Sources of Funding

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Sources of Funding for CDFIs

CDFIs are private-sector organizations that attract capital from private and public sources. Private sector funds come from many sources: corporations, individuals, religious institutions, and private foundations. Depository CDFIs, like community development banks and community development credit unions, get capital from customers and non-member depositors. CDFIs work in partnership with conventional financial institutions to channel private investment into distressed communities, either through direct investment in the CDFI or through coordination of lending, investment, and other services.

One crucial source of support for CDFIs is the federal CDFI Fund, administered by the Department of the Treasury. The CDFI Fund makes capital grants, equity investments, and awards to fund technical assistance and organizational capacity-building. CDFIs apply for limited funds through a competitive process that requires the CDFI, in most cases, to provide at least a 1:1 match of non-federal funds to receive financial assistance. The Fund also rewards banks and thrifts for making investments in CDFIs and distressed communities through its Bank Enterprise Award Program. The New Markets Tax Credits Program, initiated in 2002, encourages private sector investment by offering tax credits for qualified community development investments. CDFIs use the money awarded through CDFI Fund programs to leverage private-sector resources into distressed communities.