CDFI Impact Blog

 

 

Why We are Re-examining CDFI Certification https://www.cdfifund.gov/impact/Lists/Posts/ViewPost.aspx?ID=21Why We are Re-examining CDFI Certification <div class="ExternalClass4149CA318681437AA4D120AC2026F4C9"><p>In October 2016, the CDFI Fund released a five-year strategic plan.  <a href="/Documents/Final%20Strategic%20Plan%20102516.pdf" target="_blank"> You can read the plan here</a>.  One of the opportunities we saw was the need to re-examine our CDFI certification policies so that the certification reflects the flexibility needed to reach effectively into every community that CDFIs can serve - to more nimbly respond to changes in the financial services sector while still adhering to the primary mission of community development.</p><p>We believe that engagement of the CDFI Fund network, practitioners, and the public is a vital part of this effort, so we are calling for the public’s thoughts and ideas about CDFI Certification.  On January 6, the CDFI Fund issued a Request for Information (RFI), which was published in the <a href="https://www.gpo.gov/fdsys/pkg/FR-2017-01-09/pdf/2017-00013.pdf" target="_blank">Federal Register</a>. </p><p>Certification as a CDFI is the first step many community–based organizations take to access CDFI Fund programs and training.  Since the CDFI Fund certified its first CDFIs more than 20 years ago, their population has grown from just under 200 certified organizations in 1997 to more than 1,000 today, with total combined assets in excess of $100 billion.  While this is great news, the financial sector continues to evolve and there remains room for growth of the CDFI Fund network. Having the right certification policies will aid in this effort.</p><p>CDFI investment and lending activity touches just about every facet of finance—including lending to microenterprises and entrepreneurs; commercial and residential real estate; infrastructure investment; and financial literacy training and counseling—all of which focus on providing access to critically needed capital and credit to businesses and families overlooked by the greater economic mainstream.  Last year alone, CDFIs originated over $3.6 billion in loans and investments; financed 33,500 units of affordable housing; and made loans to over 11,000 small businesses.  This growth is a reflection of the critical demand for the vital financial services provided by CDFIs, as well as the impact they have in underserved communities. </p><p>CDFIs have matured and evolved over the past two decades, as have the tools and opportunities available to them.  The processes and policies of CDFI certification, originally established in the 1990s, need to ensure that CDFIs are able to develop operating models, products, and services to take advantage of these new tools and opportunities in order to meet the needs of underserved and distressed communities while still meeting the statutory requirements for certification.</p><p>The CDFI Fund has heard from organizations that are having difficulty utilizing new tools and growing to scale while still maintaining their CDFI certification under existing policies.  For example, new financing technologies create the potential for mission-driven organizations like CDFIs to extend their reach and impact in order to improve access to financial products and services for underserved communities and populations wherever they are. </p><p>This raises questions, however, of whether CDFI certification – particularly in terms of a CDFI’s ability to define a Target Market and demonstrate accountability to that Target Market – is currently designed to enable such scope, which was neither possible nor envisioned when the certification criteria were first established. </p><p>For instance, there may be a certified CDFI that has long worked in a local or statewide Investment Area that is growing in volume of activity as well as in the sophistication of their financing operation.  However, if this CDFI upgrades its technical ability and begins to underwrite products for customers nationwide, in areas far beyond its historic geographic footprint, it may create a challenge for the CDFI to maintain its CDFI certification. </p><p>To meet the accountability test for CDFI certification, CDFI Fund policy currently requires the CDFI to include members on its governing and/or advisory board(s) who are residents or otherwise that can represent the needs of the residents of the CDFI’s Investment Area and/or the CDFI’s Targeted Population(s).  Although the CDFI in this example historically has provided appropriate accountability through its governing board, it now would be challenged to include sufficient representation to demonstrate accountability to the communities it would be serving with a nationwide Investment Area.  However, the CDFI is still a mission-driven organization, and the increased volume from an expanded geographic market will likely strengthen their ability to further achieve their mission. </p><p>To help explore circumstances such as this one, the CDFI Fund is seeking feedback on questions such as “How should a CDFI demonstrate accountability to a national Target Market, in particular an Investment Area national in scope?   Should there be a requirement to have local accountability to supplement a national governing or advisory board?  In this context, how should the term “local” be defined?”</p><p>The CDFI Fund will tackle these and other questions – such as how the primary mission test should be met or what the criteria should be for serving Investment Areas and Targeted Populations -- when reviewing the certification criteria. </p><p>CDFI Certification represents the backbone of the nation’s on-the-ground community development finance infrastructure, and there is an enduring need to ensure this network is relevant, responsive, reliable, and representative of the CDFI Fund’s community development mission.  We hope to receive thoughtful feedback from CDFIs, community development practitioners, and the general public on how we can improve and modernize the CDFI certification process.</p><p><a href="https://www.gpo.gov/fdsys/pkg/FR-2017-01-09/pdf/2017-00013.pdf" target="_blank">View the full Federal Register notice here</a>.  Comments are due by March 10, 2017. </p><p><i>David Meyer is the Manager of the CDFI Fund’s Office of Certification, Compliance Monitoring and Evaluation. </i></p> </div>2017-01-18T20:06:00ZPrograms and Initiatives21GP0|#381b3368-a6d1-4ab9-9f3d-370d1a7e113c;L0|#0381b3368-a6d1-4ab9-9f3d-370d1a7e113c|Framework for the Future;GTSet|#52f34ab0-6f81-4fe6-b393-2715c7089532;GP0|#c8a5d5bc-32cc-47a9-88a8-702f1f974786;L0|#0c8a5d5bc-32cc-47a9-88a8-702f1f974786|CDFI Certification
