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Complex transactions: Community development financial institutions lending to ethnic entrepreneurs in Los Angeles

Despite federal and state efforts to ensure equal access to credit, ethnic disparities in financial capital remain. Community Development Financial Institutions (CDFIs) represent one type of institution working to address this inequality. Based on interviews with the staff of ten Los Angeles, CA (USA) area CDFIs, this article explores the unique way CDFIs lend to ethnic entrepreneurs. The findings highlight the role of CDFIs in providing extensive technical assistance, utilizing flexible lending criteria, and building co-ethnic weak ties. Furthermore, CDFI staff members’ specialized knowledge about particular ethnic groups, shared cultural background, and/or language ability allow them to take on greater risk. As the demand for financial capital grows in a tight credit market, it will become increasingly important to understand these community institutions and their potential impact on community development more broadly.