What Are Community Development Financial Institutions?

CDFIs are banks and credit unions that accommodate people who are traditionally locked out of financial systems.
Amber Murakami-Fester
By Amber Murakami-Fester 
Edited by Carolyn Kimball Reviewed by Kathleen Burns Kingsbury

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If you’re looking for affordable loans and bank accounts and haven’t had luck in the past, community development financial institutions might be able to help.

What are CDFIs?

Community development financial institutions, or CDFIs, are primarily banks and credit unions that focus on serving people in low-income communities that have historically been locked out of the financial system. Unlike other financial institutions, CDFIs rely less on credit scores when providing loans and other products.

In addition, they emphasize developing long-term relationships with members of the community to help them gain financial literacy, establish savings goals, build credit and access affordable loans. CDFIs can also be loan funds and venture capital funds with community-oriented missions.

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A closer look at CDCUs

A community development credit union, or CDCU, is a credit union that’s a member of Inclusiv, a nonprofit national association for CDCUs since 1974. Inclusiv coined the term “CDCU” and started supporting mission-driven credit unions two decades before the federal government created the CDFI certification. (See a list of CDCUs.)

CDCUs share a mission similar to that of CDFIs, but “CDCUs have a broader mandate around financial inclusion. The CDFI certification is a measure of lending activity,” says Pablo DeFilippi, senior vice president of membership at Inclusiv. “CDCUs do that and [more].”

CDCUs can also be CDFIs, but not all are. Smaller CDCUs may have fewer resources to go toward CDFI certification or grant-writing. “Part of our role at Inclusiv is to help [members] become CDFI-certified” if they aren’t already, says DeFilippi.

How do CDFIs work?

To help consumers who aren’t served by the mainstream banking system, Congress created community development banking in 1994.

As part of the U.S. Treasury, CDFIs are often able to offer low-cost mortgages for first-time home buyers and loans for small businesses. They can also offer small credit-builder loans designed to help consumers rebuild their credit. Extending credit throughout the community helps promote a stable and healthy local economy.

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CDFIs specialize in “communication about the right [financial] product at the right moment for [a] consumer. It’s as much a plan as it is art,” says DeFilippi, “You’re really putting yourself in their shoes.”

CDFIs can help save money for those who need it most. For example, if you need to borrow $500 but can’t qualify for a conventional bank loan, a payday lender might offer a loan at an interest rate equivalent to 400% a year. At a CDFI, someone lacking a strong credit score might successfully apply for a loan at an 18% interest rate. That can save hundreds of dollars in interest.

To find a CDFI bank or credit union in your area, check the state-by-state list below. For a fuller list, visit the CDFI Fund website.



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