CDFI certification is a unique designation that provides organizations with opportunities to market themselves, which can be beneficial when seeking partnership opportunities, investments, grants and other funding opportunities. In particular, many government programs and private investors recognize CDFI certification as substantiation of an organization’s community development mission and products. As such, CDFI certification can be leveraged into additional capital and grant sources from foundations, corporate donors, and/or federal, state and local governments. In addition, CDFI certification opens up membership, networking, and training opportunities that maximize the organization’s community and economic development impacts and effectiveness as a CDFI.
CDFI Certification was the topic of a white paper recently prepared by The National Federation of Community Development Credit Unions. The paper indicates that designation as a CDFI is a “building block to credit union growth”. Indeed, the demand for CDFI certification has increased with now over 860 CDFIs certified. At FUND Consulting, we have seen increased inquiries from organizations interested in either forming a CDFI or achieving CDFI designation for an existing entity. Increasingly, these inquiries have come from organizations that do not fit the typical CDFI types (non-profit loan fund, bank, credit union, or venture fund). Rather, these are entities that may be active in the New Markets Tax Credit (NMTC) or Low Income Housing Tax Credit (LIHTC) arenas, or even unregulated for-profit lenders. While these organizations often have community development missions that embody the essence of being a CDFI, usually with sophisticated models to address risk and capitalization, often minor adjustments need to be made to their business models in order to achieve CDFI certification. This can result in speculation from CDFI Industry veterans. In a recent conversation, a representative from a CDFI Intermediary offered, “an organization can achieve certification, but that does not make them a true CDFI.”
This comment resulted in much conversation at the FUND Consulting offices. We believe that CDFI certification is not a status that can easily be achieved, and that many of these atypical organizations represent innovative CDFIs, but is there additional information the CDFI Fund can request for certification to further verify organizations are truly representing the industry? For example, should interest rates be taken into account as part of the certification requirements?
What do you think? What makes a “true” CDFI?