CDFI Fund Director Donovan Participates in National Small Business Weekhttps://www.cdfifund.gov/impact/Lists/Posts/ViewPost.aspx?ID=23CDFI Fund Director Donovan Participates in National Small Business Week<div class="ExternalClassA53793876EB8467486890F17060B44BE"><p>Small businesses are key to our economy, significantly contributing to job growth and income in the U.S. According to the U.S. Small Business Administration (SBA), more than half of Americans either own or work for a small business, and they create about two out of every three new jobs in the U.S. each year. </p><p>Community Development Financial Institutions (CDFIs) and Community Development Entities utilize the CDFI Fund’s various programs to finance small businesses and support entrepreneurship and job creation in underserved communities nationwide. Since 2009, CDFI Program awardees have originated 88,173 small business <a href="#loans">loans</a> totaling $3.28 billion. The New Markets Tax Credit Program has also provided funding for 691 projects for small businesses totaling $276,501,094 since Fiscal Year 2003.</p><p>In recognition of <a href="https://www.sba.gov/nsbw/" target="_blank">National Small Business Week </a>and to highlight how CDFIs and CDEs help create and sustain small businesses, CDFI Fund Director Annie Donovan visited Rito Loco, a food truck to store front success story, and their CDFI partner, the <a href="http://ledcmetro.org/es/about-ledc/mission" target="_blank">Latino Economic Development Center</a> (LEDC), both of which are based in Washington, DC.</p><p>Danny Diaz and Louie Hankins started <a href="https://ritoloco.com/" target="_blank">Rito Loco </a>in 2012 (Rito is short for burrito). After a wildly successful ride with the food truck, the two partners decided to open a brick-and-mortar location in Washington, DC’s Shaw neighborhood in August of 2015. In September of 2016, Dan and Louie approached LEDC for support to expand the restaurant and make other capital improvements. </p><hr /><p style="width:48%;text-align:center;font-size:9pt;margin-right:1%;margin-bottom:0.5em;float:left;"> <img src="/SiteCollectionImages/Project%20Images/RitoLoco%20Site%20Visit%202.png" alt="" style="width:100%;" />Rito Loco Co-Owner Louie Hankins shares the rooftop expansion plans.</p><p style="width:48%;text-align:center;font-size:9pt;margin-right:1%;margin-bottom:0.5em;float:left;"> <img src="/SiteCollectionImages/Project%20Images/RitoLoco%20Site%20Visit%201.png" alt="" style="width:100%;" />LEDC Executive Director Marla Bilonick discusses their financing of Rito Loco with CDFI Fund Director Donovan.</p><p style="clear:both;"> </p><hr /><p>Director Donovan and LEDC Executive Director Marla Bilonick visited with Louie at Rito Loco’s soon-to-open new rooftop. LEDC’s $20,000 construction bridge loan filled a critical financing gap. Now, Rito Loco will triple the capacity of the restaurant and hire five to eight new employees. In addition to the bridge loan, LEDC helped Dan and Louie with technical assistance navigating the DC’s Great Streets capital improvement grant program. Overlooking the now bustling Shaw neighborhood, the three discussed the challenges and rewards of running a small business.</p><p>Please visit these links to learn how the <a href="/Documents/CDFI_infogrpahic_v03Aaf.pdf" target="_blank">CDFI Fund’s programs work </a>and <a href="/Documents/CDFI_7374_infographics_final.pdf" target="_blank">how the CDFI Fund’s programs can help your community;</a> or visit our website at <a href="http://www.cdfifund.gov/" target="_blank">www.cdfifund.gov</a>. </p><p> <i>Bill Luecht is the Senior Advisor for Legislative and External Affairs at the CDFI Fund.</i></p></div><hr /> <footer> <ol><li id="loans"> <i>The CDFI Fund utilizes the FDIC’s definition of small business loans across all its programs. Small business loans are defined as business or micro loans under $1 million. </i></li><p> </p></ol> </footer> 2017-05-03T15:00:00ZLocal Impact23GP0|#bd2515a1-c2d0-4340-a0cf-e5a5c375a274;L0|#0bd2515a1-c2d0-4340-a0cf-e5a5c375a274|District of Columbia;GTSet|#52f34ab0-6f81-4fe6-b393-2715c7089532;GP0|#6739e502-ad8d-4e57-bade-8d5d363e66c7;L0|#06739e502-ad8d-4e57-bade-8d5d363e66c7|In the Field;GP0|#b175ca6f-ecaa-427d-bc7a-677b5c37cbff;L0|#0b175ca6f-ecaa-427d-bc7a-677b5c37cbff|Small Business
A CDFI Program Financial Assistance Success Storyhttps://www.cdfifund.gov/impact/Lists/Posts/ViewPost.aspx?ID=24A CDFI Program Financial Assistance Success Story<div class="ExternalClassA0FFB11986414FB0B3038D56248C395C"><p>In Brownsville, Texas, many entrepreneurs in this underserved and underbanked area—as well as minorities, veterans, and women—cannot receive loans through traditional means. <a href="/Documents/Wild%20West%20Boots%20041917.pdf" target="_blank">Read the full story here.</a></p></div>2017-05-25T16:20:00ZLocal Impact24GP0|#0760f5d5-6360-4d45-ba32-761ff5345cd1;L0|#00760f5d5-6360-4d45-ba32-761ff5345cd1|CDFI Program;GTSet|#52f34ab0-6f81-4fe6-b393-2715c7089532;GP0|#e8a79c04-18c5-4610-9e9f-7671200e553c;L0|#0e8a79c04-18c5-4610-9e9f-7671200e553c|Texas

 Stay In Touch

Sign up to receive news and important information.

Sign Up