What is a Community Development Financial Institution (CDFI)?
A Community Development Financial Institution (CDFI) is a specialized financial institution that provides financial services and products to underserved markets and populations. CDFIs are typically non-profit organizations that are certified by the U.S. Treasury Department’s CDFI Fund. CDFIs provide access to capital, credit, and financial services to low-income individuals, small businesses, and communities that are often overlooked by traditional financial institutions. CDFIs are mission-driven organizations that focus on creating economic opportunity and promoting community development.
History of Community Development Financial Institutions
CDFIs have been around since the 1970s, when the first CDFI was established in California. Since then, the number of CDFIs has grown steadily, with more than 1,000 CDFIs operating in the United States today. CDFIs have become increasingly popular as a way to provide access to capital and financial services to underserved markets and populations. The U.S. Treasury Department’s CDFI Fund was established in 1994 to provide grants and technical assistance to CDFIs. The CDFI Fund has provided more than $2 billion in grants and loans to CDFIs since its inception.
Comparison of CDFIs and Traditional Financial Institutions
| CDFIs | Traditional Financial Institutions |
|---|---|
| Mission-driven | Profit-driven |
| Focus on underserved markets and populations | Focus on mainstream markets and populations |
| Provide access to capital, credit, and financial services | Provide access to capital, credit, and financial services |
| Certified by the U.S. Treasury Department’s CDFI Fund | Regulated by the Federal Reserve and other government agencies |
Summary
Community Development Financial Institutions (CDFIs) are specialized financial institutions that provide financial services and products to underserved markets and populations. CDFIs are typically non-profit organizations that are certified by the U.S. Treasury Department’s CDFI Fund. CDFIs provide access to capital, credit, and financial services to low-income individuals, small businesses, and communities that are often overlooked by traditional financial institutions. For more information about CDFIs, visit the U.S. Treasury Department’s CDFI Fund website or the National Federation of Community Development Credit Unions website.
See Also
- Microfinance
- Social Finance
- Impact Investing
- Community Investment
- Social Entrepreneurship
- Financial Inclusion
- Financial Literacy
- Alternative Banking
- Community Banking
- Fair Lending
