: creating a pathway to the opportunity finance industry for college and university students Published by Opportunity Finance Network with input from New York University s Leonard N. Stern School of Business Undergraduate College Undergraduate College 1
Table of Contents Introduction... 3 Background... 4 OFN and the Opportunity Finance Industry... 4 New York University Stern School of Business... 5 Career Opportunities in the Opportunity Finance Industry... 6 The Opportunity Finance Program... 7 Overview of Pilot... 7 Data and Information... 7 CDFI Participants... 8 OFP Description... 8 Lessons Learned from Pilot... 11 Conclusion... 14 Appendix... 15 2
Introduction In order for the opportunity finance industry to build on its success and develop the next generation of leaders, it must identify innovative ways to attract diverse, talented students from higher education institutions. New York University Leonard N. Stern School of Business (NYU Stern) and Opportunity Finance Network ( OFN ) collaborated to design and implement an innovative talent development program, titled the Opportunity Finance Program ( OFP or the program ), for undergraduate business students who are interested in learning about careers in the opportunity finance industry. In collaboration with NYU Stern and OFN, seven Community Development Financial Institutions ( CDFIs ) participated in the pilot program in the 2013-2014 academic year. The OFP is the first program of its kind, and has expanded to include more students and CDFIs in its second year. The OFP pilot had three primary goals: (1) inform and educate undergraduate business students about careers within the opportunity finance industry; (2) identify best practices to connect CDFIs with talented and diverse business students from higher education institutions; and (3) develop a scalable model to prepare undergraduate students to succeed in the opportunity finance industry. The pilot program explored how CDFIs and universities can work together to develop programs that increase and/or enhance students career interest in the opportunity finance industry. The purpose of this report is to share the program structure and lessons learned from the pilot OFP with both CDFIs and higher education institutions. Our goal is to provide information that will lead to a growing number of university programs to enhance students interest in, as well as foster professional opportunities within, the opportunity finance industry. In addition, nonprofit organizations interested in talent development platforms might find this report beneficial. Although this paper focuses on undergraduate business students at NYU Stern, the program structure and lessons learned are relevant for other undergraduate and graduate programs. 3
Background OFN and the Opportunity Finance Industry OFN is the leading national network of CDFIs investing in opportunities that benefit low-income, low-wealth, and other disadvantaged people and communities across America. OFN s mission is to lead CDFIs and their partners to ensure that these stakeholders and communities have access to affordable, responsible financial products and services. CDFIs are performance-oriented, responsible lenders that finance community businesses and individuals in the areas that need it most. CDFIs deliver both sound financial returns and real changes for their stakeholders and communities. They work just outside the margins of conventional finance to help low-income people and communities join the economic mainstream. By providing financing to small businesses, microenterprises, nonprofit organizations, commercial real estate, affordable housing, and individuals, they produce jobs, housing, and vital community services, and offer basic financial products and services. There are approximately 900 active CDFIs in the United States. OFN s network includes more than 240 performance-oriented CDFIs that have originated more than $34 billion in financing in urban, rural, and Native American communities through 2013. With annual net charge-off rates of 0.7% at fiscal year-end 2013, CDFIs have demonstrated the ability to lend prudently and productively in unconventional markets often overlooked by conventional financial institutions. As of 2013, CDFIs have financed nearly 120,000 businesses and microenterprise; 1.5 million housing units; 9,500 community facility projects, and have helped create or maintain 720,000 jobs. Key FY 2013 Statistics on OFN s Member CDFIs Total Assets Total 2013 Financing Outstanding $11.3 billion $7.1 billion 2013 Financing $3.6 billion Annual Net Charge-off Rate 0.7% Weighted Average Interest Rate on Loans 6.2% Total Staff (Full-time Equivalent Employees) 4,194 Average Staff (Full-time Equivalent Employees) 24 Average Year Began Financing 1991 4
