CDFI: More Than Just Another Acronym

First Southwest Bank • September 25, 2018

Hold that yawn. I know as soon as you see a blur of consonants, something happens to your eyelids. They droop a little, and your attention gets pulled anywhere but here. So stick with me. I'm going to give you the quick and dirty on what exactly a CDFI is, and why it’s super cool.

What is a CDFI?

A CDFI consists of four loaded words: Community Development Financial Institution.

How long have CDFIs been a thing?

The concept of a CDFI is as old as the railroad, but it became a formal club in the early 1990s.

What's the point of a CDFI?

In short, CDFIs exist to spur economic development in areas most in need of it by focusing on services central to revitalizing poor and working class communities. Money allocated through CDFIs boosts small businesses; supports education, financial literacy and early child care; promotes sustainable energy and access to healthy food; invests in community infrastructure; and often serves as a solution for affordable housing.

Is it like a non-profit?

Sometimes. While CDFIs can be non-profits, they don’t have to be. In fact, some of the most impactful CDFIs are for-profit because this allows them to be self-sufficient. They can focus on their important work, rather than rely on finicky outside funding sources. As CDFIs like to say, “no margin, no mission.”

Where does the money come from?

Depending on the type of CDFI, funding can come from a variety of sources. For example, CDFI Loan Funds may receive their awards from corporations or private foundations. Meanwhile, CDFI Banks often receive their funds in the form of deposits from their customers.

How much do I, the taxpayer, pay each year to support the CDFI Fund?

According to the CDFI Coalition, each American pays $.79 a year to the federal CDFI Fund, and, in 2016, your dollar helped CDFIs across the country launch 36,000 jobs, provide 11,000 business loans and finance 24,000 affordable housing units.  

Are all CDFIs the same?

Sort of. All CDFIs share a market-driven mission to develop their local communities by enabling the disadvantaged to become self-sufficient, but the structure of lending goals varies. The most common CDFIs are CDFI banks, CDFI credit unions, CDFI loan funds and CDFI venture capital entities.  

How many CDFIs are there?

The CDFI Fund certifies over 950 CDFIs in all 50 states and Washington, D.C.

How many CDFIs are in Colorado?

15. Of those, there are only two CDFI banks in Colorado, one based in Denver and one serving rural Colorado. Colorado CDFIs leveraged $40.3 million of Treasury Funds (awarded through the CDFI Fund) to inject over $400 million into Colorado's economy. Click here to read more.

How many CDFI-certified banks are there in the country?

Specifically, out of 6,300 banks in the United States, only 125 of them are CDFI-certified. In order to be considered for CDFI certification, 60-percent of a bank's loan portfolio must serve CDFI designated investment areas. Simply put, designated investment areas have high poverty rates, low income or high unemployment.   

Where is the nearest CDFI-certified bank?

The only bank in Southwest Colorado and the Four Corners region that is CDFI-certified is First Southwest Bank (FSWB). FSWB is proud to be the only CDFI-certified bank west of the Rocky Mountains.  Click here to read how FSWB invests in the community as a CDFI.

What's the coolest thing about a CDFI?

Great question. CDFIs are trailblazers in their communities. They're flexible enough to creatively adapt to the lending needs of borrowers. For instance, they often accept unconventional collateral for loans. If you have a project that feels stuck, reach out to FSWB to see how they can help!