CDFI Working Group

Overview

CDFI Working Group

At ASBN, we are committed to elevating opportunities for individual investors to deploy capital for impact that aligns with the JEDI (Justice, Equity, Diversity and Inclusion) focus of ASBN and other impact investors.  We are now excited to share this ground-breaking research on Community Development Financial Institution (CDFI) Loan Funds and highlight opportunities for individuals to invest capital in these mission-focused community lenders.

“Every dollar injected into a CDFI catalyzes another $8 of investment in private sector investment.” – U.S. Treasury Secretary Janet Yellen

OVERVIEW

For the second year in a row, we are excited to share the largest national listing of opportunities for individuals to make impact investments in Community Development Financial Institution (CDFI) Loan Funds. This page identifies over 70 CDFI Loan Funds in 33 states that accept individual impact investments to provide capital in underserved communities across the United States.

Investments in CDFI Loan Funds, that are generally 501(c)(3) non-profits, usually come in the form of private Notes with a fixed interest rate and term. About 60% of those listed in this paper provide opportunities for all individual investors, offering minimum investments of less than $5,000. The remaining 40% restrict investments to accredited investors and have higher minimums. CDFIs report paying between 1.00%-4.00% interest on the Investor Notes from one to ten years.

CDFIs are financial intermediaries certified as mission-focused by the CDFI Fund, a program of the U.S. Department of Treasury. CDFIs proved themselves to be grassroots “first responders” during the Covid-19 crises, reaching unserved communities and BIPOC entrepreneurs far more effectively than mainstream financial institutions.

Secretary Janet Yellen noted the success achieved by CDFIs when she announced the Treasury’s support of these community lenders: “CDFIs play an important role in our financial services ecosystem. They serve people in places the sector hasn’t traditionally served well.” Only a small percentage of CDFI Loan Funds have established investment programs for individuals. Through this research, we hope to make it easier for individuals to find an “investment-ready” CDFI that aligns with the communities they care about and the type of impact they believe in and consider investing.

We recognize that this inventory is a snapshot in time, and that the information will change. We remind investors that CDFI Loan Funds are not regulated and do not have deposit insurance. All investors should conduct appropriate due diligence. We also note that by providing this information to ASBN, Loan Funds are not soliciting investments.

Leading this work are two ASBN members: Pam Porter, a national expert on CDFIs, and Babbie Jacobs, Chair of the ASBN Community Capital working groups.

Disclaimer: We are not providing you with any legal, business, tax, or other advice in this briefing. You should consult your own advisors about any investment referred to in this briefing. You and the loan funds must comply with all laws and regulations that apply to any such investment. We have not reviewed any of these legal requirements and are not responsible for your compliance with these legal requirements. We are not making any representation to you regarding the legality of any investment under any law or regulation. The potential investments referred to in this briefing have not been recommended by any federal, state, or foreign securities authorities. Finally, we make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this briefing, which has been collected from third parties and has not been independently verified by us.

BACKGROUND

This initiative came about in 2020 as individual impact investors in the ASBN network and its affiliated organizations sought ways to increase their impact on the social justice inequities exposed through civil unrest and the effects of the Covid-19 pandemic, especially across lower income and BIPOC communities.  ASBN launched the Community Capital Working Group, led by New York Chapter Leader Babbie Jacobs, to identify practical ways for individuals to put money to work to support local communities.  One of the primary initiatives identified was to invest in Community Development Financial Institutions (CDFIs).  

Philadelphia ASBN member Pam Porter, who has experience working nationally with CDFIs and CDFI investors, offered to facilitate a series of webinars and to create resources to help individual investors learn more about CDFIs and identify opportunities to deploy investment capital.

Since this work began, we are aware of several million dollars of new investments in CDFIs by both individuals and by investment advisors working on behalf of individuals just in our small network. Additionally, members have been collaborating with their alma maters and faith- based organizations to encourage them to move their endowment funds into more place-based CDFIs.

MAKING YOUR INVESTMENTS IN CDFIs

Step 1: Find CDFIs in your market or that align with your interests

  • Determine your goals and align with CDFI target market (e.g., national, region, state, or city) or areas of focus (e.g. BIPOC Entrepreneurs, Native Communities, Disability, Housing, Healthcare, Healthy Food Access, Children, Energy Efficiency, Women Led Businesses).
  • Develop a target investment list of CDFI Loan Funds, as well as CDFI Banks, Credit Unions, and Venture Funds that align with your goals. Use the resources and the Loan Fund Inventory listed below.

Step 2: Evaluate and Invest

  • For Loan Funds, determine which ones accept Individual Investments and whether those opportunities are limited to accredited investors using the inventory below. 
  • Conduct due diligence by reaching out to the investment relations contact person for available documentation, such as recent audited financial statements or a prospectus. Look at their experience managing external investments, capital ratios, and loan portfolio performance. Also determine whether they have been rated by Aeris or S&P. 
  • For CDFI Banks and Credit Unions, form a deposit relationship. These are insured up to the maximum allowed by law, currently $250,000.

Step 3: Support Philanthropically

  • All CDFIs welcome grant funding and donations to support education and other services provided to their community and borrowers
  • Introduce your community foundations, alma maters and faith-based organizations to CDFIs for further grant and program related investments

RESOURCES

Past Webinars Hosted by ASBN:

  • 3/10/2021 - Investing in CDFI Loan Funds for Main Street Impact (Watch Here)
  • 1/25/2021 – CDFI Investing – Pam Porter and Babbie Jacobs (Watch Here, view Deck)
  • 11/12/2020 – The Best Kept Secret in Community Investing (Watch Here)

HOW TO FIND A CDFI

INVENTORY OF LOAN FUNDS

The following list published in February 2022 provides information about certified CDFI Loan Funds that offer individual investment programs organized by the state where the loan fund is headquartered. Visit the website of each loan fund to learn more information about the states and regions served and the types of lending and technical assistance offered. The column on the far right indicates the CDFI most recently updated this information or whether it was found on their public website. Please read information on the CDFI’s website or ask the noted contacts about limitations for investments based on state of residency or other factors that may apply. Please note the disclaimer at the beginning of this briefing and in the footer of each page that indicates this document is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy any security or other investment referred in this briefing. All investors should conduct appropriate due diligence before making investment decisions. If you know a CDFI that should be included in this report, please forward this survey link. Loan funds can add, delete, or modify the information listed via this link, as well.