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CDFI versus CDE Certification: What's the Difference?

By Moriah Taylor - November 17, 2021

Both CDFI and CDE certification can help grow your credit union's Field of Membership. Learn about how the two designations differ as well as how to qualify.

Benefits of CDFI/CDE Certification

Certification as a Community Development Financial Institution (CDFI) or Community Development Entity (CDE) makes an organization eligible to apply for awards under the CDFI Fund's competitive programs. The funds made available through these programs help organizations further serve economically distressed communities and low-income individuals.

Community Development Entity

A Community Development Entity is a domestic corporation or partnership that is an intermediary vehicle for the provision of loans, investments, or financial counseling in low-income communities. Being a CDE allows an entity to apply for New Markets Tax Credit (NMTC) allocations. The NMTC Program attracts private capital into low-income communities by permitting investors to receive a tax credit against their federal income tax in exchange for making equity investments in CDEs.

To become certified as a CDE, an organization must submit an application demonstrating that it meets each of the following requirements:

• Be a legal entity at the time of application;
• Have a primary mission of serving Low-Income Communities (LICs);
• Maintain accountability to the residents of its targeted LICs.

Community Development Financial Institution

CDFI certification is the U.S. Department of the Treasury’s recognition of specialized financial institutions which serve low-income communities and provide financial services to people who lack access to financing. CDFIs include regulated institutions such as community development banks and credit unions, and non-regulated institutions like loan funds and venture capital funds.

To be eligible for CDFI certification, an organization must meet the following criteria:

• Have a primary mission of promoting community development;
• Provide both financial and educational services;
• Serve and maintain accountability to one or more defined target markets;
• Be a legal, non-governmental entity at the time of application.

To learn more about how CUCollaborate can guide you through the CDFI certification process, schedule a free consultation with our team.

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