For a community to thrive economically it requires access to basic financial services, affordable credit, and investment capital. Yet historically, for low-income communities and individuals, that access has been limited.
What are CDFIs?
Community Development Financial Institutions (CDFIs) share a common goal of expanding economic opportunity in low-income communities by providing access to financial products and services for local residents and businesses.
CDFIs can be banks, credit unions, loan funds, microloan funds, or venture capital providers. CDFIs are helping families finance their first homes, supporting community residents starting businesses, and investing in local health centers, schools, or community centers. CDFIs strive to foster economic opportunity and revitalize neighborhoods.
Each business financed, each job created, and each home built represents a critical step in the transformation of a life, a family, and a community.
History of CDFIs
Beginning in the 1880s when the first minority-owned banks focused on low-income areas, community organizations have developed to provide needed financial services. From the creation of credit unions in the 1930s and 1940s and community development corporations beginning in the 1960s and 1970s, to the more recent emergence of nonprofit loan funds in the 1980s, the predecessors to CDFIs sought to better the conditions in these economically underserved markets.
To support the emerging community development financial institutions, the Community Development Financial Institutions Fund was established by the Riegle Community Development and Regulatory Improvement Act of 1994. The CDFI Fund’s purpose is to promote economic revitalization and community development in low-income communities through investment in and assistance to CDFIs.
What Does the CDFI Fund Do?
The CDFI Fund plays an important role in generating economic growth and opportunity in some of our nation’s most distressed communities. By offering tailored resources and innovative programs that invest federal dollars alongside private sector capital, the CDFI Fund serves mission-driven financial institutions that take a market-based approach to supporting economically disadvantaged communities. These mission-driven organizations are encouraged to apply for CDFI Certification and participate in CDFI Fund programs that inject new sources of capital into neighborhoods that lack access to financing.