ICBA Policy Resolution: Community Development Financial Institutions

Position

  • ICBA supports full funding for the CDFI Fund, proceeds of which are used to help CDFI banks continue to innovate and help their communities.
  • ICBA supports policymakers creating a legal and regulatory framework that promotes more community banks becoming CDFIs and provides increased opportunities for community banks to benefit from this special designation, such an automated or streamlined application for community banks located in low-income areas.
  • CRA exams of CDFIs should account for information that is already provided to the CDFI Fund through the application and annual certification process. Requiring a CDFI bank to provide similar information to two federal agencies is redundant.

Background 

Community banks strive to improve the financial health of their customers and communities, particularly those community banks located in low- and moderate-income (LMI) areas. Many community banks have attained the special designation of being a community development financial institution (CDFI) which recognizes their dedication to LMI communities.

CDFIs are specialized financial institutions that provide financial products and services to populations and businesses located in underserved markets. These institutions have community development missions and a reputation for lending responsibly in low-income communities. Community banks comprise approximately 240 (22 percent) of the 1,100 CDFIs in the nation.

CDFIs fill a niche in the nation’s financial services system by specializing in providing credit to borrowers and communities that may be difficult for traditional banks to serve. Many borrowers may be creditworthy but lack credit history, have a poor past experience with alternative or predatory credit providers, or have a minimal amount of personal savings. To accommodate this market, CDFIs offer products with more flexible underwriting standards, combine a range of below-market financing with their own resources, and provide technical assistance with their lending activities to help ensure that borrowers use credit and capital effectively.

Before designation as a CDFI, banks must apply to the CDFI Fund for certification. Among other requirements, a bank must demonstrate a primary mission of community development, serve one or more target markets, provide development services to borrowers in conjunction with financing activities, and maintain accountability to its target market.

Staff ContactsMichael Emancipator

2019 National Community Bank Service Awards