News Releases

Aug. 30, 2023

CDFIs Meeting Increased Demand; Face Diverse Challenges to Grow

Community development financial institutions have largely been successful in meeting strong demand for financial products over the past year, but a variety of challenges have constrained the ability of CDFIs to serve their communities more fully. This is according to the results of the Federal Reserve’s 2023 CDFI Survey, fielded April 24 through June 2.

Three out of four CDFIs saw an increase in demand over the past year, and a similar percentage expect demand to continue increasing into next year. CDFIs have been able to meet much of the demand they have seen, but for some, their ability has been limited. Among CDFIs that saw increased or steady demand, 40 percent reported fully meeting it, 42 percent mostly and 18 percent partially.

The biggest challenges to fully meeting demand varied across CDFIs. Loan funds frequently cited the increasing cost of lending capital as a challenge, as well as restrictive and insufficient operational funding. Credit unions were more likely to cite hiring and retention challenges, along with challenges related to borrower qualifications and technology.

“CDFIs are diverse institutions in how they operate and respond to community needs,” said Carrie Cook, community affairs officer at the Federal Reserve Bank of Richmond. “The 2023 CDFI Survey helps to highlight the different challenges CDFIs face so that policymakers and other community development stakeholders can target solutions to support innovation and growth in the industry.”

CDFIs have continued to adapt to address challenges. Examples include tapping into new federal funding to expand loan products, hiring specialized staff to meet operational needs, integrating online platforms with back-office technology and taking nontraditional approaches to underwriting. Encouragingly, many CDFIs were optimistic about meeting increased demand in the coming year.

CDFIs also expressed a desire to expand impact measurement. Nearly all CDFIs are capturing operational output metrics, like client counts and the dollar value of financial products. On the other hand, it has been harder to measure outcomes such as the financial performance of clients or the number and quality of jobs created. The survey suggests that limited staff resources and difficulty collecting client data are key hurdles to moving impact measurement to the next level for the industry.

The Federal Reserve’s CDFI Survey aims to understand current challenges and opportunities for CDFIs —financial institutions with a mission to serve low- and moderate-income individuals and communities. To administer the 2023 survey, the Fed partnered with the CDFI Fund, Opportunity Finance Network, the CDFI Coalition, Inclusiv, the Community Development Bankers Association, the Native CDFI Network, First Nations Oweesta Corporation, NeighborWorks America, and several statewide CDFI coalitions and networks. Detailed findings from the 2023 CDFI Survey can be found at FedCommunities.org, the Federal Reserve System’s gateway to community development insights. Sign up to receive email notifications when new stories and research about CDFIs and other topics are posted.

As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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