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What is a Community Development Loan?

Community development financial institutions (CDFIs) are lenders that seek to provide fair and responsible financing to people and communities that traditional finance usually does not reach or deems too risky.

COMMUNITY DEVELOPMENT • IMPACT INVESTING • AFFORDABLE HOUSING

 They specialize in lending to individuals, organizations and businesses in under resourced communities to support community development activities. This could include:

  • Support for affordable multifamily housing for low or moderate-income individuals
  • Support for community facilities
  • Economic development through financing small business or farms
  • Suppling underserved communities with traditional banking services like saving accounts and personal loans
  • Financial assistance for education

 

Ultimately, the benefits of these loans are multifaceted and highly impactful as they create new small businesses, living wage jobs, development of schools, grocery stores, health care centers, access to homeownership, and more.

Further, as loans are repaid, CDFIs will recycle the money back into the community to new borrowers, providing a multiplier effect on local economies.

History & Current Impact of CDFIs

CDFIs took shape around 1970 when the government started programs to more formally address both poverty and racial discrimination. With early success from these programs, CDFIs started to look to private funding sources for capital.

With additional government support in the 1990s and a strong record of success, the CDFI industry has expanded dramatically to over 1,300 certified CDFIs nationwide managing $222 billion in assets for the creation of jobs, affordable housing, financial health and greater opportunities for individuals. These impact investment are a great way for investors to directly create positive change to a specific community, city or region.

CDFIs have created a vital funding source for individuals that are overlooked by traditional banking institutions.

 

Source: OFN Annual Member Survey, FY 2020

Citizen Mint believes CDFIs play a critical role in creating economic growth and opportunity in many of the nations most underserved and distressed communities.

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