Mainstreaming community development: business strategies as radical approaches to community representation.

• Author: Shah, Daniel S.
• Position: Philadelphia Community Development Credit Union

This article is based on a case study of a Philadelphia Community Development Credit Union ("CDCU"). It argues that law school clinics are sites for change in the practice of community development. This article analyzes my community development clinic's representation of an organization seeking to set up a CDCU to ask whether techniques used to improve business efficiency in the mainstream economic sector can provide a radical new approach to counseling a community-based organization. (1)

The case study of the CDCU prompts an in-depth analysis of the role of technical assistance providers such as community development lawyers and clinics in perpetuating an economic development market structure at odds with consumer demand. Most technical assistance providers exist in a direct dialogue with the project funding stream. Either foundations and government funders are paying them to provide services that implement their agendas, or the clients are paying them to help their organizations get financing from those funders. This critique of the role of technical assistance in the community development marketplace focuses on the disempowering consequences of implementing top-down policy agendas. (2)

Because of their academic settings, community development clinics at law schools are uniquely positioned to step outside the current market structure. Clinics tend to fall into a very small group of technical assistance providers that are not dependent on community development project money. Instead, they rely on independent support from sources like the National Association of Public Interest Law and Interest of Lawyers' Trust Accounts and law school funding. (3) For this reason, they can implement agendas that differ from those of most community development technical assistance providers. (4) For example, clinics are in a unique position to contribute to client growth and early development of products. They also are able to work with clients who do not appear to have a product that meets existing funding criteria, but nonetheless does meet consumer demand. Clinics can "mainstream" community development practice by applying demand-side business practices that are standard in American for-profit business.

My premise is that community development clinics are not obligated to work with organizations that offer prescribed community development products. I argue that our clients benefit if we break the mold of standard technical assistance providers. I conclude that as long as there are educationally rich opportunities for students assisting community development clinics, there is a means of providing representation designed to meet consumer demand.

1. MARKETS, BUSINESS, AND THE CDCU

   Community economic development (5) was designed as an alternative to the mainstream capitalist market (6) that disempowered inner city communities. (7) Yet, the effectiveness of community development is usually measured in social more than economic terms. (8) It can only be understood by analyzing the markets in which projects are produced through a complex network of professionals, including non-profit staff and boards of directors; foundation managers; government bureaucrats; and lawyers and other consultants.

   Two distinct markets unite the development and distribution of community development projects. One market is driven by nonprofit funders, the other by inner city communities. The community development funding market is one of limited supply: competition is fierce amongst community based organizations for getting financial support from funders to carry out community development projects. (9) Consequently, funders have the economic power to determine community development social agendas and set the requirements that community-based organizations must meet to bring development projects into their neighborhoods. On the other hand, the inner city is a market of near monopoly: community based organizations face no real competition in the neighborhoods for their services and products. This is no coincidence. In fact, funders have in essence defined the inner city community market as being one of low competition. From an economic perspective, the very intention of community development, to address underserved and excluded neighborhoods, demands that this market of extreme competition be linked to one of extreme scarcity. The result is that funders have the economic power to predetermine community development agendas and determine the types of projects which community-based organizations can bring to their neighborhoods. Thus, despite community empowerment goals, the top-down economic pressure to satisfy funders' social goals creates serious disincentives for the consideration of local neighborhood initiatives and solutions.

   The CDCU is useful to examine because it highlights the general problems with the community development market structure and role of professionals. While a CDCU is a non-profit entity that competes for funding with other non-profit community development projects, it differs from most community development projects in that the services it provides have real competition. In the financial services market, there are options, even in low-income inner city neighborhoods. If a community development credit union is to succeed, it must compare favorably with its competition for financial services, which in most cases includes check cashing outlets and a few mainstream banks. Sadly, but predictably, CDCUs have an extraordinary high failure rate. (10)

   When a new community-based organization sought to develop a CDCU, we saw this as a particularly fruitful opportunity to test a new technical assistance role that would employ standard, noncommunity development business strategies. I was confident that the CDCU could succeed if it could counter the high cost of check cashing outlets. (11) But it was also clear that the CDCU had to thoroughly understand consumer demand for financial services. This highly competitive setting provided fertile testing ground for an alternative framework prioritizing local demand. (12)

   The client, Port Baker Development Corporation ("PBDC"), was planning to start a credit union and was already using standard community development methods of assuring the funders' required "community input" : assembling the beginnings of a board and making contacts with community residents and organizations. No one on the board had any direct experience with running credit unions, but some had expertise in the community development funding market, including writing grant applications. The initial board members included an executive director of a successful (i.e., funded) organization, an executive director of another smaller organization, and an entrepreneur who was informed about and supportive of credit unions. (13) It was unclear, however, whether PBDC had enough information to prove that a credit union would succeed in the neighborhood, especially in light of the high failure rate of Philadelphia credit unions due to under-capitalization.

   Before engaging the clinic's counsel, the client had prepared and distributed a survey designed to gauge neighborhood support for a new credit union. The survey put forth a predetermined product position. The primary question was, "Do you or do you not want a new credit union in this neighborhood?" From a business development perspective, questions of this type are highly problematic. This framework provides no opportunity for respondents to indicate the nature of their financial service problems or the desired shape of potential solutions. Even a "yes" is ambiguous support--perhaps they do not not want a new credit union. A survey like this one offers no way to verify whether there is genuine demand for a credit union because respondents have no opportunity to indicate preference for an alternative.

   This issue of demand led the clinic to consider methods of generating information to determine whether a credit union should be organized, and, if so, in what form. At a meeting between PBDC and their business consultants, we presented a means of documenting and meaningfully using a collective constituent voice on financial services issues. We suggested that the clinic could help create a "feedback loop," a process wherein information is channeled back and forth between two entities: the client and the constituency. By documenting neighborhood concerns, we could enable our client to determine whether constituents prioritized the same issues that mainstream financial service users consider critical: saving money by using a credit union instead of a check cashing service. If this was not the predominant concern among check cashing service users, then expecting them to change their behavior based on cost savings alone would not be realistic. By tying their proposed consumers' preferences to their financial service product, PBCD could increase the likelihood of the project's success, while being responsive to a local articulation of priorities.

   The client, however, was not predisposed to explore consumer demand. (14) The client expected that my students and I would provide the standard community development technical assistance required to develop a CDCU. This service might have included the clinic working with the client to move the project forward after incorporation; helping with loan policies; guiding the organization through the process of obtaining National Credit Union Association insurance; and possibly helping to obtain Community Development Financial Institution ("CDFI") certification so that the credit union could qualify for CDFI funding. When we presented detailed evidence regarding our concerns about their established competitors, however, the clients agreed that further investigation of financial service usage and preferences would be useful.

   In order to assess constituency preferences we held focus groups designed to inform us about the specific features the constituency...