Community development financial institution

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A Community Development Financial Institution (CDFI), is a category of American financial institution, which provide credit, financial services, and other services to underserved markets or populations. A CDFI may take one of four different forms: bank (community development banks), credit union (community development credit unions - CDCUs), loan fund (community development loan funds - CDLFs, including microloan funds), or venture capital company (community development venture capital funds - CDVC).[1]

CDFIs are certified by the Community Development Financial Institutions Fund at the U.S. Department of the Treasury, which provides funds to CDFIs by a variety of programs. The CDFI fund and the legal concept of CDFIs were established by the Reigle Community Development and Regulatory Improvement Act of 1994. Broadly speaking, a CDFI is defined as a financial institution that: has a primary mission of community development, serves a target market, is a financing entity, also provides development services, remains accountable to its community, and is a nongovernment entity.

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[edit] Scope

In 2006, there were approximately 1250 CDFIs, consisting of:[2]

  • More than 500 community development loan funds;
  • More than 350 community development banks;
  • More than 290 community development credit unions;
  • More than 80 community development venture capital funds.

Nationwide, over 1000 CDFIs serve economically distressed communities by providing credit, capital and financial services that are often unavailable from mainstream financial institutions. CDFIs have loaned and invested over billions in our nation’s most distressed communities. Even better, their loans and investments have leveraged billions more dollars from the private sector for development activities in low wealth communities across the nation.

While there are numerous organizations certified as CDFIs by the CDFI Fund, it is believed that there are thousands of financial institutions serving the needs of low-income people or communities in the U.S., but either have not applied for CDFI status or have otherwise not been able to fulfill all of the requirements for formal CDFI certification.

[edit] Notable CDFIs

ShoreBank, headquartered in the South Shore neighborhood of Chicago, was founded in 1973. It is the largest CDFI, with over $2 billion in assets.[1] ShoreBank has branches in Chicago’s South and West sides, Cleveland, and Detroit. Through its holding company ShoreBank Corporation, ShoreBank promotes its community development mission through affiliates in Oregon and Washington state, and in Michigan’s Upper Peninsula. ShoreBank’s international consulting services have offices in Chicago, Washington, D.C., and London, and projects in 30 countries around the world.

OneUnited Bank, headquartered in Boston, MA is the largest African-American owned CDFI in the country and focuses on serving and developing urban communities. The Bank has achieved consistent profitable growth through both bank acquisitions of similar mission driven banks and organic loan and deposit growth. The Bank has provided innovative products and services to fulfill its community development mission in the urban communities of Boston, Massachusetts, Miami, Florida and Los Angeles, California. OneUnited Bank continues to be integrated into the social and economic fabric of each of these communities in every respect from not-for-profits, small business, affordable housing, churches, etc.

The Center for Community Self-Help, another leading CDFI, was founded in 1980 in Durham, North Carolina. Self-Help's home and business lending has provided low-wealth, minority, rural and female borrowers with over $5.24 billion in financing.[2] Much of this is through Self-Help's national secondary market program, which enables conventional lenders to make more home loans to low-wealth families. Self-Help also develops commercial and residential real estate and operates retail credit unions. In response to predatory lenders increasingly targeting family wealth in poor and minority communities, Self-Help in 1999 worked with the NAACP, AARP and other North Carolina groups to form the Coalition for Responsible Lending and help enact one of the US's first laws to curb predatory mortgage lending.[3] In 2002, Self-Help founded the Center for Responsible Lending, a nonprofit, nonpartisan research and policy organization that recommends solutions to predatory lending abuses.[4]

Other CDFIs include:

[edit] Other countries

While the CDFI Fund and its certifications are limited to the U.S., institutions similar in purpose exist around the world, such as Grameen Bank in Bangladesh or the recently created Fair Finance Consortium in the UK, a collaboration of 11 financial institutions with focused on improving access to alternative forms of finance within disadvantaged areas.

[edit] Resources

There are a number of trade associations and other resources applicable to the CDFI industry. For more information, see:

[edit] References

  1. ^ The Four Sectors of the CDFI Industry, Opportunity Finance Network
  2. ^ Industry Statistics, Opportunity Finance

[edit] External links

Retrieved from "http://en.wikipedia.org/wiki/Community_development_financial_institution"