CDFIs work in diverse communities and are interested in attracting and developing workforces that reflect the diversity of the communities they serve. Geographic Breakdown of Clients Served (Average Per CDFI) Minor Urban (MSA < 1 million) 24% Major Urban (MSA > 1 million) 49% Rural (not in MSA) 27% Average % of Clients Served Low-Income 73% Minority 52% Female 49% Source: OFN s Inside the Membership: Fiscal Year 2013 Statistical Highlights from the OFN Membership New York University Leonard N. Stern School of Business Undergraduate College NYU Stern, founded in 1900 and located in New York City, is ranked highly among undergraduate business programs in the United States. It is an undergraduate business school within a research university. Approximately 98 percent of graduates are employed or enrolled in additional schooling within six months of completing their baccalaureate degree. NYU Stern has a diverse student body, which is comprised of over 2,500 undergraduate students who, during their academic careers, take core courses in the liberal arts, social impact, global business, and business fundamentals. Through coursework and co-curricular offerings, NYU Stern places strong emphasis on ensuring all students graduate with a thorough understanding of their responsibilities as business leaders and their potential to make a significant positive impact in the world. 5
In 2013, NYU Stern Undergraduate College established the College s Office of Student Engagement ( OSE ) to facilitate students exploration, collaboration, and engagement through leadership, social, and career development experiences, integrating co-curricular and extra-curricular activities that build community while developing leaders who are able to create value for both business and society. Identifying an opportunity within CDFIs for talented business students to make a social impact in low-income and low-wealth communities, NYU Stern s OSE led a pilot of the OFP during the 2013-2014 and 2014-2015 academic years. Career Opportunities in the Opportunity Finance Industry The opportunity finance industry is expecting to increase its scale and impact over the next decade. Human capital will play an integral role in this growth. Average loans outstanding for OFN Members increased by more than 36% from 2005-2013 and we expect to see such growth rates continue. In order to build upon their successful track records, CDFIs must develop methods to attract diverse, talented college graduates for internships and entry-level positions. CDFIs have a number of exciting and challenging internship opportunities and entry-level positions in several areas including, but not limited to, lending, technical assistance/ consulting, policy, finance, marketing, and research. 1 Many recent college graduates possess competencies in disciplines that are closely aligned with these entry-level positions, such as finance, real estate, marketing, accounting, and research. CDFIs can provide millennials with not only exciting work but a unique chance to make a social impact through a rewarding professional career. Thus, an opportunity exists to create a pipeline of diverse, talented college graduates to the opportunity finance industry. Connecting undergraduate students from higher education institutions to CDFIs faces three potential impediments. First, unlike large financial institutions, many CDFIs do not have the financial and human capital resources to create a talent development and recruitment program for undergraduate students. Second, there is a lack of general awareness about the opportunity finance industry and career paths within CDFIs among undergraduate students. Third, CDFIs may not have formalized, structured internship programs that lead to full-time employment opportunities. Thus, programs within higher education institutions that educate students about careers in the opportunity finance industry and lead to internship and employment opportunities with CDFIs can help begin to bridge the talent divide. Most importantly, filling this critical talent gap will help ensure that CDFIs can continue to deliver their valuable services to underserved people and communities across the United States. 1 Visit ofn.org/cdfis-and-universities to learn more about career tracks in the opportunity finance industry 6
THE OPPORTUNITY FINANCE PROGRAM Overview of the OFP Pilot In order to bridge the talent divide, college students need to know about the CDFI industry and have the opportunity to apply for open internships and full-time positions within CDFIs. The challenge, however, is that many talented college students participate in an internship during the summer following their junior year that usually lead to offers for full-time employment upon graduation. Thus, if the opportunity finance industry wants to attract talented college graduates for full-time opportunities, it is essential to provide education and intern opportunities early in their student life. One of the primary factors that leads students to apply for internships is their knowledge of both the industry and company. We found that the vast majority of students, however, are unaware of the important work currently being done in the opportunity finance industry, as well as the interesting career pathways that are available for college graduates. In order to address this knowledge gap, the OFP