National Community Investment Fund debuts AI tool to amplify impact of mission-driven lenders
Who says you can’t teach an old CDFI new tricks?
At a conference commemorating its 30-year anniversary, the National Community Investment Fund, a Chicago-based community development financial institution, launched an AI data platform designed to help mission-driven lenders scale. NCIF.ai, as it is called, combines its three decades of bank-level lending data with census-tract level data to help CDFIs and impact investors better screen opportunities in underserved communities, mitigate economic risks and track the impact of their capital in real time.
The platform draws on the CDFI’s 30 years of experience investing in, and alongside, other mission-driven financial institutions, including CDFI banks and minority depository institutions, or MDIs. Since 1996, NCIF has deployed some $550 million in equity investments, debt and New Markets Tax Credits financing, and catalytic grants in 34 US states.
“The economy, particularly for low- and moderate-income people, and small and rural parts of the country and inner cities are facing some really challenging times, and they’re facing them today,” says Saurabh Narain, who has led NCIF as CEO for nearly two decades. “If we don’t do something about it, there will be significant problems.”
CDFIs and other mission-oriented community lenders, he told ImpactAlpha, “need to evolve, and evolve very rapidly, in terms of our thinking, in terms of our scale, in terms of how we use technology. If we don’t use technology to grow and scale, we’ll be left behind.”
NCIF’s push into AI reflects a broader shift taking hold across the CDFI and impact investing industry, where mission-driven lenders long constrained by limited budgets and technical staff are looking to leverage technology to amplify their impact. Pacific Community Ventures last summer acquired Radiant Data to build its own AI-powered data hub for small CDFIs whose leaders, the company says, don’t have easy access to data, machine learning and AI talent.
“They’re microlenders. They’re doing a fantastic job in terms of thinking about it at the local level,” Narain says of the effort. “We are commercial lenders, and we are lenders in partnership with CDFI banks and CDFIs.”
AI-powered data
NCIF has co-invested alongside more than 50 mission-driven financial institutions, including Carver Federal Savings Bank, Appalachian Credit Union, Allivate Impact Capital and United Bank of Philadelphia in small businesses, housing and community infrastructure, from healthcare clinics and charter school facilities to transit systems. NCIF has made equity investments in about 17 of them to increase their lending in low-income, underserved communities in small towns, rural areas and urban neighborhoods nationwide.
“In some of these communities, we don’t have strong institutions, and therefore the need for CDFI and minority banks, CDFIs in general, is paramount,” Narain says. “That to me is one of the only ways in which you can have long-term sustainable change in these communities. So that’s our impact thesis.”
NCIF is hoping the AI data platform will help scale not only the lending of its partners in underserved communities, but its own lending, as it works toward a goal of $1 billion in new originations over the next five years.
“So let’s say there’s a CDFI bank in Philadelphia, and we want to know how much of their lending is in low-income neighborhoods,” says Narain. “Now you can connect their lending to census-tract data. We’re adding pollution, we’re adding crime, we’re adding CRA investments and things like how many [Paycheck Protection Program] loans went to low-income borrowers. That information will take two weeks of an analyst’s time, but it can be done in a minute on our platform.”
NCIF is planning to open up the platform not only to its partners but also the broader mission-driven lending industry. It hopes it will also foster more collaborations among these institutions, especially in rural areas, where the CDFI aims to focus half of its lending.
“It’ll be a subscription-based platform where you log in, you put in your private data, you use my public data, and you do this in house,” says Narain. “This work can’t be done by NCIF itself, it has to be done through this community of mission-oriented financial institutions, banks and non-banks.”
Integrated capital
NCIF’s roots trace back to ShoreBank, the Chicago-based bank widely credited with supercharging the CDFI movement. A $15 million investment from Bank of America in 1996 helped ShoreBank launch NCIF, initially as a nonprofit private equity trust fund to finance CDFIs, minority-owned banks and other mission-driven lenders.
Ford Foundation, Amalgamated Bank, Black Vision Fund, MacArthur Foundation and other institutions have also backed NCIF over the past 30 years.
“The goal of NCIF is to foster long-term change, and long-term change comes through an integrated capital model, a very large network of CDFIs, and increasingly an artificial intelligence-based data platform,” says Narain.
The AI data platform, he adds, complements what local institutions have always sought to do, especially today: the ability to distinguish a legitimate business from an unreliable one, to know whether a neighborhood’s real need is a school or a health clinic, and to judge the risk of a local investment accurately.
The intention is for that kind of careful approach to amplify the near-term and long-term impact of investment dollars in communities. “It’s how we take further something like, ‘Can we make sure that there’s training for construction jobs?’” Narain says, “to ‘Can we make sure that those training jobs are accessible to formerly incarcerated people, who oftentimes were unfortunately incarcerated for a lot of the wrong reasons?’”
To reach its goal of $1 billion in new originations over the next five years, NCIF is looking beyond traditional public funding streams toward untapped pools of capital, such as family offices, donor-advised funds and other philanthropic wealth willing to bet on underserved communities. That search has taken on new urgency, Narain says, amid concerns that federal funding for the CDFI Fund could shrink.
“There’s a lot of money that needs to be invested in these communities, so as we look at a billion dollars, that can only happen if we have both public sector and private sector capital,” he adds. “There’s a lot of money that wants to do good, so if we can continue to do good by channeling that money, people will be in business, and we’ll have a more just, more civil society.”
