What is a CDFI?

A distinction that is sometimes missed when talking about CCV is that we are a certified Community Development Financial Institution (or CDFI) in addition to operating as a non-profit organization. So again, what is a CDFI?

A CDFI is an entity that provides needed financial services to communities and individuals who lack access to dollars necessary for job creation and business development. CDFIs focus specifically on economically disadvantaged markets and underserved communities. CCV’s focus is on women-owned businesses, minority-owned businesses and businesses located in low to moderate income communities. By directly investing in these communities, CDFIs are able to trigger economic activity and community development.

Newsweek recently wrote an excellent article discussing the tremendous power CDFIs possess. While the article is focused on the sub-prime lending crisis, it speaks to the need for CDFIs on a larger scale. The article goes on to applaud CDFIs as being able to “manage risk properly” and citing that “they haven’t bankrupted their customers or their shareholders. Nor have they rushed to Washington begging for bailouts.”

CDFIs are part of a large and growing industry. There are currently 800 – 1000 CDFIs and other opportunity finance institutions open in the United States. The Opportunity Finance Network estimates that as of the end of fiscal year 2005 CDFIs had accomplished:

• Total financing of $4.3 billion
• Financed 55,242 housing units
• Financed 9,074 businesses
• Created or retained 39,151 jobs
• Financed 613 community organizations

Here in Chicago there are other CDFIs aside from Chicago Community Ventures that each have a different focus. Here is a list of some of our partner institutions who are also CDFIs:

• ACCION
• Shorebank
• Chicago Community Loan Fund
• IFF

One way to think about CDFIs is that we act as the bridge between lenders and individuals who lack access to what traditional banks offer.  It is certain that as our country continues on the road towards economic recovery, CDFIs will play an instrumental role.

If you are interested in learning more about CDFIs check out the U.S. Treasury’s CDFI Fund, the CDFI Coalition as well as the Opportunity Finance Network.