also, corporate
contributions are coming “not out of corporate charitable-giving budgets, but from the budgets of
public affairs, marketing, or other corporate business units” (Miller, 1997a). The bottom line is
that a thorough understanding of strategic philanthropy and trends in private sector giving is
instrumental in successful solicitation of private-sector capital.
Conclusion
This paper has identified the potential for CDFIs to initiate and maintain long-term and
mutually beneficial relationships with the private sector through an understanding of strategic
philanthropy. It has also presented information useful to the CDFI interested in tapping the
private sector as a sustainable source of subsidy. Still, the most valuable knowledge will come
15
from CDFIs and the lessons they learn from their successful and unsuccessful attempts to solicit
donations of labor and capital or build partnerships with the private sector. Their efforts will be
invaluable to answering important questions: How can CDFIs play a role in strengthening ties
between business and government through strategic philanthropy? How might the Community
Reinvestment Act be used as tool for creating mutually beneficial partnership between CDFIs
and mainstream banks?
Should a CDFI initiate a multi-pronged approach and contact
employees, human resources and marketing departments simultaneously? If so, can this be done
without a volunteer or staff devoted exclusively to private-sector relations?
In light of the important mission of CDFIs and their constraints in fulfilling that mission,
the more we learn about strategic philanthropy and efforts to take advantage of it the better. It is
clear that the private sector will continue to shoulder many of the social responsibilities
traditionally fulfilled by governments and other institutions. Yet, as far as the private-sector
goes: “their money is limited and the requests seem infinite” (Mckenna, 1995).
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