A Community Development Financial Institution (CDFI) is a lender that exists to empower underserved and distressed communities by producing positive outcomes in areas of economic, family, and ecological impact. The CDFI industry is about 20 years old and a number of Native CDFIs exist in Washington State which are sponsored by their respective Tribe but independent from the government: Taala Fund (Quinault), Lummi CDFI, Chehalis Tribal Loan Fund, and Northwest Native Development Fund (Colville).
Services are customized by Native CDFIs to match the needs of their respective community –making possible:
· Financial education for individuals to learn budgeting and credit management;
· Credit builder loans to individuals;
· Lending to existing tribal member owned businesses and startups;
· Finance land acquisition, infrastructure, and economic development needs of a Tribe;
· Act as a non-political long term conduit to manage capital –both intellectual and dollars.
CDFIs are a non-bank lender which means they make loans like a bank but do not collect deposits. This allows a Native CDFI to focus upon education and deploying capital. Loans are made according to set criteria of underwriting guidelines and approved by a loan committee. A loan committee may be comprised of elders, financial professionals from the local area, and others with a desire to help their community.
In addition to leveraging a tribe’s resources a CDFI may attract capital from the Department of Treasury, foundations, individuals, and other lending institutions. The result is an amplified benefit to the community by leveraging multiple funding sources to promote community health.
(Full disclosure: Jim works for Craft3, a Community Development Financial Institution).