Community Development

Community Development Financial Institutions (CDFIs) are those that serve low-income and underserved communities by providing access to affordable financial products and services. These  banking institutions are mission-driven and their primary goal is to promote economic development and job creation in economically disadvantaged areas.  To qualify as a CDFI, banking institutions must undergo a rigorous certification process by the Community Development Financial Institutions Fund, a program within the U.S. Department of Treasury. 

CDFIs offer various financial products and services, including loans, grants, and investments. They work with community-based organizations, non-profits, and small businesses to provide financing for affordable housing, small business development, community facilities, and other community development projects.

These financial institutions serve a wide range of communities, including rural areas, Native American communities, and inner-city neighborhoods. They play a crucial role in providing access to financial services for individuals and small businesses that are often excluded from traditional banking institutions due to factors such as low income, lack of collateral, or poor credit histories.

Many — including all CDFIs on the Raisin platform — are also covered by FDIC or NCUA deposit insurance. That means that funds in FDIC- or NCUA-insured CDFIs have the same protections against potential bank failures as funds held in any insured bank or credit unions, including the biggest name banks you may know.

Community development banks form an essential part of the financial ecosystem, and choosing to invest your savings with one means that your money may go to providing vital financial services to communities that mainstream financial institutions have traditionally underserved.

Key takeaways

Community development banks: They are private-sector financial institutions that provide affordable financial services and products to underserved communities. They can be community development banks, credit unions, loan funds, and microfinance institutions.

How they help: More than 5% of US households have no access to a bank account. CDFIs play a massive role in making banking services and products accessible to underserved communities.

Community investing: CDFIs often work with small businesses and nonprofits to deploy financial resources to support community development initiatives such as affordable housing, small business development, youth centers, and senior facilities.

What are CDFIs?

CDFIs are financial institutions that fall under the category of community development banking. They have the unique mission of serving low-income communities via a tailored range of financial products and services. CDFIs provide affordable financial products and services, such as loans, grants, and investments, to promote business and job creation in poorer areas.

They work with community-based organizations to finance community needs, enabling individuals and groups historically excluded from traditional banking institutions to access financial services that can help them thrive.

To become a CDFI, financial institutions must meet specific requirements and undergo a rigorous certification process by the Community Development Financial Institutions Fund, a program within the U.S. Department of Treasury.

Types of CDFIs

There are several types of community development financial institutions. These include: 

  • Community Development Banks: FDIC-insured banks focusing on targeted community lending and investment to underserved communities. 

  • Community Development Credit Unions: Member-owned credit unions providing affordable financial products and services. Such credit unions encourage community ownership of assets, taking deposits, and making loans to members only. 

  • Community Development Loan Funds: Nonprofit organizations providing loans below market rates to small businesses, affordable housing developers, and other community development organizations.

  • Community Development Venture Capital Funds: Investment funds providing equity and debt financing to small businesses and entrepreneurs in underserved communities.

Why are community development financial institutions important?

Community development banking is invaluable to disadvantaged communities because it provides them with access to financial services and products that have been historically beyond their reach. These institutions play a vital role in promoting economic growth and opportunity, particularly in low-income areas, immigrant families, and communities of color. Besides that, CDFIs provide various financial products and services such as small business loans, affordable housing financing, and consumer loans. They often work in partnership with community-based organizations and government agencies to identify and address the unique needs of the communities they serve.

In addition to providing access to capital, CDFIs offer technical assistance and financial education to help individuals and small businesses build their financial skills and knowledge. This support can help people succeed financially and contribute to the economic vitality of their communities.

CDFIs also help improve the standard of living and local facilities in a community by funding local businesses, building schools, recreational spaces, healthy food resource banks, and affordable housing projects. These efforts can lead to job creation and stimulate economic growth, creating a positive ripple effect throughout a given community.

CDFIs are essential tools to bring vital resources into communities that need them the most. They help promote economic equity and inclusion by providing access to banking facilities. CDFIs play a critical role in building more resilient and thriving economies by supporting the growth and development of local businesses and communities.

What’s in it for you with CDFIs?

Sure, they are important for the greater good of disadvantaged communities, but why should you go out of your way to invest your money in a community bank? Let’s consider a few reasons:

  • Lower fees: The profit motive at CDFIs are tempered by their commitments to local communities. As part of this approach, they generally offer lower maintenance fees, lower interest rates on loans, and more accommodating eligibility criteria and repayment terms. 

  • Mission-driven banking: Given their community development focus, CDFIs have a core mission that can appeal to depositors who want to make sure their money is being used responsibly.

Community development spotlight

Ponce Bank has served as an investor in the future of underserved and underbanked communities for over 50 years and is a designated Community Development Financial Institution (CDFI).

GreenState Credit Union is one of the nation's largest financial cooperatives and serves thousands of members across all 50 states. In addition to delivering profits back to customers in the form of better rates, they also give time and funds back to the communities they serve — supporting hundreds of local charities through millions of dollars in donations.

Growing your savings with community financial institutions

It can be hard to access financial services for people who come from historically disadvantaged communities. CDFI products are an excellent way to improve their financial situation and build on their savings. They are also a great option for people who are keen on ensuring their money is being held by institutions with a mission to drive change.

Raisin is the ideal platform to find the community bank that perfectly fits your requirements. Our revolutionary online financial platform makes it easy to find and compare banks and banking products that suit your priorities. 

The wide range of financial products on our platform includes high-yield savings accounts, money market deposit accounts and certificate of deposit accounts.  Raisin lets you build a savings strategy that suits your needs and manage multiple financial products from the convenience of a single login. 

Experience the best that community banking has to offer with Raisin!

Share this article

Secure Messaging Center


Call: 844-994-EARN (3276) (Monday to Friday from 9:00 a.m. - 4:00 p.m. ET)

The Raisin name and logo are trademarks of Raisin GmbH. All other trademarks, logos, marks, and brand names are the property of their respective owners — used with permission.

© 2024 Raisin GmbH. All rights reserved.

*APY means Annual Percentage Yield. APY is accurate as of {todayDate}. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.

Raisin is not an FDIC-insured bank or an NCUA-insured credit union, and does not hold any customer funds. Funds deposited through Raisin are exclusively held at federally insured financial institutions. FDIC or NCUA deposit insurance coverage covers the failure of partner banks and credit unions on the Raisin platform.

Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered through Central Bank of Kansas City (CBKC), Member FDIC, d.b.a. Central Payments is the Service Bank. CBKC, Lewis & Clark Bank and Starion Bank, each Member FDIC, are the Custodial Banks.