The John D. and Catherine T. MacArthur Foundation recently awarded Darden Prof. Greg Fairchild an $850,000 grant to support and further his study of the business models of successful community development financial institutions.
CDFIs are organizations that invest in the revitalization of minority and lower-income areas, according to Fairchild. The funds from this particular grant will be used to support a range of quantitative and qualitative research methods, through such means as covering travel costs for interviews with leading practitioners and funding a nationally-representative survey.
"The [MacArthur] Foundation invited Greg because of his background and experience," said Michael Stegman, director of policy in housing at the MacArthur Foundation. "He's done a lot of research in many kinds of ethnic markets, and he's familiar with these kinds of institutions."
Fairchild, who has been a professor in the Darden School since 2000, said he will collaborate with one of the leaders in the financial field, Harvard Business School Prof. Josh Lerner.
Fairchild said his relationship with Lerner began years ago on a teaching project.
"As the details of the present study began to come together, it was clear that we needed someone with the knowledge and creativity to help us understand the financial management challenges these organizations face," he said. "Josh was the single best person we could think of for the study, and we were delighted when he agreed to collaborate."
Fairchild said he first came into contact with the Foundation last year, when it invited a group of scholars, himself included, to its Chicago headquarters to discuss various research interests in his field. "Given my research stream on entrepreneurship in developing contexts, my ideas involved the strategic and leadership challenges CDFIs face in providing capital in low- and moderate-income communities," Fairchild said. "After the convening, I was encouraged to apply for funding."
During the past 20 years, the MacArthur Foundation has invested about $250 million in CDFIs, Stegman said.
"We thought it was really time to take stock of what our investments have accomplished, how the field has developed and take a systematic look at the business models and growth strategies that the best of these CDFIs have adopted over the years and how they've really adapted to market changes," Stegman said. "We invited Greg to lead that project."
Fairchild said his research will be conducted from January 2008 through 2011 and will focus on the best practices and key forces enabling CDFIs to grow and become self-sustaining.
"The focus of my research will be in the field of community development and understanding the evolution over the last 20 years of CDFIs," he said, noting that he hopes to determine whether the financial models employed by some CDFIs can be applied more broadly.
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