created opportunities for students to increase their knowledge about the opportunity finance industry. The OFP pilot included multiple events held both on and off NYU Stern s campus and across both the fall and spring semesters of 2013-2014. OFP was integrated at NYU Stern in the following ways: First, students had an opportunity to engage in four programs that were part of NYU Stern s pre-existing professional development programming: the Industry Introduction Series, Student Club Presentations, the Industry Conference Series, and the Case Walk-through Series. The four programs were specialized for the OFP. Second, speakers from CDFIs were incorporated into existing courses on social impact, and Third, a group of students was selected to intern at CDFIs for the summer. These programs are described in more detail below. Data and Information NYU Stern collected and analyzed both qualitative and quantitative data over the course of the OFP to illuminate the experience. NYU Stern collected qualitative data from all students and CDFIs who participated in the OFP internships. Students were interviewed at two points during the OFP: first, at the beginning of their summer to explore why they applied for the program, and then again at the end of the internship to explore what experiences they found to be meaningful. Representatives from each participating CDFI were interviewed mid-way through the summer in order to better understand their involvement, if any, in various OFP events, as well as their internship experience. NYU Stern surveyed all participating students and CDFIs to capture additional information related to their participation in the OFP. 7
CDFI Participants A total of seven CDFIs (including OFN) participated in the 2013-2014 OFP and each of the CDFI participants were located in urban communities within New York, New Jersey, and Pennsylvania. The descriptive characteristics of the CDFI participants varied significantly: total number of employees ranged from as few as three employees to more than 350; total assets ranged from $4 million to more than $400 million; and year founded ranged from 1971 to 2002. State City Year Founded Total Assets # Full-time Equivalent Employees Bethex Federal Credit Union NY Bronx 1971 $19,255,000 25 BOC Capital Corp. NY Brooklyn 2002 $3,771,000 8 Leviticus 25:23 Alternative Fund, NY Elmsford 1984 $19,495,000 4 Inc. Local Initiatives Support NY New York 1982 $440,728,000 359 Corporation New Jersey Community NJ New Brunswick 1988 $81,300,000 30 Capital Nonprofit Finance Fund NY New York 1984 $102,150,000 56 Opportunity Finance Network PA Philadelphia 1986 $112,054,000 37 Note: FY 2013 data These CDFIs participated in the OFP events described below and committed to hiring one or more Stern students to intern during the summer 2014. OFP Description NYU Stern s OSE coordinated all components of the OFP and identified meaningful opportunities to incorporate it into academic, professional development and other extra-curricular activities. The following describes in more detail the components of the program s 2013-2014 pilot year. 8
Industry Introduction Series Students were first exposed to the opportunity finance industry during the Industry Introduction Series (IIS). The IIS is a nine-week program that provides freshmen, sophomores, and juniors with an opportunity to learn about a different industry each week during the fall semester. The nine-week workshop series informs students internship and career exploration. Each week, students have the opportunity to learn about a different industry from faculty, companies, and alumni. The OFP held sessions on four nights during a one-week period, which included an overview of the CDFI industry, a panel of local CDFI professionals, and a discussion of career opportunities and tracks within the CDFI industry. Student Club Presentation NYU Stern s student clubs promote professional development in a broad range of industries and interests, from finance and accounting to social impact and entertainment. Many of the clubs focus on career development and cultivate strong relationships with companies and organizations as well as NYU Stern s alumni who continue to support the club system by attending or speaking at events. More than 60 percent of NYU Stern s students participate in the club system. During the pilot, CDFIs were incorporated into events hosted by NYU Stern s Net Impact club, which focuses on students creating positive social and environmental change in the workplace and in the world. Industry Conference Series As part of NYU Stern s Industry Conference Series (ICS), a group of five students were selected to participate in OFN s Annual Conference, which was held in Philadelphia during the 2013-2014 academic year. The students attended along with representatives from NYU Stern s OSE. The ICS provides students with the opportunity to attend professional conferences throughout the academic year. OFN s Annual Conference brings together more than 1,000 practitioners, investors, and other key stakeholders in the opportunity finance