A CDFI is a for-profit corporation that provides capital to economically distressed communities. The board of directors includes community representatives. They are regulated by the Federal Deposit Insurance Corporation, the Federal Reserve, the Office of Comptroller of the Currency, and state banking agencies. Unlike traditional banks, CDFIs are FDIC-insured.
One example is the Enterprise Community Loan Fund, one of the largest nonprofit community development financial institutions in the country. The ECLF blends financial discipline with deep expertise to provide loans to disadvantaged communities. The nonprofit also invests in neighborhood resources such as affordable housing and healthy food. Its mission is to strengthen communities by strengthening neighborhoods.
CDFIs have been growing in size and scope since the 1990s. In 1993, there were only 300 of them operating, but by 2000, there were 550 CDFIs, managing $6 billion in assets. Growth has been driven in part by increased CRA enforcement, but there are other factors as well. Federal programs like The CDFI Fund help fund the CDFIs and banks that invest in them. To date, the CDFI Fund has allocated approximately $350 million to CDFIs.
Community Development Financial Institutions (CDFIs) are nonprofit financial cooperatives owned by their members. In 2013, CDFIs provided $168 billion in loans to small businesses and consumers, financed 33,000 affordable housing units, and provided financial literacy training to 343,471 people. These institutions are not a monopoly, and are supported by government funding and the private sector.
Community Development Financial Institutions can be a great resource for people in underserved communities. They are committed to helping people improve their lives and become self-sufficient. These institutions focus on innovative lending practices and educational efforts. This helps these communities grow as a whole. This type of financial institution provides much needed resources for local communities and businesses.
Community Development Financial Institutions (CDFIs) provide low-cost business loans to people in communities in need. These loans enable people to buy their first home or start a local business. They also provide loans for nonprofit organizations to build community facilities and launch critical community programs. They have also played a pioneering role in community wealth building. For example, the Healthy Food Financial Initiative was started by a CDFI in Pennsylvania, while the New Hampshire Community Loan Fund pioneered and expanded lending to community owned manufactured housing cooperatives.
CDFIs are an important part of the community development finance landscape, but why are they not having a larger presence? Why isn’t the CDFI industry doing more to support and strengthen existing CDCUs? According to Tansey, CDCUs offer the best replicable model for providing affordable financial services to low-income communities. There are many reasons, but the primary one is the economics.
While community development finance does not exist in isolation, it is vital to connect the sector with community resources and leaders. It is important to remember that CDFIs represent borrowers, investors, and local elected officials. They can also advocate for workers and local residents.