CDFI Types

Comparing Different Types of CDFIs

The following tables present a detailed comparison of six types of community development financial institutions. The first table evaluates the CDFIs by purpose, start-up considerations, governance and ownership, and regulation. The second table continues the comparison in the fields of borrowers, capital sources, financial products and services offered, and technical assistance provided.

CDFI Type Purpose Start-up Considerations Governance & Ownership Regulation Borrowers Capital Sources Financial Products & Services Offered Technical
Assistance Provided
Community
Development
Bank
To provide capital to rebuild lower-income communities through targeted lending and investment •Large capital requirement
•Compliance with regulatory agencies
For profit corporation; stock ownership; community representation on board Federally regulated and insured through the Federal Depository Insurance Corp., the Federal Reserve, Office of the Comptroller of the Currency, state banking agencies Non-profit community organizations, individual entrepreneurs, small businesses, housing developers Deposits (often below market investments) from individuals, institutions and the government Mortgage financing; home improvement, commercial business, non profit and student loans; consumer banking services Usually sub-contractors or separate subsidiaries offer credit counseling, business planning
Community
Development
Credit Union
To promote community ownership of assets and savings, provide affordable credit card and retail financial services to lower-income people with special outreach to minority communities, take deposits and make loans only to members •Need to organize communities •Compliance with regulatory agencies Nonprofit financial cooperatives owned and operated by lower-income persons who are members Federally and state regulated and insured by the National Credit Union Administration Members of the credit union (usually individuals) Member deposits and limited non-member deposits from social investors, the government Consumer banking services (e.g. savings accounts, check cashing, personal loans , home rehabilitation loans) Credit counseling, business planning
Community Development
Loan Fund
To aggregate capital from individuals and institutional social investors at below-market rates and re-lend this money primarily to non-profit housing and business developers in urban and rural lower-income communities •Flexible start-up requirements Nonprofit, democratic; community investors, borrowers and technical experts serve on the board and loan committees Self-regulated; except for non-profit 501(c)(3) restrictions and state securities law where applicable Non-profit community organizations, social service provider facilities and small businesses Foundations, banks, religious organizations, corporations, the government, insurance companies and individuals Construction; pre-development; facilities and business start-up and expansion loans Extensive guidance before, during and after the loan transaction
Community
Development
Venture Capital
Fund
To provide equity and debt with equity features for medium-sized businesses to create jobs, entrepreneurial capacity and wealth that benefit low-income people and communities •Large capital requirement For profit or nonprofit.; varied community representation. Variable; depends on funding sources Invests in small to medium-sized businesses in distressed communities that hold the promise of rapid growth Foundations, corporations, individuals, the government Commercial equity investments and loans with equity features Extensive technical assistance to portfolio companies, including taking seats on their board of directors
Microenterprise
Development
Loan Fund
To foster social and business development through loans and technical assistance to low-income people involved in very small businesses or self-employed and unable to access conventional credit •Flexible start-up requirements Nonprofit, democratic; in peer lending model, borrower groups make loan decisions Regulated by the IRS and grant makers as any other 501(c)(3) nonprofit Low-income individuals and entrepreneurs Foundations, the government Micro-business start-up and expansion Substantial training and technical assistance in social and business development
Community Development
Corporations
To revitalize neighborhoods by producing affordable housing, creating jobs, and providing social services to low-income communities •Community participation •Community-directed workplans Nonprofit; formed by local community residents; operated by a volunteer board, community residents are board members Regulated by the IRS and grant makers as any other 501(c)(3) nonprofit Entrepreneurs, homeowners, business owners, consortia of community residents Banks, foundations, corporations, other private support, the government Equity Investments, mortgage lending, debt financing, linked deposits, Individual Development Accounts Marketing, business planning, flexible manufacturing networks, business improvement