Canals Where Rivers Used to Flow: The Role of Mediating Structures and Partnerships in Community Lending

Christie I. Baxter
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Christie I. Baxter: Massachusetts Institute of Technology

Economic Development Quarterly, 1996, vol. 10, issue 1, 44-56

Abstract: This article considers urban disinvestment as a consequence of increasing specialization by financial institutions over time. In the resulting segmented markets, mainstream financial institutions serve growing suburban and corporate clients; nonprofit lenders and social investors have created an alternative market to channel credit to low and moderate income and inner-city communities. This restricts the supply of credit for development, because investors in the alternative market control vastly fewer financial resources than do mainstream institutions. Increasing investment in inner cities in any significant way depends on creating effective connections between the mainstream and alternative credit markets, through products such as new secondary market instruments and through cross-institutional collaborations at the local level. Policies to increase investment through stronger Community Reinvestment Act regulation and by capitalizing Community Development Institutions with federal dollars do little to improve intermarket connections; this limits the impact of such policies.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ecdequ:v:10:y:1996:i:1:p:44-56

DOI: 10.1177/089124249601000107

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