Left to right: PCV Associate Director of Finance Somer Williams Lee; Carolyn Johnson, CEO of East Oakland Black Cultural Zone; and Bulbul Gupta, CEO of PCV, together at an event in Oakland.
Getting Real About Racial Equity in Lending
Bulbul Gupta, President and CEO, Pacific Community Ventures
OFN member PCV shares lessons learned on the journey to align mission with practice.
Read time: 11 minutes
This is the second piece in a five-part series exploring the journey of different CDFIs toward finance justice. Bulbul Gupta, president and CEO of Pacific Community Ventures (PCV), reflects on lessons learned during the CDFI’s journey from intention to action, as PCV reimagined what it meant to recommit to the civil rights mission that CDFIs were born to address — Black and brown wealth building.
Read more about PCV’s work in the Operationalizing Racial Equity, Inclusion, and Accessibility (REIA) into Lending Practices toolkit. This resource was developed under OFN’s Career Meets Purpose initiative, which aims to help CDFI practitioners and partners expand their knowledge and skills to achieve the most significant impact.
Wanda Rogers is the first, and likely only, African American woman in the U.S. to own a construction staffing agency. She founded Construction Service Workers in 2009 to help place underestimated and justice-involved community members in construction jobs.
Wanda is a longtime PCV client. We helped her grow Construction Service Workers with affordable financing and Good Jobs rebates when other investors would not.
By all measurements, she runs a successful business, yet she asks, “Why are there so many restrictions on credit? If PCV worked with me, why wouldn’t others?”
Why indeed?
Because, as we in the mission lending field know, the financial system is still far from equitable. It was built for the purpose of enclosing wealth and power by and for a small number of people. For all the talk about justice, mainstream capital remains constrained by racism and inequity.
But it’s not just traditional finance.
Even though the CDFI field was founded out of a federal acknowledgment of systemic discrimination and redlining — even though it was established to invest in racial wealth building — CDFIs are often complicit in perpetuating inequities in our lending practices. Instead of disrupting the status quo, we too often accept the same bank terms and rates that create an inequitable system.
PCV is actively and intentionally examining our complicity and working to change it.
We know we cannot address the market failure of the Black-white wealth divide by using the exact market mechanisms that created the divide in the first place. We must re-center the civil rights mission that our field was born to address. This calls on all of us to embrace human-centered design principles in redesigning products and services that address an entrenched market failure.
In our efforts to do just that, PCV has learned a few key lessons, which I humbly share below. First, a little about our journey.
Putting Intent Into Action
I joined PCV after years in the impact investing space, including international microfinance and entrepreneurial ecosystem building. When I started at PCV, I, perhaps naively, assumed because the CDFI field was born out of civil rights legislation that our lending would intentionally focus almost entirely on Black and brown wealth building and our products and services would meet the specific needs of the low-income communities we aim to serve.
I was wrong. CDFIs, often unintentionally, uphold restrictive lending practices.
A key example is when our agreements with banks and investors specify rates of return and terms that effectively exclude BIPOC or low-income business owners, in effect elevating financial return over impact.
PCV was guilty of this. Even though we were one of the nation’s first impact investing funds focused on supporting low-income entrepreneurs, our stated mission of racial and economic justice didn’t align with our lending policies, procedures, and practices.
This is where PCV started our journey to decolonize capital. (Edgar Villanueva’s book Decolonizing Wealth and my experience designing community-centric, blended capital approaches in the impact investing space influenced our work).
We began by listening.
In conversations with PCV’s small business clients and community partner organizations, we learned that small business owners within Oakland’s lowest-income zip codes faced specific challenges: indebtedness, credit scores that didn’t see them as a whole person, bank rejections, gentrification, and displacement. Additionally, entrepreneurs who pivoted their businesses during the pandemic hesitated to take on additional debt that might over-leverage them.
By early 2020, PCV moved away from requiring minimum credit scores. We also stopped asking about personal assets when our research showed that low-income entrepreneurs and entrepreneurs of color tend to underreport personal assets (whether for fear of seizure if a loan goes south, or insecurity about their worth, or likely both). These changes, among others, allowed us to more fully live PCV’s first organizational value of “coming from a place of yes” with community clients. It allowed us to welcome them not just as a “whole entrepreneur,” but as a whole person.
Oakland Restorative Loan Fund
Then, in 2021, we launched our Oakland Restorative Loan Fund with a community impact investment from the University of California, San Francisco, and grant support from PCV’s supporters.
Co-created and deployed with several local BIPOC-led community organizations, the Oakland Fund became our precedent for reimagining a community-centered, decolonized capital approach to lending.
The Oakland Fund offers zero-interest loans for BIPOC and AAPI-owned businesses in an area that was 65% Black 30 years ago and is 25% Black today. To increase the fund’s accessibility, there are no application fees or minimum credit scores, and intentional language translation services are available.
The product upholds our new organizational mission: support small business owners and their communities in advancing economic, racial, and gender justice.
Within the fund’s first three days, we originated $2.5 million; within 10 days, we were four times oversubscribed. To date, the fund’s loans perform as well as, or better, than our entire loan portfolio and illustrate what a deep impact for racial wealth building can look like.
