By: Vanessa Lowe
Hi, I’m Vanessa Lowe, a Summer Fellow with Values Added Financial, a career changer, and someone who spent 21 years in federal service working on access to capital for underserved communities. I had the pleasure of shepherding more than $500M of capital into economic development institutions and projects with the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund, the National Credit Union Administration, and the U.S. Economic Development Administration. I retired early, at the age of 56, and have enjoyed my own journey of moving my retirement funds to align with my primary values–gender and racial justice.
In this blog post, I explore CDFIs, one of the topics in Our Ethical Investing Series. You’ll learn about what they are, why they matter, and practical steps you can take to use them to create a better world.
What are Community Development Financial Institutions (CDFIs)?
Too often in the U.S. (and elsewhere), underserved communities lack access to loans due to issues like discrimination and the fact that traditional lenders are so focused on profit. CDFIs help solve this problem. They are mission-based lenders that lend to improve the communities in which they operate.
While lending is their primary business, they also provide education, sometimes called technical assistance, to their borrowers. CDFIs also engage in advocacy and partnerships with the larger communities they serve to address underlying factors impacting economic security.
Later in this piece, I’ll share the origin of one CDFI and a profile of a more recent CDFI credit union serving Latinos in North Carolina.
Where did CDFIs Come From?
The CDFI movement started in the 1970s and was largely funded by women’s religious orders and other faith investors dedicated to poverty alleviation. As more mission-driven lenders were established and demonstrated success, they lobbied for federal funding. They succeeded and in 1994, the CDFI Fund, an agency within the U.S. Treasury Department, was created.
The CDFI Fund formalized the industry, offering both CDFI certification and an annual competitive funding opportunity. Today, CDFIs include loan funds, credit unions, banks, and even community development venture capital funds. CDFIs total more than 1,400 and exist in all 50 states, the District of Columbia, Guam, and Puerto Rico. 64 CDFIs are dedicated to serving Native American communities in 23 states.
Nuns Funding Affordable Housing
The need for affordable housing was a key issue in the 1970s and remains a deep and persistent problem in our country today. Sister Timothy Marie O’Roark spent 13 years as a legal aid attorney working with families facing eviction, often on short notice. She saw the conditions clients were living in and vowed: We can do better than this.
She appealed to her order, Sisters of Mercy of Omaha, for help, and the Order approved her request for $500,000 “to provide opportunities for residents to stabilize their lives and achieve their dreams”. Mercy Housing was born. With real estate guidance, the Order leveraged that money to build 310 units of affordable housing. Since its founding in 1981, Mercy Housing and its partner CDFI, Mercy Community Capital have supported 48,218 affordable housing units, investing more than $4 Billion in development costs over four decades.
Lifelong Relationship Lending
CDFI banks and credit unions finance auto, home purchase, and small business loans, often for those rejected by traditional lenders. Latino Community Credit Union (LCCU), a certified CDFI, is well-known for its origins in 2000 as a grassroots response to a wave of robberies and muggings of Latino immigrants in Durham, North Carolina. They offer products and services that build deep relationships leading to lifelong financial success. The Mozqueda family arrived in North Carolina from Mexico in 2004 and opened savings and checking accounts. Over 20 years, they’ve established credit via LCCU’s financial education programs, borrowed for their cars, painting business, and purchased their first home with a 5-year adjustable-rate mortgage in 2016. Their two daughters have received LCCU’s academic scholarships totaling more than $10,500.
Pandemic Loan Heroes
CDFIs gained significant attention during the pandemic. The first Paycheck Protection Program (PPP) loans failed to reach businesses most in need. Through effective advocacy from the CDFI industry, the program was revamped in the second and third rounds, ensuring that CDFIs were central to the outreach and loan deployment strategy. CDFIs deployed just 3% of PPP loans in the first round but more than 20% in the third. More importantly, CDFIs transformed the PPP. Though the program started as an exclusive program, predominantly moving capital from large banks to large businesses, it became one of the most inclusive programs for small minority and low-income businesses.
Mitigating Climate Change in Low-Income Communities
In 2022, President Biden signed the Inflation Reduction Act (IRA) into law, one of the largest investments ever in the American economy, energy security, and climate mitigation. For the first time, the legislation required a commitment to ensure that low-income communities received their fair share of this critical funding. CDFIs were recognized early on as critical to meeting the Justice40 commitment to ensure that 40% of these federal funds support financing the clean energy transition in low-income and underinvested communities. CDFIs have recently received some of the first awards announced under the federal Greenhouse Gas Reduction legislation. Awardees included Oweesta ($156M), a native community CDFI intermediary; Inclusive ($1.87B), a network association for CDFI and other community development credit unions; and Opportunity Finance Network ($2.29B), one of the oldest CDFI trade associations.
More to Explore
Access the full data table of certified CDFIs or use the CDFI Fund’s Searchable awards database to find CDFIs that have received federal funding in addition to being federally certified. Each data source can be filtered by city, state, and institution type and includes website links for further research. Also, this 2022 report from ASBN lists results from a survey of those CDFIs that confirmed they were taking investment dollars as of 2022.
Here’s a short list of some of my favorite CDFIs. Based on my research and experience, these align well with at least one of my value priorities – racial and gender justice. They’re also creating financial systems change and supporting a more inclusive economy. They are in alphabetical order for fairness.
- CityFirst Bank: I interned at this budding CDFI during my graduate school summer in 1997. After many years and millions lent to revitalize areas in Washington DC, they merged with Broadway Federal Bank in 2021 to become the first and largest Black-led Minority Depository Institution with over $1 billion in total assets. CityFirst Bank is now a CDFI-certified, FDIC-insured bank with loan offerings for affordable housing developers, affordable housing investors, small businesses, and community-serving nonprofits (including PACE Green lending). They also offer both personal and business checking and savings accounts. Branches include 1 in DC, 2 in Los Angeles, and 1 in Inglewood, CA.
