CDFI Types

Comparing Different Types of CDFIs

The following tables present a detailed comparison of six types of community development financial institutions.

CDFI TYPEPURPOSESTART-UP CONSIDERATIONSGOVERNANCE & OWNERSHIPREGULATIONBORROWERSCAPITAL SOURCESFINANCIAL PRODUCTS & SERVICES OFFEREDTECHNICAL
ASSISTANCE PROVIDED
Community
Development
Bank
To provide capital to rebuild lower-income communities through targeted lending and investment•Large capital requirement
•Compliance with regulatory agencies
For profit corporation; stock ownership; community representation on boardFederally regulated and insured through the Federal Depository Insurance Corp., the Federal Reserve, Office of the Comptroller of the Currency, state banking agenciesNon-profit community organizations, individual entrepreneurs, small businesses, housing developersDeposits (often below market investments) from individuals, institutions and the governmentMortgage financing; home improvement, commercial business, non profit and student loans; consumer banking servicesUsually sub-contractors or separate subsidiaries offer credit counseling, business planning
Community
Development
Credit Union
To promote community ownership of assets and savings, provide affordable credit card and retail financial services to lower-income people with special outreach to minority communities, take deposits and make loans only to members•Need to organize communities •Compliance with regulatory agenciesNonprofit financial cooperatives owned and operated by lower-income persons who are membersFederally and state regulated and insured by the National Credit Union AdministrationMembers of the credit union (usually individuals)Member deposits and limited non-member deposits from social investors, the governmentConsumer banking services (e.g. savings accounts, check cashing, personal loans , home rehabilitation loans)Credit counseling, business planning
Community Development
Loan Fund
To aggregate capital from individuals and institutional social investors at below-market rates and re-lend this money primarily to non-profit housing and business developers in urban and rural lower-income communities•Flexible start-up requirements(Mostly) nonprofit, democratic; community investors, borrowers and technical experts serve on the board and loan committeesSelf-regulated; except for non-profit 501(c)(3) restrictions and state securities law where applicableNon-profit community organizations, social service provider facilities and small businessesFoundations, banks, religious organizations, corporations, the government, insurance companies and individualsConstruction; pre-development; facilities and business start-up and expansion loansExtensive guidance before, during and after the loan transaction
Community
Development
Venture Capital
Fund
To provide equity and debt with equity features for medium-sized businesses to create jobs, entrepreneurial capacity and wealth that benefit low-income people and communities•Large capital requirementFor profit or nonprofit.; varied community representation.Variable; depends on funding sourcesInvests in small to medium-sized businesses in distressed communities that hold the promise of rapid growthFoundations, corporations, individuals, the governmentCommercial equity investments and loans with equity featuresExtensive technical assistance to portfolio companies, including taking seats on their board of directors
Microenterprise
Development
Loan Fund
To foster social and business development through loans and technical assistance to low-income people involved in very small businesses or self-employed and unable to access conventional credit•Flexible start-up requirementsNonprofit, democratic; in peer lending model, borrower groups make loan decisionsRegulated by the IRS and grant makers as any other 501(c)(3) nonprofitLow-income individuals and entrepreneursFoundations, the governmentMicro-business start-up and expansionSubstantial training and technical assistance in social and business development
Community Development
Corporations
To revitalize neighborhoods by producing affordable housing, creating jobs, and providing social services to low-income communities•Community participation •Community-directed workplansNonprofit; formed by local community residents; operated by a volunteer board, community residents are board membersRegulated by the IRS and grant makers as any other 501(c)(3) nonprofitEntrepreneurs, homeowners, business owners, consortia of community residentsBanks, foundations, corporations, other private support, the governmentEquity Investments, mortgage lending, debt financing, linked deposits, Individual Development AccountsMarketing, business planning, flexible manufacturing networks, business improvement
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