Getting Started with CDFI and MDI Partnerships

By Kevin Eaton
While they aren’t synonymous—although there is some overlap between the two categories—community development financial institutions and minority depository institutions have common roots in a shared historical purpose.
Watch the ABA Foundation’s webinar on CDFI/MDI partnerships at
“The roots of the CDFI banking sector began with the minority depository institutions,” says Jeannine Jacokes, chief executive of the Community Development Bankers Association. “In the early 20th century, when it was legal to refuse service to a customer on the basis of race, Black business people began organizing financial institutions that were Black-owned and committed to serving Black customers—and as populations of other communities of color grew, the diversity of the minority depository institutions grew as well.”
Today, partnering with CDFIs and MDIs is one way banks of all sizes and geographies can expand their reach to underserved and underbanked communities. For example, Wells Fargo invested in Citizens Savings Bank and Trust, based in Nashville, and created a relationship that has helped Citizens continue fulfilling its community-focused mission.
“The partnership we have with Wells really is an extremely important part of our living and accomplishing the mission,” says Citizens Savings Bank and Trust Company CEO Sergio Ora, speaking on a recent ABA Foundation webinar. With $111 million in assets, “our method of operation all throughout has been establishing partnerships.”
CDFI Fast Facts

CDFIs demonstrate that at least 60 percent of their total lending and services are directed to low-income and underserved communities.There are 165 CDFI banks representing about $76 billion in total assets. The largest CDFI bank has about $5 billion in assets and the smallest has about $22 million.CDFI banks are regulated like other banks but have access to competitive grant programs administered by the U.S. Treasury’s CDFI fund that can help mitigate the cost of activities targeted at low-income communities.

Source: CDBA

Citizens has several community-based initiatives, including financial education programs for students from second grade through college. Citizens Bank also has programs to help community members become homeowners through a down payment assistance program. “Through our relationship with Wells and their investment in Citizens, we feel much more confident about our ability to reach more people and really provide a long-lasting beneficial impact for the community,” Ora says.
Meanwhile, Simmons Bank, based in Pine Bluff, Arkansas, has partnered with Southern Bancorp—based in Arkadelphia, Arkansas, and operating throughout the Mississippi Delta region—enabling Southern Bancorp to expand access to safer small-dollar loans.
“Last year we did 7,022 loans, and 47.4% of our loans were for less than $10,000,” says Southern Bancorp CEO Darrin Williams. “We cannot do that without support of banks like Simmons. That’s not the typical loan size, and of course it costs us just as much to do a $10,000 loan as it does to do a $10 million loan in many respects—but because of the support we get from Simmons and others, we are able to do that.”
For Southern Bancorp, investments like the one from Simmons Bank enable the bank to expand their footprint and serve a larger area than would have been possible working alone. “In the state of Mississippi, there are more storefront payday lenders than there are McDonald’s, Burger Kings and Starbucks combined,” Williams notes. “It’s often not another bank we’re competing with, it’s often a high-cost predatory lender. These types of investments in CDFIs make it possible for us to bank those places.”
To start a partnership with a CDFI, Simmons Bank SVP Martie North Hamilton recommends looking nearby. “Look at those community-based banks in your footprint. We are constantly looking for partners we actually have a CD in [Citizens Savings Bank and Trust] as well, so we’re constantly seeking out these opportunities,” she says.
“If you are an American Bankers Association member looking for a partnership with a CDFI, I would encourage you to reach out to those close to you,” adds Williams. “These are unique investments; they actually help you fulfill your mission to be a good community bank.”