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- A community development financial institution (CDFI) serves disadvantaged communities.
- A CDFI can be a bank, credit union, or non-profit organization.
- There are CDFIs in every US state, Washington, DC, Puerto Rico and Guam.
A community development financial institution, or CDFI, can be a credit union, bank, or non-profit organization that helps underserved communities. Many CDFIs were founded to work alongside minority-owned financial institutions, which also serve local communities.
CDFIs are part of the US Department of Treasury's Community Development Financial Institutions Fund and have to complete a certification process. When a CDFI is fully certified, it can apply for financial awards and trainings offered by programs under the CDFI Fund.
Learn more about the role of CDFIs in the banking sector, and where you can find these institutions depending on where you live.
Why are CDFIs important?
CDFIs can provide necessary financial resources to low-income and disadvantaged communities. In 2021, 71% of all lending at CDFIs went to distressed or underserved communities, according to the CDFI Fund.
In the 2021 State of Latino Entrepreneurship, researchers from the Stanford Entrepreneurship Initiative said CDFIs play an important role in addressing the needs of underserved communities. Past research from the Standford Entrepreneurship Initiative also has found that Latino-owned small business owners were more successful at getting PPP loans from CDFIs than national banks.
CDFIs can help people regardless of their credit score or financial history, so you can still seek assistance and find loan opportunities.
What financial resources are available at CDFIs?
Financial resources can vary greatly depending on which type of CDFI you visit.
If you go to a bank or credit union, you'll have direct access to financial products and services. Just like any other financial institution, you'll be able to open a personal bank account, apply for a loan, or get an individual retirement account. Some may even offer international banking products or second chance bank accounts.
Meanwhile, non-profit loan funds work as intermediaries in providing financial resources. They'll provide financial education and connect you with credit unions and banks where you can get the products and services you need.
For example, Inclusiv is a non-profit CDFI that works with credit unions. Through its Juntos Avanzamos initiative, credit unions must have a holistic approach to banking. Inclusiv will provide a Juntos Avanzamos designation if a credit union is inclusive of immigrant and Hispanic American communities.
Non-profit CDFIs can be a great first step if you live in an area that doesn't have many banks, or you feel like you have limited financial opportunities.
Should you use a CDFI?
CDFIs can be a good pick if you prefer a local banking experience. Since CDFIs are based in underserved communities, they'll often provide more flexible lending options than national banks. If you've struggled to open a bank account in the past, some CDFIs offer second chance bank accounts, which are bank accounts that do not require a credit check. You may also pay fewer fees on bank accounts. Some of the CDFIs we've reviewed have free checking or savings accounts, which means you won't have to pay monthly service fees.
CDFIs are also a worthwhile option if you want to learn more about personal finance. Many offer financial literacy education or will point you to places that offer it.
You'll want to look elsewhere if you prioritize a large ATM or branch network, though. Most CDFIs have branches and ATMs in a few cities or states. There aren't any national CDFIs that are available throughout all 50 states. However, there is at least one certified CDFI in every US state, Washington, DC, Guam, and Puerto Rico.
Where can I find a CDFI near me?
Currently, there are more than 1,400 CDFIs across all 50 states. Some CDFIs are also minority-owned banks and credit unions.
The number of CDFIs per state varies. Some states like California, New York, Louisiana, and Missouri have significantly more options than others. If you don't see a CDFI near where you live, don't be deterred. The CDFI Fund's list has additional options, and the amount of CDFIs has increased by more than 1, 200 in the last 26 years.