industry to discuss emerging trends in the industry. It is held every year in a different city. The students who attended OFN s conference learned about both trends and social impact occurring in the opportunity finance industry. Students heard the State of Industry speech from OFN s President & CEO and attended the ceremony for the NEXT Awards, which awards millions of dollars to CDFIs with innovative and promising financing strategies each year. OFN also held a special networking session for students that allowed them to engage and network with opportunity finance industry professionals. As a result of participating in the conference, students were excited about potential careers in the opportunity finance industry and served as informal ambassadors for the OFP on campus. 9
Case Walk-through Series The Case Walk-Through Series (CWS) provides an opportunity for sophomores and juniors to learn about an industry by walking through an actual client engagement. Professionals present and walk through a client project. Students then have an opportunity to work in groups to discuss pertinent case questions, and professionals provide feedback. All participants are invited to network over lunch. Through the CWS, NYU Stern hosted a case on the opportunity finance industry. A representative from JP Morgan Chase s Community Development Banking team walked through a case study of a project in which the bank had partnered with a local CDFI. Several local CDFIs attended and facilitated small group discussions with students that worked through issues related to financing and impact. More than 80 students attended the pilot case walkthrough on opportunity finance. Over lunch, the students had the opportunity to network with professionals from the industry. Course Engagement In its pilot year, NYU Stern invited OFN to participate in Business and Its Publics, a mandatory freshman class. OFN served on a nonprofit executive panel that explored different types of nonprofit organizations and their business models and impact. Students asked numerous questions about capitalization, business models, and types of CDFIs. Internship Description & Process A key component of the OFP was the CDFI internships. The initial participating CDFIs committed to having one or more Stern students that participated in the OFP intern for the summer. In the pilot year, Stern committed a $2,000 stipend (each) to cover living costs for the duration of internship for up to 10 students to intern at CDFIs during the summer of 2014. The CDFIs had the option of providing additional compensation to the students, though this option was only available to US residents or students who had completed proper work authorization. OFN compiled a list of positions available at CDFIs. Students interested in internship submitted an application form to NYU Stern s OSE. On the forms, the students selected which CDFIs were their top choices and why they were interested in the opportunity finance industry. NYU Stern s OSE reviewed and screened applications and provided a list of up to five students per CDFI to interview. CDFIs interviewed students by phone or in person on the NYU campus, and made an offer to the student they selected. The matching process continued until a student accepted an internship. In the first pilot year of the OFP, 10 students were placed at the seven participating CDFIs. 10
NYU Stern Student Comments about Internships I think that marketing this program to younger students is an excellent strategy, not only because they are in a better place to take advantage of something new and atypical, but also because this program provides the knowledge that there are plenty of opportunities available in finance other than the traditional ones like investment banking, sales and trading, etc. - Abby Lyall My boss takes me out to meet loan clients and board meetings, which was terrific. - Zhe Yu I learned a lot, not just about opportunity finance but also about web developing, credit unions, CDFIs, and other important areas. - Fernando Polit I cannot put into words what an incredible experience this was for me. I applied on a whim just to see what it was about and it ended up exceeding my wildest hopes. I learned so much during my time at [CDFI] and am hoping to continue working there at some point in my future. - Katie Anderson LESSONS LEARNED FROM THE OFP PILOT Given the success of the OFP during the 2013-2014 academic year, the program continued and expanded for the 2014-2015 academic year. Based on lessons learned from the pilot year, NYU Stern and OFN made some changes to the OFP to enhance the program s participation, learning, and visibility. Below are lessons learned and program enhancements based on the pilot program s experience. Concentration of OFP Activities The biggest programmatic change was to concentrate a number of the educational and information sessions into one week in mid-february, rather than schedule them throughout the fall and spring semester. NYU Stern and OFN believed that the concentration of these activities would engage a greater number of students, provide a more concentrated learning and networking experience for students, and generate greater interest in the internship opportunities. In the 2014-2015 academic year, there was a more concentrated effort made in marketing and educating the students about the one week of programming, titled the Opportunity Finance Week, held February 17-20, 2015. The mid-february timing also led directly into the applications for the internships at CDFI. Applications to intern at CDFIs increased in the second year of the program. Attached in the Appendix is an overview of key elements of the activities in the mid-february timeframe for Opportunity Finance Program in 2014-2015. 11
