
Nearly a third of US communities are CDFI “deserts.”
In these turbulent times, many leaders of the nation’s growing network of community development financial institutions (CDFIs)—which now collectively manage $468 billion in assets, a 615 percent increase over the past decade—have high hopes. One reason is the $27 billion Greenhouse Gas Reduction Fund (GGRF), part of the climate-focused Inflation Reduction Act of 2022. This fund, divided into three programs (the National Clean Investment Fund, the Clean Communities Investment Accelerator, and Solar for All), marks the single largest federal investment in CDFIs to date.
Opportunity Finance Network (OFN), a national network of CDFIs, expects this federal investment “will transform the clean energy financing ecosystem nationwide.” Whether it does or not depends on CDFIs’ ability to address the challenge of place—the geographic inequities in access to community finance. Because while the number of federally certified CDFIs has grown to 1,462 (as of January 2024), nearly a third of US communities are CDFI “deserts”—that is, communities with a high need for CDFI financing but low CDFI lending activity. If unaddressed, this disparity could hinder the distribution of clean energy financing to underserved regions.
The Nature of the Challenge
CDFI Friendly America, a CDFI support organization where I work, defines a CDFI “desert” as an area where over half the census tracts qualify as Investment Areas (IAs) under the rules of the federal CDFI Fund, but the aggregate lending per person since 2005 is less than 80 percent of the national per capita lending amount ($714). While commitment to place, in theory, is the raison d’être of CDFIs, place remains a major challenge in practice.
As the GGRF becomes a reality on the ground, becoming the lead conduit for a strategic federal priority of clean energy finance creates not just a funding stream for the CDFI sector, but also a challenge. National CDFI coverage has long been a movement goal. It has now become an imperative.
Not Just Scale, but Scope
In 2022, during a meeting of CDFI leaders, I acknowledged my role in shaping the current CDFI coverage shortcomings through strategies like “Grow, Change, or Die.” While this approach helped grow CDFI assets and visibility, it often prioritized efficiency over equitable coverage as it was more efficient and cost-effective to build scale within well-defined communities.
National CDFI coverage has long been a movement goal. It has now become an imperative.
Perhaps ironically, this is the same reason the big banks concentrate their lending, branches, and offices in big cities. This is not to deny that CDFIs reach thousands of communities that the big banks never do, including many rural Native communities. But they don’t reach all of them.
Addressing these gaps requires CDFIs to embrace “scope” as a core strategy to eliminate CDFI deserts by 2040. While CDFIs like CRF, Lendistry, and Momentus Capital are leveraging digital platforms to broaden their coverage, technology alone cannot build the relationships at the heart of community development finance. New strategies are needed using both quantitative and qualitative ways of finding and financing underserved communities.
One promising approach is the development of community-centered CDFI hubs, an idea used by my organization, CDFI Friendly America. These hubs offer a path to begin to tackle the challenge of making community finance truly accessible in all low-income communities, connecting local demand with regional and national CDFIs.
Building Community Finance Hubs at the Local Level: Key Elements
A CDFI Friendly hub is a lean, local nonprofit matchmaker pairing local demand for financing with bankers, foundations, impact investors, or other financial partners. Recent changes in Community Reinvestment Act rules make it easier than ever for CDFIs to lend outside their home geographies.
Communities seeking CDFI financing have four options:
- Start up a new CDFI
- Recruit an established CDFI from somewhere else to serve the community
- Tap into the network of national CDFIs
- Become a CDFI Friendly hub
Focusing on the fourth option, the CDFI Friendly hub approach is less expensive to start and operate. That’s because a “hub” organization absorbs the customer acquisition and overhead costs for many CDFIs, increasing their lending margins. Additionally, hubs can facilitate lending for participating CDFIs in new communities, allowing CDFIs concerned about geographic concentration to de-risk their portfolios by distributing their loans across a greater number of communities.
The hub model seeks to manage a community development finance ecosystem, which involves more than CDFIs. Through facilitating partnerships beyond CDFIs, prospective borrowers are matched with banks, foundations, and other technical assistance providers as needed.
How Did This Approach Emerge?
The concept of CDFI Friendly hubs started in Bloomington, IN. In 2016, John Hamilton won the election for mayor of Bloomington. Hamilton was previously the founding board chair of a CDFI, City First Bank, based in Washington, DC.
