Study: Low-Income Lending Safe

Contrary to popular belief, investing in economically disadvantaged communities and lending to low-income people is as safe as, or safer than, loans to wealthier individuals and communities, according to a study of the performance of over 100 community development financial institutions in 2002.The new study was released by the National Community Capital Association, Washington, D.C., in cooperation with the Community Investing Program of the Social Investment Forum Foundation and Co-op America. For instance, the NCCA study found that the net chargeoff rate for community development financial institutions was 0.70% in 2002, compared with 0.97% for all commercial banks. It also found that over the last 30 years, 138 CDFIs invested about $6.6 billion in financing for distressed and underserved communities around the country, producing 185,874 jobs, 283,415 housing units, and 3,849 community facilities. "This study shows that CDFIs provide investors the opportunity to be socially responsible and financially prudent at the same time," said NCCA chief executive officer Mark Pinsky. "Community investors now have 30 years of experience and evidence that making investments in low-income communities is no riskier than doing business in mainstream markets."