CDFI Movement Responds to Latest Trump Threat

Last month, in response to the government shutdown, the administration of President Donald Trump on October 10 initially sought to lay off 4,200 federal workers, effective December 13. This move included all 83 staff at the Community Development Financial Institutions Fund (CDFI Fund), an agency that provides grant support to 1,400 loan funds, banks, venture funds, and credit unions around the country. This CDFI network holds over $400 billion in assets that provide loans and technical assistance for housing, businesses, and community faculties in low-income communities.

While the CDFI Fund still enjoys broad support, it’s quite clear that CDFIs face a very significantly changed political and economic environment.

Founded in 1994 and housed at the US Department of Treasury, the CDFI Fund, with modest federal allocations ($324 million in fiscal year 2025, the fund’s highest core funding ever), has helped spur a network of community lending institutions. Not long ago, due to their ability to support businesses during the pandemic in low-income communities, CDFIs had garnered record support, including $12 billion in one-time funding to support lending by CDFIs and other banks and credit unions owned by and operating in communities of color.

But the Trump administration has regularly attacked CDFIs. Earlier this year, as Oscar Perry Abello detailed in Next City, CDFIs faced down both a March executive order seeking to wind down the CDFI Fund and Trump’s 2026 budget proposal to end funding altogether. Congressional support helped end both efforts.

This new attempt to terminate CDFI fund staff not only resulted in the judge’s ruling to temporarily block the layoffs, but it also spurred letters to Congress and US agencies from Native CDFIs and their supporters, state banking regulators, a group of six banking associations, and 105 GOP senators and representatives. While the CDFI Fund still enjoys broad support, it’s quite clear that CDFIs face a very significantly changed political and economic environment.

Impacts So Far 

Because the CDFI Fund budget has yet to be cut, there are not many direct visible effects yet. However, there have been multiple indirect effects.

First, there have been changes in grant allocation rules that, for instance, remove “climate-focused fundraising” and “eligible markets” based on race from the list of federal grant eligible categories, according to the Opportunity Finance Network (OFN), a leading CDFI trade association.

Second, CDFIs that are serving immigrant communities and immigrant-owned businesses have been severely affected. Writing in NPQ earlier this year, Rudy Espinoza of Inclusive Action for the City in Los Angeles, CA, called out the need for “broad solidarity, beyond just CDFIs like us, that included other organizations committed to serving the communities where we work. We are not just lenders—we are advocates; we are resource connectors; and, above all, we must be neighbors.”

A more constrained federal policy environment for CDFIs, for example, may make CDFIs more dependent on banking allies.

Additionally, some CDFIs have been affected by cutbacks in other programs. For example, Farah Ahmad, president of Partners for Rural Transformation (PRT), a coalition of six regional rural-serving CDFIs focused on meeting community needs in high-poverty rural counties, told NPQ that one of PRT’s members, the Rural Community Assistance Corporation, which works in 11 Western states, faced delays on a project serving 90 rural families needing a water system replacement and upgrades due to funding delays from the US Department of Agriculture Rural Development.

As Ahmad explained, “They are just waiting for the federal funding to come….The projects are ready. The families are ready to be able to improve their water and septic systems in their households.”

Ahmad also noted that “there have been some slowdowns of the certification process” that have hampered operations for some, which, in turn, harms CDFIs. Without federal CDFI certification, CDFIs are, unsurprisingly, ineligible for CDFI funds. Moreover, to the extent that CDFI status is taken as a queue for investment by banks and foundation investors, a slowdown in certification or recertification can have additional slow-down effects.

One further effect may be more subtle: A more constrained federal policy environment could make CDFIs more dependent on banking allies whose values may not always be fully aligned with their values. According to Next City,  at the OFN conference held in Washington, DC, in October, for example, OFN’s CEO Harold Pettigrew announced a $45 million “strategic partnership” with Capital One.