Conference/Seminar Opportunities The OFN Annual Conference was a great opportunity for students to learn more about the industry, participate in CDFI site visits, and network with CDFI professionals. Because the conference changes locations each year, it may be difficult for students to attend in certain years. NYU Stern and OFN have discussed the possibility of bringing seminars, leadership opportunities, and conferences locally to students on a regional basis, which could incorporate learning about various aspects of the industry, visiting local CDFIs, and networking with CDFI professionals. Finally, OFN recognized the value of having students attend the conference, and for the first time in 2015, has discounted registration rates for students. Best Practices for and Expansion of Internships Based on interviews with CDFIs and students, the internships were the most valuable experience to get hands-on knowledge about the industry. NYU Stern was able to expand the placement of students from 10 students at seven CDFIs in the summer of 2014 to 14 students at eight CDFIs in the summer of 2015. NYU Stern was able to continue to provide a stipend to the 14 students that participated. Recognizing the value of this work experience, NYU Stern has secured funding to place 20 students at CDFIs for the summer of 2016. The summer opportunities that were most fruitful were ones that had clear responsibilities, had a project plan, and provided opportunities to learn about the CDFI s mission, vision, and strategies. Below are a few best practices for summer work experience gained from the pilot experience: Best Practices for Internships Develop a clear project plan at the outset for the various projects the student will work on over the summer. Identify goals and deliverables for various projects. Provide the student with an overview of the department and how the assigned projects fit within the department and entire CDFI organization. Example of Project Plan Project Project Goal Student Role Supervisor Relevant Skills Provide opportunities for the student to learn about the CDFI s mission, vision, and strategy, and about the CDFI industry (e.g., read and discuss the organization s strategic plan or business plan; provide industry documents such as OFN s strategic plan; sit in on Board or Committee meetings; participate in a visit to a borrower). To supplement this learning, OFN began a summer webinar series for students working at CDFIs, and hosted two webinars in the summer of 2015. 12
Provide opportunities to work on projects with other students and/or junior staff at the CDFI. If the organization has multiple interns, consider creating a collaborative project where the students must work as a team. For example, OFN s 2014 summer interns collectively worked on a project to develop resources to support collaboration between CDFIs and institutions of higher learning (see the project deliverables at http:// www.ofn.org/cdfis-and-universities). Identify upfront one or more areas of professional development that the students would like to explore through the summer and suggest ways he or she can develop these skills. Bring students to meetings and calls to learn about various aspects of the team or organization. Assign tasks (e.g., note taking, research) to provide value-added work from their participation. Example of Intern Project Plan Related to Technical Skills Learn how to use pivot tables and other unique/useful functions in Excel Become proficient in database systems such as LMS and RPA; become proficient in identifying key information from documents to use in database systems Be able to critically analyze qualitative and quantitative information in both standard and creative ways Be able to succinctly, clearly and aesthetically present important information derived from analysis, research and/or general projects Related to Lending and Community Development Learn what makes a good investment both fiscally and in relation to social impact Become more familiar with the various stakeholders and their roles in community development including equity investors, for-profit corporations, standard banking institutions and governments Understand the long-term impact of community development investments made today; be able to justify community development as both a socially impactful and fiscally sound industry Related to Professional Development Develop further the ability to effectively learn from and communicate with co-workers and senior personnel Learn through the unique experiences, backgrounds and long-term visions of LISC employees Discover a favorite coffee flavor for enjoyable caffeine intake in the future through experimentation with the K-Cup machine Learn to focus on both short-term necessities and long-term goals when approaching work and projects Be able to thrive in a team-oriented environment by demonstrating accountability and providing useful input OFN initiated an internship bank (ofn.org/internship-bank) in 2015 where CDFIs can post various internship opportunities available in the summer or throughout the year. 13
