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CDFIs are “private financial institutions dedicated to delivering responsible, affordable lending to help low-income, low-wealth and other disadvantaged people and communities join the economic mainstream” (see the Opportunity Finance Network). CDFIs include both for-profit and nonprofit institutions like community development banks, credit unions, loan funds, and venture capital funds. These institutions invest in communities by financing small businesses, microenterprises, nonprofit organizations, and commercial real estate and affordable housing. As of 2018, there were more than 1,100 CDFIs serving cities, rural areas, and Native American reservations.
CDFIs also serve as intermediaries that help commercial banks invest in low-income communities to meet their Community Reinvestment Act (CRA) requirements. Some Community Development Corporations and affordable housing developers operate CDFIs as part of their work (for example, the affordable housing developer Mercy Housing has an associated CDFI, Mercy Loan Fund).
Leading CDFI resources include the Opportunity Finance Network, the nation’s leading CDFI trade association, and the United States Treasury’s CDFI Fund, the federal government’s designated funding source for CDFIs. Established in 1994, the CDFI Fund provides financial and technical-assistance grants to certified CDFIs, and manages the New Markets Tax Credit program, among others. CDFIs must be certified through the CDFI Fund to access these programs. In 2013, the CDFI Fund distributed $172.6 million to CDFIs nationwide.
For more information on CDFI’s, check out this great video from the Opportunity Finance Network: