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In perhaps the most unprecedented shift, the Consolidated Appropriations Act of 2021, designed to provide financial relief during the pandemic, included $3 billion specifically for the CDFI Fund, which provides financial assistance to CDFIs and Minority Deposit Institutions (MDIs). That amount almost equals what the fund has received in total since its inception in 1994. “There’s a lot of public investment in mission-driven institutions,” says Betty J. Rudolph, the Federal Deposit Insurance Corporation’s national director of minority and community development banking.

Spurred by 2020’s national reckoning on race, CDFIs and MDIs—institutions that are often also CDFIs but serve predominantly minority communities and have minority leadership—have also attracted hundreds of millions of dollars from some of the country’s biggest technology and finance companies. That includes Google ($180M), Bank of America ($150M), PayPal ($135M), and Twitter ($100M). At the end of 2020, philanthropist MacKenzie Scott made public her gift of more than $4.1 billion to 384 organizations, with special attention to those operating in communities with “low access to philanthropic capital,” 32 of them CDFIs.

The influx of funds means CDFIs will be able to reach, and help, more customers. “We’re focused on positioning them to take these new resources to build and grow, to better serve their customers and to build wealth in their communities,” Rudolph says.

In mid-June the Treasury Department awarded $1.25 billion in funding to 863 CDFIs; 463 loan fund organizations received awards, along with 244 credit unions.

Capital Good Fund, a CDFI in Rhode Island, says it will have a transformative impact on its ability to provide unsecured personal and other loans to its customers. Unlike banks, which according to Capital Good’s founder and CEO Andy Posner look at pay stubs, credit reports, and 1099s to determine an applicant’s loan eligibility, Capital Good weighs banking history, considers letters from family or friends, and makes allowances for immigrants who may be paid cash. The process can be completed entirely on a smartphone in about 10 minutes, and decisions are made within two days. The CDFI’s small-dollar loans have an APR of 5 percent, with no application, origination, closing, or late fees.

In April, the CDFI Fund opened applications for its new Small Dollar Loan (SDL) Program, designed to compete with payday lenders. Under the program, up to $13.5 million will be dispersed to certified CDFIs to create loans for as much as $2,500, to be repaid in installments with payments reported to at least one credit bureau. The program aims to provide opportunities to the unbanked and underbanked who don’t traditionally have access to the mainstream financial system. 

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