In 2017, Mayor Hamilton sought to create a small-business CDFI but found the Bloomington market too small to support one. To create broader demand and support, we worked with Tina Peterson, the president of the Community Foundation of Bloomington and Monroe County, and launched CDFI Friendly Bloomington in 2019. Since then, the hub has facilitated over $26 million in financing, a 27-fold increase in annual CDFI lending compared to the 15 years prior. It has received two CDFI Fund Technical Assistance awards and has applied for CDFI Certification.
Sign up for our free newsletters
Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.
By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.
In South Bend, IN, the second place to establish a CDFI Friendly hub, CDFI Friendly South Bend has facilitated over 50 loans (mostly microenterprise loans).
While many Justice40 tracts are in well-served CDFI markets, many are not.
A similar, more recent story comes from Tulsa, OK, where CDFI Friendly Tulsa launched in February 2024. In less than a year, the hub built a pipeline of more than $100 million of prospective demand for CDFI financing of all types—small and micro-business, affordable and workforce housing, commercial real estate, nonprofits, and more.
Previously, from 2005 to 2021, CDFIs financed just $70.7 million in Tulsa, or $176 per person, well below the state per capita average of $288 and the national average of $714. Tulsa demonstrates how hubs can organize local demand and connect promising financing opportunities to CDFIs nationwide.
Expanding the Model
How can more cities benefit from this model? We made some steps forward in 2024 and plan more for 2025 and 2026. For example, in partnership with Accelerator for America—a national network of cities and mayors working on inclusive economic development—we developed a pilot CDFI Friendly Accelerator to work with cohorts of 8 to 10 cities at a time, or 40 to 50 over the next 5 years.
The partnership with Accelerator for America began in 2024 when it organized a series of focus groups with mayors and other city leaders. The findings show that many city leaders—whether their cities are true CDFI deserts or just low-CDFI-access places—are convinced that more CDFI financing will help them in significant ways. In fact, many have spent years trying to start or recruit CDFIs.
In August 2024, the accelerator introduced the CDFI Market Map, the first geospatial look at CDFI coverage—or, more precisely, CDFI deserts. It quickly clarified the CDFI coverage challenge. By November, several CDFI investors were launching plans to prioritize CDFIs serving CDFI deserts, which are drawing interest as well from the regional Federal Reserve Banks of New York, San Francisco, and Richmond, VA.
The map also includes Justice40 census tracts—areas designated by the Biden administration to target Greenhouse Gas Reduction Fund financing. While many Justice40 tracts are in well-served CDFI markets, many are not.
Looking for True National Scale
There are two more big steps required to successfully expand access in CDFI deserts and other low-CDFI-access places.
The first is raising awareness. In addition to Accelerator for America, CDFI Friendly America is partnering with the Federal Reserve Bank of New York on a public event on June 12, 2025, titled “CDFIs Reaching Further: Solving for Place, Credit Insecurity, and CDFI Strategies.” Other Federal Reserve banks may join in similar public education programs.
A second priority is using public policy to encourage and reward CDFI and bank financing in CDFI deserts and low-CDFI-access places. Similar to how the CDFI Fund emphasizes and rewards CDFIs for working in areas of persistent poverty, it could and should spotlight CDFI deserts.
Nationwide, there are 341 US counties classified as areas of persistent poverty. Adding the nearly 1,300 CDFI deserts (many of which, of course, overlap with those persistent poverty counties) as part of the fund’s focus sharply increases the incentives for CDFIs to fill needed coverage gaps. In addition, federal attention paid to CDFI deserts might encourage more banks to partner with CDFIs to serve these underinvested regions.
One of the top complaints bankers express about the Community Reinvestment Act (CRA) is that they don’t know where to work. Elevating CDFI deserts and other low-CDFI-access communities would help.
The Path to Impact: Combining Scale and Scope
The problems CDFIs exist to solve are now within the foreseeable, albeit long-term, reach of the solutions that CDFIs and their partners offer. Because of economic and policy flux, it may be unrealistically ambitious to think that CDFIs will ever achieve complete national coverage. The truth is that even where CDFIs achieve the most coverage, there are still people, businesses, and community leaders who need more.
However, the CDFI industry has consistently exceeded expectations. Just because the goal is ambitious does not mean it cannot be done.