- Enterprise Community Partners: Like Mercy Community Capital, this 42-year-old housing CDFI focuses on affordable rental homes, racial equity, and upward mobility. It works with a network of national partners with local expertise to develop neighborhood housing and community anchors, like schools and grocery stores. Enterprise Community Partners works in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. It is a leader in federal, state, and local affordable housing policy advocacy. Individuals can invest in its Impact Notes and Preservation Equity.
- Oweesta Corporation: For 25 years, Oweesta has provided the tools, training, and capital to help Native people control their economic destinies. As a CDFI intermediary, they are serving the above-mentioned 65 Native CDFIs and communities operating in 23 states. Transformative impact in these deeply underserved communities has been achieved, including training in financial education, lending technical assistance, deployment of lending capital, research, and policy advocacy. Oweesta has developed an integrated range of asset-building products and services. As noted above, Oweesta was awarded $156M under EPA’s “Solar for All” program supporting low-income community solar access as part of the Justice40 commitment.
- Reinvestment Fund: For 35 years, this CDFI has invested $3.2 billion in transforming underserved neighborhoods and communities. A recent initiative includes HBCU Brilliance, a $25M fund for critical facilities improvements and overall growth of historically Black colleges and universities. Ongoing investments continue in affordable housing, healthy food financing and retail, solar in partnership with Sunwealth, and quality childcare, just to name a few. They work nationally, with concentrations in the Mid-Atlantic and Southeastern regions of the United States. Offices are in Philadelphia and Atlanta.
[Editor’s note: “I [Zach] interned here one summer while in college and share Vanessa’s enthusiasm!”]
- Self-Help Credit Union: This CDFI credit union gained national attention for its work with its North Carolina-based advocacy partner, Center for Responsible Lending (CRL), which has been fighting predatory lending practices since 2002. This original CDFI is one of two credit union affiliates under the Center for Community Self-Help that have provided more than $11 billion in financing to help more than 164,000 borrowers buy homes, start and grow businesses, and strengthen community resources. Impact investment offerings include “Women and Children CDs,” “Green Term CDs,” and IRA accounts paying up to 4.39% as of August ’24. Branches operate in eight states: NC, SC, FL, GA + CA, IL, WA, and WI.
- Ujima Fund*: A democratic, community-engaged, investment vehicle raising capital to finance small businesses, real estate, and infrastructure projects for Boston’s working-class Black, Indigenous, and other communities of color, as part of the larger Boston Ujima Project. They share their unique model of deep community engagement and flexible financing with other U.S. cities. Note that Ujima is not yet CDFI certified*.
- The Working World, Inc. dba Seed Commons: Seed Commons is a national network of locally rooted, non-extractive loan funds that brings the power of big finance under community control. “By taking guidance from the grassroots and sharing capital and resources to support local cooperative businesses, we are building the infrastructure necessary for a truly just, democratic, and sustainable new economy.” There are 39 funds in the network with a concentration on the East Coast as of this writing.
National/Multi-State Community Development Opportunities
Values Added has compiled a curated list of investment options that reach a wider impact footprint than a single city, state, or region. Popular options include CNote investments and Calvert Notes, an international fund that was one of the earliest public market option for investing in CDFI and other community development finance entities. Your Values Added advisor can suggest options from the list during your investment policy statement discussions.
Accredited Designation
It is worth noting that most CDFI investment offerings are notes or loans, however some may offer an equity option. Depending on the type and amount of your investment, you may be required to be an “accredited investor.” Large private investment offerings must follow strict rules set by the Securities and Exchange Commission (SEC) to limit their marketing to those deemed “financially sophisticated” enough to understand the higher risk involved. That financial sophistication is determined by income, net worth, or financial training. See Accredited Investor Bulletin April 2021 for more details. Individuals who meet any of the following standards are considered “Accredited”:
- Annual income of at least $200,000 individually (or $300,000 combined with a spouse),
- Net worth of at least $1 million, excluding the value of the primary home, OR
- Holds a financial securities license 7, 65, or 82, in good standing.
Values Investing Learning Communities
As you continue aligning your money with your values, I encourage everyone, but particularly women, to find a supportive community to continue your learning. You may have read about the McKinsey study that projects women will inherit $30 Trillion in the great wealth transfer by 2030. How and what women learn about investing will be key to shifting investments to support the sustainable future we need. Consider these options for learning in supportive communities:
- Invest for Better – Small cohorts of women learn impact investing over six-sessions with the goal of moving money to align with their values.
- Level – Focused on addressing the racial wealth gap, this is a 10-week long, intentionally multiracial, learning cohort for women. Sessions cover the racial impact of U.S. economic policy and mechanics of angel investing. Each cohort ends with the group collectively investing in a single Black female-led business.
- Women of Color Connecting (WOCCON) – Focused on helping underrepresented founders with networks needed to succeed, WOCCON holds an annual conference and hosts networking tours in major cities profiling women of color founders.
I hope you’ve found this CDFI deep dive helpful. Best of luck on your journey to values alignment. Deep gratitude to the BLX Internship Program for facilitating my match with Values Added Financial.
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Editor’s note: Vanessa has completed a successful fellowship with Values Added and continues to be a trusted industry colleague. She shares other ideas and resources on her podcast, Vanessa’s Money Hour, and in her workshop, Investing for Justice. You can follow her on LinkedIn for more articles and session announcements.