The Impact of Transformative Narratives in Opportunity Finance

How do you reshape narratives to drive social equity and impact?

Read time: 6 minutes

Societal narratives are shared beliefs that shape our collective identity, social norms, and policies, often influencing public opinion in unifying or divisive ways. In finance, these narratives affect how we view institutions, including those in the opportunity finance sector, like Community Development Financial Institutions (CDFIs). 

While CDFIs work to democratize access to capital for underserved communities, which they are uniquely qualified to do, they face increasing scrutiny.

Critics argue CDFIs have lost sight of their original mission to serve marginalized populations. Instead, they behave more like the traditional banks, which do not address systemic inequity effectively, detractors say.

Recent public policy changes, such as the Supreme Court’s 2023 ruling against affirmative action, also have increased legal challenges to these nonprofit loan funds’ missions. The claims allege that opportunity finance institutions are discriminating against some people with their race-based lending programs. 

In response, CDFIs must engage in adaptive communications strategies to address criticism while conveying impact. They must shift these narratives away from the pejoratives associated with social constructs around identity and focus on values.

As opportunity finance organizations reshape narratives, adopting the principles of narrative finance can allow them to influence public perception and drive systemic change with their organizations. By telling stories that highlight their role as champions of economic empowerment and social equity for underrepresented communities, including racialized ones, they can use financial narratives to influence outcomes.

Narrative finance explores how stories shape financial markets, influencing behavior, policy, and investment decisions. In the opportunity finance sector, these narratives affect which communities receive capital, how risk is assessed, and how resources are distributed.

The need for narrative transformation isn’t new; historically, financial narratives have played a critical role in shaping economic power and societal outcomes.

In the last 150 years, the role of finance in America has shifted twice—moving from a servant to society to its master. This shift, driven by evolving financial narratives, expanded finance’s control, enabling practices where institutions prioritized profits over the public good and shaped regulations to their advantage. 

These narrative changes were both cultural and economic. They reshaped society’s view of finance from a tool serving public welfare to a dominant force driving economic recovery, often justifying exclusionary practices that prioritized profit over equity.

As finance took on a dominant societal role, it led to increased instability and inequity, highlighting the dangers of unchecked financial narratives, particularly for marginalized and poorer communities. Marginalized communities, however, have consistently resisted such negative portrayals, pushing back through organized activism.

To continue to counter this legacy, CDFIs must adopt paradigm-shifting stories that emphasize their role in promoting equitable financial outcomes, centering economic empowerment, and community resilience. They also can convey measurable social impact and align with broader policy goals, such as the Justice40 Initiative.

In today’s rapidly changing policy landscape, it's essential the opportunity finance sector do transformative narrative work. Entrenched racialized narratives not only limit access to capital and financial services but also obscure the true disparities in racial wealth. On average, Black families own 23 cents in assets for every $1 white families own. Yet, these narratives also undermine the perception of marginalized groups’ ability to overcome barriers.

CDFIs, designed to reverse this exclusion, focus on communities of color excluded from traditional financial systems. Recent research by CDFI Friendly America shows that 78% of majority-minority census tracts qualify as CDFI Fund Investment Areas, compared to just 31% of non-majority-minority tracts. This overlap between race and place means that place-based lending, which focuses on economically distressed areas, often serves predominantly BIPOC communities. 

The Supreme Court’s ruling against affirmative action has already fueled legal challenges to race-conscious lending programs, including a case against the Houston-based CDFI LiftFund, Inc. Although that case was dismissed, concerns among CDFI leaders remain that similar lawsuits challenging race-based lending could still be filed, undermining CDFIs’ ability to promote economic equity.

These ongoing threats highlight the need for CDFIs to shift their narratives, focusing on alleviating economic distress across demographics while still pursuing their core mission of advancing racial equity.

A Southern Black-led CDFI shows their success by emphasizing economic empowerment through investments in housing, entrepreneurship, and community development. By focusing on economic outcomes like these, along with race-based lending objectives, CDFIs can frame their work as vital to regional economic strategies, which may help address criticisms about race-conscious programs.

Beyond an organization's communications strategy, narrative change is vital for shaping public policy. Policymakers, investors, and stakeholders make decisions based on the narratives they hear about work being done in economically distressed communities. These stories significantly impact their actions. Public policy often follows public perception, and transforming narratives surrounding financial exclusion allows opportunity finance organizations to influence policies that prioritize equitable economic development.

For example, the Justice40 Initiative may offer a powerful framework for policy alignment, ensuring disadvantaged communities receive targeted investment. CDFIs must adopt narratives that show their work is central to achieving this goal—addressing economic inequality through place-based solutions that directly impact vulnerable communities.

Culturally competent storytelling is a powerful tool for narrative change in the opportunity finance sector. This communications approach allows organizations to move beyond surface-level messaging, crafting stories grounded in a nuanced understanding of systemic inequities that resonate with the lived experiences of those facing economic exclusion. This strategy also should consider the intersectional identities of your core stakeholders.

When done effectively, this storytelling can change how both stakeholders and the public perceive these issues and the people facing them. Organizations can use change communications strategies like storytelling to recenter the narrative around the economic impact of systemic exclusion on racialized populations. This technique shifts focus away from perceived shortcomings within these communities and instead offers forward-looking solutions for rebuilding them.

Effective culturally responsive storytelling that considers intersectionality in this sector goes beyond showcasing loan products and technical assistance services. It reshapes the narrative to emphasize economic empowerment and financial justice. This shift elevates nonprofit community loan funds, positioning them as champions of wealth development and community resilience.

The opportunity finance sector faces both unprecedented challenges and opportunities. To democratize capital access and foster financial inclusion, organizations must proactively reshape their narratives to reflect evolving legal and societal contexts.

Transformative narratives grounded in cultural competence and aligned with broader policy goals are essential for ensuring opportunity finance institutions continue their vital work. 

Dahna M. Chandler is a doctoral researcher at the University of Southern California, investigating the historical role of narratives in shaping modern racialized discrimination within the U.S. finance industry. An award-winning finance journalist with a master’s in corporate communications from Georgetown University, she partners with opportunity finance sector organizations as a social impact communications consultant. Drawing on lived experience that aligns with your organization's core constituents, she helps you amplify your mission through strategic, culturally competent storytelling that transforms narratives and drives social change. Contact her to explore how her expertise can help you elevate your organization’s impact communications.

About the image above: This is a colorized version of a photo taken of demonstrators walking along a street holding signs demanding the right to vote and equal civil rights at the "March on Washington for Jobs and Freedom" in 1963.  Get more information on the photo here.

(c) 2024. Dahna M. Chandler for UpThink Communications, a division of Thrive Media Collaborative, Inc. All rights reserved. This case story may not be reproduced or reposted in whole or in part without express written permission of the author.