What Is a Community Development Financial Institution?

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The Riegle Community Development and Regulatory Improvement Act of 1994 established the CDFI Fund to help communities develop financial institutions. This fund provides community development financial institutions with federal awards and flexibility in how they allocate the funds. In addition to lending, CDFIs can provide financial literacy training to low and moderate-income individuals.

A CDFI is a private financial institution that focuses on assisting low-income communities to become self-reliant and economically self-reliant. The goal of CDFIs is to increase economic growth and create jobs in low-income communities, particularly those in need. These institutions often receive federal funds and private sector investment to help create a more prosperous environment.

While traditional lending institutions don’t lend to low-income individuals, CDFIs provide loans and other financial services to underserved communities. They act as a conduit between investors and community members, thereby reducing disparities in access to capital. In addition to reducing poverty and creating job opportunities, CDFIs have demonstrated that they can improve communities’ economic development.

CDFIs measure their success by maximizing their impact and lowering costs. They help local communities by providing low-cost, flexible financing to local nonprofits and businesses. They also help communities build community assets and infrastructure.

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