Community Development Financial Institution - CDFI

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DEFINITION

A private sector financial institution that focuses on personal lending and business development efforts in local communities. CDFIs can receive federal funding through the U.S. Department of the Treasury by completing an application. They can also receive funding from private sector sources such as individuals, corporations and religious institutions.




INVESTOPEDIA EXPLAINS

CDFIs focus on serving the needs of the poor and working class within urban and poor rural communities, as many of these citizens are underserved or ignored by traditional commercial banks and lending processes. The goal is to help these people to become financially self-sufficient, allowing them to increase their contributions to national economic growth and to rebuild run-down communities.

There are hundreds of chartered CDFIs operating in the United States, each with the goal of fostering economic growth within the local community through innovative (and often less stringent) lending practices, educational efforts and small business lending.

CDFIs tend to be controlled locally, without interference from the federal government or national corporate hierarchy.


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