CRS: CDFI Programs Duplicate Many Other Federal Efforts

By David Baumann - July 05, 2022

Report notes federal initiatives with similar aims to those of CDFI program, but also acknowledges key distinction.


If Congress wants to eliminate duplicative federal programs, members might want to consider the Department of the Treasury's Community Development Financial Institutions (CDFI) program, the Congressional Research Service (CRS) said, in a new report.

“The potential for duplication may be seen by the existence of at least 130 economic development programs overseen by over 20 offices and agencies,” the report stated.

The CRS explained that in 2011, the Government Accountability Office identified economic development programs whose effectiveness may be compromised due to overlap or insufficient coordination.

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For instance, the report said the Community Development Block Grant program’s efforts to support neighborhood revitalization and economic development might duplicate some CDFI program goals. The CRS further reported that some programs offered by both the Federal Home Loan Bank System and the Small Business Administration might also share the same goals as the CDFI program.

A Key Difference

However, there is at least one important distinction between the CDFI program and many others in the federal program, the CRS said. Some federal agencies that offer loans and guarantees must follow price-setting rules, which may not cover the higher default risk posed by high-risk borrowers.

By comparison, the report noted that CDFIs may have more flexibility in setting higher interest rates and fees that could be used to offset losses.

The CRS added that if Congress wants to consider the effectiveness of programs provided by the CDFI Fund, members might want to clearly establish standards that could be used to measure success.

Future of the CDFI Program

The report, which is intended to provide an overview of the CDFI program, states that some stakeholders believe its goals can be achieved “through other public policy” or by private means.

The Trump Administration attempted to eliminate the program in each of his budgets, but it remains popular on Capitol Hill.

On the other hand, the CRS noted that some stakeholders are concerned a shortage of capital from CDFIs could reduce opportunities for new entrepreneurs, existing businesses and consumers.

 


To learn more about the CDFI program and how your credit union can access its resources, visit our CDFI Certification page or reach out to us directly today!

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