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Banks and CDFIs: Partnering for community impact

By Paige Chapel, March 10, 2017

Most banks recognize that their enterprises can only thrive if their customers also do. And to thrive, those customers need economically diverse and healthy communities in which to live and work. Partnering with local organizations to promote the health of those communities is often a top priority for banks.

Community Development Financial Institution (CDFI) loan funds help to promote healthy communities by providing early-stage credit, capital, and financial services to small businesses, affordable housing and community facilities developers, community organizations, and other types of borrowers. Most commonly structured as revolving loan funds, CDFIs intermediate capital between investors and underserved U.S. communities where capital tends to be scarce. Banks have historically been—and continue to be—a primary capital source for CDFIs.

In part because these loan funds work closely with the communities they serve, many banks partner with CDFIs to pursue community reinvestment, including the type of activity mandated by the Community Reinvestment Act (CRA). CDFIs are attractive partners to banks in part because of their long, 30-plus-year track record of managing capital, with few examples of investor losses.

For the full story featuring Sageworks, visit Community Bank Insight - Banks and CDFIs: Partnering for community impact.