Bridging the information gap between capital markets investors and CDFIs

Proceedings of the Conference on the Secondary Market for Community Development Loans The problem of efficiently matching buyer and seller is both ancient and ubiquitous. It is, of course, the source of the concepts of brokerage and intermediation. The situation in which sellers are small, traditional and local and buyers large, sophisticated, and national or, indeed, global, is an especially difficult one to get right?especially from the perspective of the sellers. But it is also the situation in which modern technology may be most useful. This ancient dilemma resembles the problem of connecting the CDFI industry to the capital markets. The vast majority of CDFIs are small and local, and, to the extent anything can be traditional in an industry barely twenty-five years old, traditional in the sense that they are structured as vertically integrated portfolio lenders heavily reliant on low-cost funding. The capital markets are huge, efficient, market-based, and global. Even the most sophisticated CDFIs find them difficult and often frustrating to access. The disconnect exists on a number of levels, including scale, structure, and systems. But as important as these items are, the lack of understanding by potential buyers and sellers of each others? needs may be a bigger barrier. In other words?and this was repeated many times during the September 2006, Secondary Markets Conference sponsored jointly by the Federal Reserve Bank of San Francisco and the Federal Reserve Board of Governors?information asymmetry may be at least as much a barrier as scale, structure, and systems.