Learn about CDFI Certification and the benefits it could bring your credit union through CUCollaborate's definitive guide.
What Is CDFI Certification?
A CDFI Certification is a designation conferred by the Community Development Financial Institution (CDFI) Fund of the Department of the Treasury, which recognizes a financial institution as specialized in serving low-income communities and those without access to financing.
The stated aim of the CDFI Fund is: “to expand the capacity of financial institutions to provide credit, capital, and financial services to underserved populations and communities in the United States.”
Who Is Eligible for CDFI Certification?
Banks, credit unions, loan funds and venture capital funds may all apply for CDFI Certification provided they meet certain eligibility requirements:
- Be a legal entity;
- Have a primary mission of promoting community development;
- Provide financial products;
- Serve one or more defined target markets;
- Maintain accountability to a defined market;
- Provide developmental services such financial literacy training; and
- Not be controlled by governmental organizations.
What Makes CDFI Credit Unions Different?
CDFI-certified credit unions differ from other institutions mainly in that at least 60% of all their financial product activities must be geared towards economically distressed target markets.
They are also naturally much more likely to offer services directly tied to community development such as affordable housing, and creation of jobs and local businesses, as well as financial counseling and education.
Despite the restrictions imposed by certification, CDFI credit unions still perform comparably to—or even outperform—peers due largely to their ability to create new markets and successful, loyal members.
What Are the Benefits of CDFI Certification for Credit Unions?
CDFI Certification makes a credit union eligible to apply for both financial and technical assistance grants, as well as allowing access to training and support, through the CDFI Fund's various awards programs.
The CDFI Bond Guarantee Program, which provides full guarantees on any bonds issued, giving institutions long-term credit at below-market interest rates.
Financial Assistance awards and Technical Assistance grants from the CDFI Program to help CDFIs grow, achieve organizational sustainability, and contribute to the revitalization of the communities they serve.
The Capacity Building Initiative, which offers training and direct technical assistance to any certified organizations on better serving distressed communities.
The Capital Magnet Fund, providing grants towards financing affordable housing and community revitalization efforts in low-income communities.
The Native American CDFI Assistance (NACA) Program, which offers Financial Assistance awards and Technical Assistance grants for Native CDFIs.
The Small Dollar Loan Program, which provides grants for Loan Loss Reserves as well as Technical Assistance to help CDFIs establish small dollar loan programs to help unbanked and underbanked populations build credit, and access affordable capital.
How to Apply for CDFI Certification
Credit unions may apply using a standard application submitted directly to the CDFI Fund, which provides specific guidance on the entire process.
The application itself is filled out through the CDFI’s online Awards Management Information System (AMIS), for which any organization seeking certification must register.
Here an institution must prove it meets the CDFI criteria by providing basic entity information in addition to data related to affiliates, primary mission, target markets, boards, accountability and development services.
Once certified, an organization must prove it continues to meet CDFI Certification standards by submitting an Annual Certification and Data Collection Report (ACR). In the report, an institution is required to assess and report on any changes related to its certification status as well as potentially provide additionally requested data to demonstrate continued compliance.
Expand Beyond What You Thought Was Possible!
Our software platform ExpandCU has an additional feature only available to consulting clients, which considers billions of different expansion options to make sure your credit union chooses the best possible way to expand. As a result, we can identify field of membership options no one else can and that were previously thought to be impossible.