WASHINGTON - Judith Knight wants to convince all bankers that community reinvestment is good business - not a compliance nightmare.

Ms. Knight, who took over as director of the American Bankers Association's Center for Community Development last month, plans to drive this point home with bankers as well as policymakers.

"This is a profit-making business," Ms. Knight said in an interview. "Community investment has a return beyond compliance."

Last month, the ABA moved the center under its government relations wing. In its first 2#1/2 years, the center concentrated on designing community development products and services, such as schools and software.

The center will still offer products, but it will become more issue- oriented, serving as the primary resource base for ABA lobbyists on community development matters.

"We will have a voice in affecting policy," Ms. Knight said.

Edward Yingling, the ABA's executive director of government relations, said the center will help coordinate the group's policy development.

"The center will provide ideas and a sounding board" for the lobbyists, he said.

The center's change in focus was spurred by industry angst over Community Reinvestment Act reform and stepped-up enforcement of fair- lending laws.

Ms. Knight refused to talk in detail about what role the center will play on these burning issues.

Prior to her appointment as director, the position had been vacant since Ronald Weldon Tigner left in September to become deputy director of community development at the Office of the Comptroller of the Currency.

Beyond persuading bankers that community development lending can be profitable, one of Ms. Knight's first priorities is to promote small business lending as a vital part of community reinvestment.

The center has set up a task force to help bankers understand and meet the capital needs of low-income and moderate-income small business owners.

"Access to credit is not just mortgage lending, it is small business development," Ms. Knight said.

Small business lending was singled out because, Ms. Knight said, it has been overshadowed by an emphasis on mortgage lending for the past few years.

Although in her job less than a month, Ms. Knight, 45, is no stranger to community development. She was ABA's housing and real estate senior legislative representative for the past year. From 1990 to 1994, Ms. Knight managed federal relations at the Federal Home Loan Mortgage Corp.

"Judith's knowledge of, and commitment to, community development will put the center in the forefront of creating innovative and safe and sound ways to meld banking services with communities," said Donald G. Ogilvie, ABA executive vice president, in announcing her appointment.

In an interview, Ms. Knight said the main roadblocks to community development lending are lack of access to equity, especially for smaller banks, and an inability to find the right partners.

Part of Ms. Knight's plan is to teach bankers how to change with a community development environment that is constantly in flux.

For example, she said, bankers need to realize that a potential customer is not necessarily a bad risk just because he has had many addresses and many jobs. People move more these days, she said.

"There's not the same affinity for place that there used to be," Ms. Knight said.

Bankers also need to serve their communities by helping to assimilate immigrants, Ms. Knight said.

Developing products, such as the center's data base of CRA success stories and video guide to fair lending, will remain important, she said. The annual community development lending conference will continue, with the next one scheduled for May 15-17 in Washington.

The center also will continue a program started last year with South Shore Bank in Chicago to train community development leaders.

While Ms. Knight now has a four-person staff, that may change. "If we do our job well, we may be forced to grow," she said.

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