Community Development Financial Institutions

1
Community Development Financial
Institutions
CDFIs

• Jennifer RennieCliff Black
• Esa WiegertJoey Killeen

www.cdfi.org.whatare.aspproducts
2
Text Reference

• Pg. 382
• One paragraph on government involvement in the
  mortgage market
• Ch. 6
• The evolution of the modern bank

3
History of CDFIs

• 1800sImmigrant communities
• 1930sFirst community credit-unions
• 1960sModern CDFIs developed
• Government organizations that address poverty and
  racial discrimination
• CDCs launched as a result of President
  JohnsonsWar on Poverty

www.cdfi.org/whatare.asp
4
CDFIs Today

• 1994CDFI Fund created
• 1995Community Reinvestment Act amended
• Qualified CDFI investments for tax credits
• 2004Over 600 CDFIs are certified
• CDFIs exist in all 50 states
• To dateCDFI Fund has distributed over 650
  million
• 200461,000,000 appropriated

www.cdfi.org/cdfifund.asp
5
CDFI Subscribers

• Start-up companies
• Firms with prior credit problems
• Businesses trying to expand
• Businesses that benefit low-income communities

www.cdfi.org/whatare.asp
6
CDFIs Cost of Lending

• Priced according to risk
• Rates 0.5-3 higher than bank
• loans
• Wide range of funds available
• Easier to acquire than commercial loans

www.cdfi.org/whatare.asp
7
Advantages of CDFIs

• Helps to rebuild troubled communities
• Assists business in expanding
• Offers a second bottom line
• Efficient allocation of funds
• increases investment in society

www.cdfi.org/whatare.asp
8
CDFI Challenges

• Bureaucracy
• High Risk Clientele
• Lack of regulation

www.cdfi.org/whatare.asp
9
Summary

• CDFIs evolved as philanthropic entities
• CDFIs primarily focus on rebuilding dilapidated
  communities
• CDFIs have many attributes and drawbacks

www.cdfi.org.whatare.aspproducts
10
Reference Links

• http//marketplace.publicradio.org/morning_report/
  goodman/2000/09-cdfi.html
• http//www.economist.com/displaystory.cfm?story_id
  323230
• http//www.economist.com/displaystory.cfm?story_id
  137835
• http//www.communitycapital.org/community_deveopme
  nt/fiannce/statistics.html
• www.cdfi.org
• www.cdfifund.gov
• http//www.entrepreneur.com/article/0,4621,261884,
  00.html
• http//www.entrepreneur.com/article/0,4621,300785,
  00.html

www.cdfi.org.whatare.aspproducts
11
Questions

• CDFIs were created under which presidents
  administration?
• Clinton
• Johnson
• Bush
• The primary purpose of a CDFI is to
• Maximize their profits
• Promote community development
• Replace traditional financial institutions

www.cdfi.org.whatare.aspproducts