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What is Community Development Financial Institutions?
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What Are Community Development Financial Institutions?
CDFIs are banks and credit unions that provide financial services to people who are typically excluded from financial institutions.
By Amber Murakami-Fester Amber is a former bank writer for NerdWallet. Her work has been highlighted on USA Today, The Christian Science Monitor and The Associated Press. She has a bachelor's degree in comparative literature from UCLA.
Updated Mar 4, 2022
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If you're looking for affordable loans or bank accounts, and haven't had success previously, community development financial institutions could be able to help.
What exactly are CDFIs?
CDFIs, also known as community development financial institutions or CDFIs are mostly banks and credit unions that concentrate on serving people in communities of low income that have historically been excluded from the financial system. In contrast to other financial institutions, CDFIs do not rely on credit scores when providing loans and other products.
Additionally, they focus on creating long-term relationships with people of the community to help them gain financial literacy set savings goals, build credit and access low-cost loans. CDFIs can also be loan funds or venture capital funds that have communities-focused missions.
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Find out how to locate an institution that has great customer service for you , and an aim to make the world better for everyone.
A closer look at CDCUs
Community development credit unions, or CDCU is a type of credit union that is a member of Inclusiv which is a non-profit national association of CDCUs that has existed since 1974. Inclusiv coined the term "CDCU" and began to support credit unions that were mission-driven over two decades prior to the time that the federal government introduced its CDFI certification. (See an .)
CDCUs are able to fulfill a similar mission to CDFIs but "CDCUs have a broader mission that revolves around financial inclusion. The CDFI certificate is an gauge of lending activity" states Pablo DeFilippi, senior vice president of membership at Inclusiv. "CDCUs are able to do this and much more."
CDCUs are also CDFIs, but not all are. Smaller CDCUs might have less funds to invest in CDFI approval or grants-writing. "Part of our role at Inclusiv is to help [membersget CDFI-certified" in case they're not already, says DeFilippi.
What is the function of CDFIs?
To help those who aren't being served by the mainstream banking system, Congress created community development banking in 1994.
In the U.S. Treasury, CDFIs are often able to offer low-cost loans for first-time buyers of homes and loans to small companies. They may also provide small credit-builder loans that are designed to assist consumers build credit. The ability to extend credit across the community helps promote the stability and health of the local economy.
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CDFIs specialize in "communication regarding the appropriate [financialproduct at the appropriate time for a consumer. It's as much of a plan as it is art" DeFilippi says "You're really placing yourself in their shoes."
Get your
CDFIs can save you money for those who need it most. For instance, if you require a loan of $500 but can't qualify for a traditional bank loan, you could apply to a payday lender could offer a loan with the rate of 400% a year. With the rate of a CDFI one who doesn't have an excellent credit score could be able to get the loan at an 18% interest rate. That can help save hundreds of dollars on interest.
To locate the nearest CDFI banks or credit union within your area you can look through the state-by state list below. To find a more comprehensive list, visit the .
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
None
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
None
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Author bio: Amber Murakami is a former banking writer for NerdWallet. Her writing has been featured on USA Today and The Christian Science Monitor.
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