The Community Development Financial Institutions (CDFI) Fund, administered by the Department of Treasury, makes capital grants, equity investments and awards for technical assistance to community development financial institutions. The CDFI Fund was authorized by the Riegle Community Development and Regulatory Improvement Act of 1994.
Since its inception, the Fund has made more than $1.4 billion in awards to community development organizations and financial institutions.
The CDFI Fund Award Programs
The Community Development Financial Institutions Fund Program has three separate components: The Financial Assistance (FA) component, the Technical Assistance (TA) component and the Native American CDFI Assistance Through these three components, the CDFI Program provides loans, equity investments, and grants to CDFIs to support their capitalization and capacity building, enhancing their ability to create community development impact in underserved markets. CDFIs compete for federal support based on their business plan, market analysis, and performance goals. To receive financial assistance, CDFIs must provide matching private and non-federal funds to obtain CDFI Fund support.
The Fund provides incentives for bank and thrift investments in distressed communities through its Bank Enterprise Award Program.
In addition, the CDFI Fund administers the New Markets Tax Credit, which encourages private sector investments in communities with persistent poverty.
The Financial Assistance component makes Financial Assistance (FA) grants to certified CDFIs that create demonstrable community development impact in CDFI Fund priority areas, and can provide at least a 1:1 match with private, non-federal funds. FA funding is made to certified CDFIs regardless of asset size; however, larger CDFIs are expected to leverage greater degrees of non-federal dollars (above the required 1:1 ratio) for their FA awards and serve more targeted markets. In FY 2004 the CDFI Fund reintroduced a Small and Emerging CDFI (SECA) category as part of the FA component. The SECA category provides smaller levels of financial assistance to CDFIs with a small amount of assets or those that have been in operation for less than three years. Applications for FA awards are usually due in the spring with awards being announced in late summer/early fall.- with awards being announced in late summer/early fall. Previous awardees with late reports or outstanding balances are ineligible for funding.
The Technical Assistance (TA) component provides TA grants to CDFIs with the goal of building the capacity of the CDFI industry. Grants may be used for a wide range of purposes. For example, awardees can use TA funds to purchase equipment, materials, or supplies; for consulting or contracting services; to pay the salaries and benefits of certain personnel; and/or to train staff or board members. The CDFI Fund makes awards of up to $100,000 under the TA component of the CDFI Program.
The Native American Initiatives Program targets CDFIs serving Native American communities and are designed to overcome identified barriers to financial services in Native Communities. These initiatives seek to increase the access to credit, capital and financial services in Native Communities through the creation and expansion of CDFIs primarily serving Native Communities.
The Bank Enterprise Award (BEA) Program recognizes and rewards the key role played by traditional financial institutions in community development lending and investing. It provides cash incentives for banks and thrifts to invest in CDFIs and to increase their financial services, lending and investments in distressed communities. BEA Program awards have varied in size from less than $1,000 to almost $3 million, depending upon the type and amount of assistance provided by the bank and the activities being funded through the bank’s investments. In general, banks that provide equity investments to CDFIs are likely to receive the largest awards relative to the size of their investments.
The New Markets Tax Credit (NMTC) Program is designed to generate $15 billion of private sector equity investments in low income communities by financing neighborhood retail centers, small businesses, charter schools, child care centers and other community facilities in distressed areas nationwide. Congress enacted the NMTC in the Community Renewal Tax Relief Act of 2000, and to date, the Fund has made 664 awards totaling $33 billion in allocation authority, including $3 billion in Recovery Act Awards and $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone. Approved Community Development Entities (CDEs) apply to the Fund annually for New Markets Credits. These entities will sell the credits for cash to individual investors and use the proceeds to support their community revitalization projects. Taxpayers will claim credits over 7 years, starting on the date when the equity investment is made in the CDE and on each anniversary. The NMTC has a present value of approximately 39 percent, meaning that activities it finances generally will have to generate substantial economic benefits on their own to attract investors.
For more information about the Fund’s award programs, including, applications and eligibility requirements; and detailed breakdowns of awardees by component, year and state, visit the Fund’s website at www.cdfifund.gov