This is the same Capital One that entered into a $425 million settlement agreement for underpaying interest to depositors earlier this year and which had been previously called out by the National Community Reinvestment Coalition for operating with a business model based on “luring LMI [low-to-moderate income] people into debt,” with an estimated half of its profits coming from fees and interest. Because of its past bad behavior, advocates had opposed Capital One’s merger with Discover earlier this year. Despite this, the merger happened.

Why CDFIs Matter

At NPQ, we have written about the value of CDFIs before. In April, public policy professor Michael Swack wrote that “CDFIs are pillars of local economic growth and national financial inclusion policy.”

How does this translate at the local level? Ahmad offered a few examples. The six regional rural-serving CDFIs in the PRT coalition primarily serve what are called “persistent poverty communities.” These are defined as communities where the “poverty rate has remained above 20 percent for three consecutive decades.”

At its most basic, Ahmad explained that the work is to “identify and secure different forms of capital and move them into rural communities.” Typically, this involves “stacking” federal, bank, and philanthropic capital. On average, a dollar of federal support attracts and additional $8 in private investment. The range of projects can be, she added, “Everything from a grocery store in a community that didn’t have one before, to affordable housing, to a rural health clinic.”

One of the primary roles of these CDFIs is to serve as project managers, a role that can be particularly important in low-income, rural communities. As Ahmad explained, not every small town “can have an expert who is an engineer, who knows how to redo infrastructure, and also be a financial expert and a grant writer. So, I think CDFIs kind of provide that important human capacity.” CDFIs, she noted, also provide education and training to seed the missing capacity in the communities they work with, so that the capacity remains in the town after the project being funded has been completed.

A specific project mentioned by Ahmad was an alternative payday lending product developed by come dream come build, a CDFI based in Brownsville, TX. The CDFI, Ahmad noted, found that the overwhelming majority of clients coming into the community lender’s doors wanted home loans but did not qualify for mortgages. So the CDFI, with support from local philanthropy, developed a low-interest, low-dollar amount (many loans were for about $1,000) lending project to wean residents from payday loans and ultimately get them to qualify for home ownership loans. The same CDFI has also developed a modular home construction program that reduces home building costs and which has since been emulated by partner CDFIs outside of Texas.

What’s Next?

As Ahmad pointed out, because the CDFI Fund is supporting financial infrastructure rather than direct project grants (like the way Rural Development grants work), the effects of funding cuts, if they come, would likely take a year to two years to be felt locally in these communities.

The six CDFIs in PRT’s coalition, she added, are “regional in nature and so they have multiples forms of long-term and patient capital. So, we haven’t seen immediate effects of programs stopping but for in the case of specific infrastructure or business programs that they are directly waiting for [other federal funding].”

“CDFIs help enable the things that matter to people’s everyday life from childcare centers to grocery stores to safe and clean drinking water.”

In an article published in October in American Banker, Oswaldo Acosta, the CEO of City First, a CDFI based in Washington, DC, and Mark Pinsky, CEO of CDFI Friendly America and former OFN president from 1995 to 2016, wrote that a less favorable funding environment might compel mergers within the field and called for “standardized loan documentation, centralized back offices, and shared service models” as potential steps that could lead to more financially efficient operations.

There are, surely, many efficiencies that can be gained. At the same time, Ahmad noted that for CDFIs to thrive in the future they need to make sure that both public officials and the public at large do not lose sight of the essential values that CDFIs help support.

“CDFIs help enable the things that matter to people’s everyday life, from childcare centers to grocery stores, to safe and clean drinking water,” Ahmad said. “Those are the essentials of everyday living. CDFIs are really the back end of those. It is hard to see. But I think everybody knows that it is sometimes hard to make the finances work for a grocery store or a rural health clinic. I think that’s what CDFIs do is kind of provide the backbone for those really important community facilities.”

CDFIs will need to make these arguments, while negotiating the difficult dance that CDFIs always must make between banking industry supporters, on one end, and the communities that they serve, on the other. This has long been a challenging balance to maintain, but in 2025, it’s gotten a lot harder.