Two independent reports finding that Community Development Financial Institutions (CDFIs) are a critical component of the financial services industry were recently released. The reports provided evidence to show that CDFIs are important financial services players because they work to ensure low-income people have access to credit and capital.
CDFIs are private financial institutions dedicated to providing access to capital to low-income and other under-resourced populations. OBDC is proud to be a CDFI, joining other organizations in serving entrepreneurs in our communities to help their businesses create jobs and thrive.
Since CDFIs focus on lending to “higher risk” populations, such as start-up businesses and entrepreneurs with no or poor credit history, some of the findings in these reports were even more impressive. For example, both reports found that CDFIs have no more risk than conventional lenders, despite the fact 90 percent CDFI clients are in low-to-moderate income investment areas. Additionally, one report found that CDFIs and credit unions have nearly the same performance as mainstream financial institutions, showing that it is possible to effectively lend to under-resourced groups.