Trends Among Early CDFI Certification Applicants

Fund Community Institute recently sat down with FUND Consulting (FUND) to hear about their recent work with clients on early submissions for the CDFI Fund’s updated Certification Application. As part of the early certification work, FUND Consulting compiled trends on how applicants faired in relation to the seven tests related to certification. Thus far, FUND has compiled information on 22 early applicants, divided evenly between CDFI banks and loan funds. While these early applicants are not a fully representative sample of the CDFI industry, their experience with the application provides some early examples and trends of how CDFIs are faring with the updated certification guidelines.

CDFIs are required to have a Primary Mission of promoting community development. While each of FUND’s clients currently does so, several have needed to update how they document and demonstrate that mission in order to meet the updated guidelines. The CDFI Fund’s new materials call for a documented Community Development Strategy, that is board or owner approved. Sixty percent of FUND’s currently Certified CDFIs passed the Primary Mission test with no necessary modifications (73% of banks and 45% of loan funds), and the majority of those that did not meet the guidelines can remedy this by documenting their Community Development Strategy. Other potential reasons for not meeting the new Primary Mission guidelines include not having an appropriate mission in place for their required amount of time, not being able to demonstrate that financing activities meet a set of responsible financing practices, or conducting ineligible financing practices as defined by the CDFI Fund.

Target Markets -- the populations and geographies which CDFIs focus their activities on -- have changed with the new guidelines, including new Other Targeted Population type Target Markets, new geographic guidelines, and new ways borrowers are qualified as within Target Markets. FUND has found that among their early application clients, 100% of organizations continued to serve qualified Target Markets with at least 60% of lending (dollar and number) although many made adjustments by adding new Target Markets. Many CDFI banks that had routinely designated Customized Investment Areas were able to qualify with pre-qualified census tracts. However, some also had to add new Other Targeted Population type Target markets. In this group, larger CDFI banks with regional presences seemed more easily able to qualify, while smaller urban based CDFI banks needed to add additional target markets.

Finally, FUND’s early applicant clients saw trends related to changes in the Accountability criteria. CDFIs must have a system in place, through either governing and/or advisory boards to provide accountability to their target markets they serve through representation of identified population. FUND found that almost all organizations already had Boards in place that provided the required representation. A small number of organizations needed to update Advisory Board policies, officially appoint a Governing Board member to the Advisory Board, or make membership changes due to staff or family members being on the Boards.

Fund Community Institute continues to share insights on the updated certification guidelines and how they are impacting the CDFI industry. Stay tuned for additional posts related to the changes.

Learn more about FUND Consulting at their website: http://www.fundconsulting.com/