What is the CDFI Fund and How Can it Help Your Credit Union

What is CDFI?

A Community Development Financial Institution (CDFI) is a financial institution certified by the U.S. Department of the Treasury’s CDFI Fund. Its mission is to provide financial services to underserved communities—helping individuals, families, and businesses access capital, build wealth, and drive local economic development.

CDFI Certification Eligibility Requirements

• Is a legal entity at the time of certification application
• Has a primary mission of promoting community development
• Is a financing entity
• Primarily serves one or more Target Markets
• Provides development services in conjunction with its financing activities
• Maintains accountaility to its defined Target Markets; and
• Is a non goverment entity and not under the control of any goverment entity (Tribal goverment excluded)

Target Market Financing Requirement

A CDFI must demonstrate that at least 60% of its lending- both in dollar amount and volume- was directred to its approved Target Market in the most recently completed fiscal year. This must be verified by submitting a Transaction Level Report (TLR) prior to applying for certification and annually maintain it.

Types of Target Markets:

• Investment Area (IA)- Borrower is in a qualified census tract
• Low-Income Targeted Population (LITP)- Family income adjusted for family size 80% or less than area benchmark
• Other Targeted Population (OTP)- Self-reported

Target Market Accountability Requirement

Requirement can be met by sufficient Target Market representation on the Governing Board. However if Target Market representation is inadequate, an advisory board can be established to help meet the requirement.

Governing Board:

• At least one governing board member is accountable to each proposed Target Market
• At least 33% of the governing board is accountable to the overall proposed Target Market(s)

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Advisory Board (If needed):

• 33% of credit union members must be part of an 'individual target market'
• At least one advisory board member must be accountable to each TM component
• 60% of the advisory board must be accountable to the overall proposed TM
• A governing board member must have a seat on the advisory board
• Organizational Accountability Policy

Requirements for Development Services

Development Services are required to promote community development and prepare current/potential borrowers to use the credit union's products and services. Services can be porvided by the CDFI, its affiliate, or contractor.

Requirements:

• Regularly offered, at least once a year
• 3rd party services must be regularly reviewed by applicant
• Must be separate and distinct from routine customer service
• Prepared consumers to access and be successful in using an entity's Financial Products and Financial Services

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Examples:

• First-time homebuyer counseling
• Financial or credit counseling
• Business planning and management assitance

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Potential Annual Funding Sources

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Technical Assistance Awards (TA)- Funding up to $150,000 (for "emerging CDFI's pr CDFI's, 100M in assets). This award is focused on capacity development and can be used for capacity development to launch/sustain a CDFI's endeavors.

Financial Assistance Awards (FA)- Funding up to $1,000,000. This award is focused on growing a CDFI's products or services to underserved communities and can be used to sustain and expand CDFI's financial products and services.

Small Dollar Loan Program Awards- Funding up to $500,000 ($50,000 for LLR, $150,000 for TA). The purpose of this award is to promote growth of small dollar consumer loans and can be used to expand/launch smaller dollar programs.

The ROI Case for CDFI Certification: Why Multi-Year Commitment Pays Off

When institutions consider pursuing CDFI certification, one of the most common questions is simple: Is it worth it? While no funding outcome is ever guaranteed, a six-year ROI model shows that even under conservative assumptions, the long-term financial return of CDFI participation can be substantial.

Across every asset size and success scenario, the model demonstrates a positive return on investment, reinforcing the value of sustained engagement rather than a one-year, transactional approach.

A Six-Year View Reveals Compounding Value

The model evaluates ROI across four asset tiers—institutions with more than $2 billion in assets, those between $2 billion and $500 million, $500 million to $100 million, and institutions under $100 million. It then applies four success scenarios, ranging from optimistic to very conservative, based on realistic award frequency assumptions over six years.

In the baseline scenario, which reflects typical award success rates, institutions see meaningful returns across the board. Larger institutions achieve ROIs in the 6–8x range, while smaller institutions—often the strongest alignment for CDFI programs—can realize returns exceeding 11x. Even with modest participation, the economics remain compelling.

Strong Upside, Even with Conservative Assumptions

What’s most striking is how resilient the ROI remains under downside scenarios. In a conservative model, where award success falls below average, institutions still see returns ranging from approximately 3.5x to 6.5x, depending on asset size. In the very conservative scenario, which assumes only two awards across 13 applications over six years, ROI remains positive—ranging from 2.2x for the largest institutions to more than 4x for smaller organizations.

In other words, even when success is limited, the investment rarely fails to pay for itself.

Why Smaller Institutions Often See the Highest Returns

The model also highlights a consistent trend: smaller institutions tend to realize higher ROI multiples. While award amounts may be smaller in absolute dollars, the relative impact is significantly greater due to lower operating scale and a stronger alignment with CDFI mission priorities. For many sub-$500MM institutions, CDFI certification can materially accelerate growth in underserved markets while delivering outsized financial returns.

A Strategic, Not Speculative, Investment

It’s important to note that this model is illustrative, not predictive. Award timing, amounts, and success rates vary year to year. However, the assumptions used reflect typical baseline outcomes, with optimistic and conservative cases layered on to stress-test results.

Costs in the model assume annual CDFI compliance and support, including ongoing membership and advisory engagement. Returns assume strong institutional commitment, compelling use of funds, and intentional strategies to serve underserved communities—factors that consistently improve award competitiveness.

The Bottom Line

CDFI certification isn’t about chasing a single grant cycle. It’s a multi-year strategy that compounds value over time. When approached with commitment and clarity, the financial upside is real—and durable—even in less-than-ideal scenarios.

For institutions weighing whether the effort is worth it, the data points to a clear conclusion: a long-term CDFI strategy delivers positive ROI far more often than not. Looking to become a CDFI certified credit union? Our CDFI advisory team paired with our suite of technology solutions ensure the best possible outcome for your Credit Union. Schedule your free consultation here.