Community Development Financial Institution - CDFI

DEFINITION of 'Community Development Financial Institution - CDFI'

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.


BREAKING DOWN 'Community Development Financial Institution - CDFI'

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.

RELATED TERMS
  1. Community Investing

    Investments made directly into low-income or disadvantaged communities ...
  2. Community Currency

    A form of paper scrip issued at the county, town or community ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds ...
  4. Lending Facility

    A mechanism that central banks use when lending funds to primary ...
  5. Fiscal Localism

    Institutionalized monetary exchange focused upon local and regional ...
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds ...
Related Articles
  1. Financial Advisors

    Socially Responsible Lending Goes Mainstream

    The solid rates of return that socially responsible lending has posted has caught the attention of institutional investors. Here's a primer.
  2. Investing Basics

    Community Investing 101

    Discover a type of socially responsible investing that helps to contribute to noble causes close to home.
  3. Active Trading Fundamentals

    The Top 5 Impact Investing Firms

    Learn what impact investing is and obtain information on some of the top impact investing firms ranked by total assets under management.
  4. Retirement

    Top Retirement Community Developers

    Learn which companies are the top developers of communities for active adults and the history behind each of these popular and well-known companies.
  5. Economics

    What is the Private Sector?

    The private sector encompasses all for-profit businesses that are not owned or operated by the government.
  6. Credit & Loans

    What Goldman Sachs’s Online Lending Means For Banking

    Recently Goldman Sachs has announced its entry into the online lending space. Most commonly known as an investment bank, Goldman’s newest venture may provide insight into the future of online ...
  7. Trading Strategies

    Eyeing a Loan? Consider Skipping the Banks

    Peer-to-peer lending platforms, such as Lending Tree, Lending Club and Prosper, offer borrowers newfound leverage. Here's a look.
  8. Personal Finance

    The Banking System: Commercial Banking - How Banks Make Money

    ByStephen D. Simpson, CFA As mentioned before, banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on ...
  9. Personal Finance

    The Banking System: Commercial Banking - Business Lending

    ByStephen D. Simpson, CFA Commercial lending - lending to businesses - is really a two-tier market in the United States. At the level of large corporations, bank lending is not as significant ...
  10. Investing Basics

    How To Invest In Private Companies

    It can be tough to invest in a company that doesn't trade on an exchange, but there are also several advantages.
RELATED FAQS
  1. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  2. Who do hedge funds lend money to?

    Discover the various entities that hedge funds are lending to, and the reasons why these hedge funds have been providing ... Read Answer >>
  3. What are some of the key reasons a large corporation might prefer to remain a private ...

    Understand the reasons why a large corporation would want to remain as private instead of going public through an initial ... Read Answer >>
  4. What type of funding options are available to a private company?

    Understand how private companies can obtain financing for startup, growth or expansion projects, and learn how this differs ... Read Answer >>
  5. What are the most important interest rates?

    Learn about the most important interest rates in the economy; the Federal funds rate and discount rate are set by the Federal ... Read Answer >>
  6. How does a nation transition from a socialist economy to a free market economy

    Read about why and how markets transition from socialism to capitalism, and learn how privatization can become hijacked by ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center