A Community Development Financial Institution, or CDFI, is a private financial entity focused on delivering responsible and affordable financial services to economically disadvantaged and underserved communities. Certified by the U.S. Department of the Treasury’s CDFI Fund, these institutions must demonstrate a primary mission of community development and serve specific target markets such as low-to-moderate income individuals, minority- or women-owned businesses, or rural communities.
Unlike traditional banks, CDFIs often provide more flexible lending solutions and financial education, offering loans, investment capital, and banking services tailored to the unique needs of their communities. This specialization allows them to extend credit to businesses and individuals who might be declined by conventional lenders, helping to build local wealth and support economic growth.
CDFIs come in several types, including community development banks, credit unions, loan funds, and venture capital funds, each offering different services:
- Community Development Banks: Regulated banks providing traditional banking services with a community focus.
- Community Development Credit Unions: Member-owned non-profits offering affordable personal loans and banking products.
- Community Development Loan Funds: Non-profit lenders supporting small businesses, affordable housing, and community facilities.
- Community Development Venture Capital Funds: Providing equity investments to help small and growing businesses in distressed areas.
To become certified, an institution must direct at least 60% of its activities to eligible target markets and uphold its community development mission, as outlined on the CDFI Fund’s official site. Certified CDFIs access federal funding, which they combine with private investments to increase their lending capacity.
Common misconceptions include the belief that CDFIs are charities—they are not. They are mission-driven lenders that operate sustainably, expecting repayment and offering fair, competitive interest rates often lower than predatory alternatives.
If you want to locate a certified CDFI to support your small business or personal financial needs, use the CDFI Fund’s searchable database.
For related financial assistance resources, explore our glossary entries on Women-Owned Business Loan, Minority Business Loan, and Small Business Lending Fund.
Understanding CDFIs can empower you to access fair financial tools designed to foster economic inclusion and community revitalization.