Author: Christi Baker, Director of Strategic Initiatives, Asset Funders Network
A foundation for understanding CDFIs and how philanthropy can partner with them to expand economic opportunity, build wealth, and strengthen communities.
New to CDFIs? Start here.
Community development financial institutions (CDFIs) are mission-driven financial institutions that expand access to capital and financial services for people and communities that have historically faced barriers to traditional finance. Rooted in the communities they serve, CDFIs help finance small businesses, affordable housing, homeownership, community facilities, and other pathways to economic opportunity.
For asset funders, CDFIs can be powerful partners. They fill critical gaps in the financial system, bring together public, private, and philanthropic capital, and recycle loan repayments into new lending—multiplying the reach and impact of capital invested in communities.
Advancing Economic Opportunity with CDFI Partners: What’s Possible? provides an accessible introduction to the CDFI field and a practical guide for philanthropy. It explains how CDFIs work, why they matter, and the many ways funders can partner with them to advance economic security, mobility, and wealth building.
What are CDFIs—and why do they matter?
With more than 1,300 CDFIs operating across the United States, the field encompasses community development banks, credit unions, loan funds, and venture capital funds. While CDFIs represent a small share of the overall financial system, they have an outsized role in reaching people and places traditional financial institutions may not.
This report helps funders understand:
- Who CDFIs are and what distinguishes them from mainstream financial institutions
- How different types of CDFIs operate and the communities they serve
- How the CDFI business model works, including how capital is leveraged and recycled
- Why CDFIs are effective partners for advancing economic opportunity and wealth building
- How philanthropy can strengthen CDFIs through flexible capital, capacity building, and other forms of support
From understanding to action
The report moves beyond the basics to help funders think about what partnership can look like in practice.
Philanthropy can provide the flexible, patient, and mission-aligned capital that allows CDFIs to innovate, build capacity, expand lending, reach underserved communities, and respond to changing community needs. Depending on a funder’s goals, that can include general operating support, programmatic grants, loan loss reserves, recoverable grants, program-related investments, mission-related investments, guarantees, deposits, and other forms of patient capital.
The report offers a practical framework for matching:
Funder goals → CDFI type → Capital tool
Funders can use this framework to consider the right CDFI partner and investment approach based on their goals, geography, desired outcomes, and risk tolerance.
See what’s possible
The report brings these ideas to life through examples of philanthropy-CDFI partnerships across a range of goals and communities, including:
Small Business & Entrepreneurship
Expanding access to capital for entrepreneurs and businesses that have historically been underserved.
Affordable Housing & Homeownership
Increasing housing supply, expanding homeownership, and helping communities preserve and build wealth.
Community Infrastructure
Financing essential community assets such as childcare, healthcare, food access, and other neighborhood-serving facilities.
Climate Resilience & Disaster Recovery
Supporting resilient housing, green improvements, and community recovery.
Native & Rural Economic Mobility
Expanding access to capital in communities where traditional financial services may be limited.
Systemic Change
Strengthening the broader CDFI ecosystem and expanding CDFIs’ access to capital markets.
A starting point for deeper exploration
This report provides the foundation for understanding AFN’s broader body of work on CDFIs.
AFN’s previous CDFI briefs take a deeper look at specific strategies and opportunities—including affordable and sustainable homeownership and wealth generation and equity through small-business investment.
Affordable and Sustainable Homeownership Through CDFIs: Creating Pathways to Building Wealth
Leveraging CDFIs to Increase Wealth Generation and Equity