Classroom and Student Club Engagement Based on learnings from the pilot, there is a tremendous opportunity to share more information about the opportunity finance industry with NYU Stern students. NYU Stern has an active club system, comprised of 24 student-run and industry-focused organizations, including two clubs that place an emphasis on social impact and overarching student-faculty organization called the Social Impact Council that helps students explore topics and careers in roles and industries that have social impact. Sharing information about the opportunity finance industry in the classroom and in clubs could be beneficial to students as they explore all aspects of business. CONCLUSION OFN and NYU Stern are excited to share the OFP program structure and lessons learned with the academic and CDFI communities so that other universities may replicate elements of the program. Beyond talent development, there are multiple ways that CDFIs can expand collaboration with institutions of higher learning, including research, CDFI capitalization, project development and financing, and board engagement.² We hope that this paper is one step in an ongoing process to expand the knowledge that students and university administrators have about the opportunity finance industry and to facilitate partnership opportunities between these communities. 2 A paper developed by OFN with generous support provided by the Jessie Ball dupont Fund, Partnerships for Community Impact: Higher Education and CDFIs Working Together, explores partnerships to strengthen the local community. Visit http://ofn.org/cdfis-and-universities to download the paper. 14
Appendix Opportunity Finance Program at NYU Stern (2014-2015 Academic Year) - Schedule of Events Opportunity Finance Week Tuesday, February 17 12:30pm to 1:45pm: Opportunity Finance Program Info Session Description: Freshmen, sophomores, and juniors will be invited to learn more about the Opportunity Finance Program, the internship application process, and the internships. 2:00pm to 4:30pm: Opportunity Finance Network Office Hours (Optional) Description: The OFN representative will be available to meet one-on-one with students for 15-20 minutes to answer questions about the opportunity finance industry. 5:00pm to 6:00pm: Industry Overview Description: A senior-level executive from OFN will take approximately 45 minutes to provide students with an overview of the industry. (If a borrower is able to attend, s/he will use some of this time to speak about his/her experience.) We will allow 10 to 15 minutes for questions, and then students will be invited to stay to connect with the professional(s) in attendance. Wednesday, February 18 5:00pm to 6:00pm: Industry Professional Panel Description: A moderated panel of four to six industry professionals will engage in an interactive 50 minute Q&A session with students about their experiences in the opportunity finance industry. Panelists will discuss their current positions, their career paths, and skill sets that are most critical to success in the industry. Panelists will be asked to stay up to 30 minutes after the event to network with students. 15
Thursday, February 19 5:00pm to 6:00pm: Student Panel Description: A moderated panel of four to six Stern students who participated in the 2013-14 OFP will engage in an interactive 50 minute Q&A session with students about their internship in the opportunity finance industry. Panelists will be asked to stay up to 30 minutes after the event to network with students. Friday, February 20 11:00am to 2:00pm: Case Walk-Through and CDFI Networking Event Description: From 11:00am to 1:00pm, professionals from the firm will present and walk through a real client deal. Students will work in groups with the professionals to analyze the case and answer the questions posed. From 1:00pm to 2:00pm, students and CDFI representatives will network over lunch. 16
OFP Timeline Week of February 23 February 26 February 27 Event Application deadline OSE application review Week of March 2 March 2 March 3-5 March 6 Event Approved applications distributed to CDFIs CDFI application review and selection Selected students invited to interviews Week of March 9 March 9-13 Event Student interviews Week of March 16 (Spring Break) March 16-20 Event CDFIs make decisions Week of March 23 March 23-27 Event CDFIs extend offers to students 17