Lessons Learned on The Path to Equity in Lending
I’ve written and spoken a lot about PCV’s ongoing capital decolonization effort. And I’m excited to see OFN and other CDFIs committing to addressing this issue with practical resources that help move the needle.
As PCV has grown and evolved in our journey toward economic justice, we’ve noted three key areas everyone should consider going forward. These “lessons learned” are essential to the work. Without them, I don’t believe any organization will truly achieve a mission of equity in practice.
A note about the lessons: Be prepared to be uncomfortable. Talking about and confronting issues around race, power, and equity is challenging at all levels of the organization, from the board to staff to investors and community partners.
Feeling unsettled, often deeply, is a necessary part of the process. It is worth spending the time to hold space for that discomfort in your redesign process and reflect on why you feel that way.
Until we unlearn much of what we’ve been taught about upholding the financial system the way it is — in ways that don’t value racial equity — we cannot relearn or reimagine how it might be: a system supporting an inclusive economy that values Black and brown people.
1. Do your “home” work first. It’s important to start with your team and organization. You can’t just talk the talk.
If the organization hasn’t committed the time to unpack what committing to justice and equity means and requires, it won’t sustain trust in this journey with other stakeholders, whether clients, investors, or community members — nor is that trust earned.
For PCV, the journey began by asking what it means to be anti-racist. More than a one-time exercise, the question now guides our work. What does advancing a civil rights mission through a financial organization mean? Does our staff embody and champion the values? Is our executive leadership team thoroughly bought into the work? What are we doing right? What are we doing wrong? Do we have community trust and license to operate?
Just as critical are the organization’s policies and procedures. Are they designed to perpetuate or eradicate cultural norms around lending? Do products and services meet the needs of communities? What needs to change in how business is done?
2. Align your board. Ensure your board understands and supports your mission and implementation plan.
Without board commitment and support, your efforts risk remaining a seed that lacks the necessary conditions to grow lasting roots. Enduring change requires courageous conversations that look closely, honestly, and frankly at whether your organization and leadership align intention with action.
It can be a difficult and sometimes painful process, especially for the people on your team who have been personally impacted by the status quo. Patience, persistence, and care are key.
PCV has intentionally built a board that understands why we are making the changes we are. Our board is committed to our shared equity journey. Board members know that sustained change management comes with discomfort, uncertainty, and dedication to the mission. They’ve held space to support the team in service to the challenging work of bending the arc to justice.
3. Ensure capital meets mission. Once your organization is aligned around its strategy, staff and board are engaged, and policies and procedures are in order, it’s time to focus on the money. Your capital must match and support your equity goals, or change won’t occur.
Funders and investors are critical to the journey; they must understand what you’re doing and why. Seek out new investors that enable you to meet the needs of your communities and the goals of your strategy. Follow up with existing investors to try and bring them to where you need them to be — some may pleasantly surprise you, as they have us!
My team and I have noticed more than once that although banks — who have long been the primary investors in CDFIs — often have the tightest rates and terms, they can adapt to meet your mission when they see compelling impact metrics, low write-off rates, and a healthy pipeline of demand through community trust-building. Banks are interested in models for what investing in racial justice can be. They can and often will become internal champions for more affordable lending. You don’t know until you ask. Show them what is possible and why!
If Not Now, When? If Not CDFIs, Who?
It’s been four years since PCV set out on the journey to decolonize our capital, democratize access to lending and advising, and break the cycle of extractive lending in our communities by committing to being restorative.
The Oakland Fund, one piece of what we do, brings us closer to aligning our products and services with our mission and seeing what’s possible when intent meets action.
Again, this work has not been easy — it’s often been uncomfortable. As we commit to centering justice, I am exceedingly proud of our staff and board’s determination to work through a lot of discomfort, including during the worst of COVID-19 times.
Discomfort is the gateway to growth and innovation. There’s no way out except to go through if what you seek is systems change. So, as PCV continues to do, I invite you to sit with the discomfort, interrogate it, and get curious about it. Ultimately, it’s a sign you’re doing “the work.”
PCV is just beginning on our journey. The market failure we’re meant to address will not be resolved by just writing more people a check. The extractive economy is also driving the climate crisis. Last year, PCV began integrating climate justice into our racial justice work to partner health and well-being with wealth-building for the people we serve.
If CDFIs—which are defined by our missions to serve communities impacted most by systemic racism—can’t be the change we were meant to be, then who can? If not us, who? If not now, when? If we can’t make inroads toward an equitable economic system, who will? After all, the end goal of true equity — of decolonization — is our mandate; it’s our purpose, and it must happen, however uncomfortable we may be. We’re in this together.
PCV offers the Oakland Fund Playbook, a place-based guide to investing in underestimated people and places by listening to and co-creating with community power builders. The playbook is structured around three pillars: Capital Structuring, Community Engagement & Trust-Based Outreach, and Data-Driven Impact Optimization.
Each section highlights stories to inform and inspire future place-based efforts, as well as a User Guide with questions and resources for practitioners.
Download the playbook now to better understand impactful strategies and contribute to positive change.
Learn More
Download the Operationalizing Racial Equity, Inclusion, and Accessibility into Lending Practices toolkit.
Watch OFN’s CONNECT+ Webinar on Designing Loan Products that Advance Racial Justice.
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