Trades Urge Lawmakers to Address Bias in CDFI Fund Allocation Process

Together with six financial trade associations, ABA today urged lawmakers to include in the upcoming appropriations bill language that would explicitly reaffirm Congress’ intent that the Community Development Financial Institutions program support the entire diverse CDFI sector.

The CDFI Fund’s current evaluation process combines all CDFI institutions — which include both regulated bank and credit union CDFIs and unregulated nonprofit loan and venture capital funds — into a single applicant pool, the associations pointed out in a letter to House and Senate Appropriations Committee leadership. Bias in the process has resulted in non-regulated CDFIs receiving a disproportionate amount of funds in the 20-year period between 1996 and 2016. In fact, non-regulated loan funds received 81 percent of the funds during that time, while the nation’s regulated CDFIs — which together represent 50 percent of all CDFI entities and 90 percent of total assets in the CDFI sector — received less than 20 percent of CDFI funding, the groups said.

The letter suggested legislative language that would address this disparity and ensure funds are awarded proportionally. “To fulfill Congressional intent, it is important for the CDFI Fund to serve the entire CDFI industry – not just one subsector,” the groups said.