CDFI Loan Fund Model Highlighted as Catalyst for Change in New Research

February 27, 2025 –

OFN’s new research report — The Business Model of CDFI Loan Funds — examines the business model of CDFI loan funds and highlights the model’s key components, benefits, and tradeoffs.

Read time: 3 minutes

CDFI loan funds are specialized lenders that offer fair, responsible financing and promote economic opportunity in rural, urban, and Native communities across all 50 states, as well as the District of Columbia, U.S. Virgin Islands, and Puerto Rico. They are highly effective and impactful, but not as well understood as other financial institutions.

A new OFN report helps fill this knowledge gap. The Business Model of CDFI Loan Funds takes a research-based look at the CDFI loan fund business model to help investors, policymakers, and other new and diverse audiences understand it.

With financing and coaching, the mission-driven lenders support affordable housing, community facilities, small businesses, and more elements of thriving communities. Their financing and tailored technical assistance enable wealth building and create jobs that help boost local economies.

The study, based on interviews with 15 CDFI loan fund leaders from 13 states, examines how loan funds operate and create value for their customers. The report identifies and examines four key components of the CDFI loan fund business model:

Mission-driven lending

A core component of the loan fund mission and business model is providing access to capital through loans. As lenders, loan funds prioritize community impact over profit, aim to fulfill unmet needs, and invest capital to advance economic opportunity and community transformation.

Localized focus

Loan funds act as place-based lenders, deeply embedded in their communities. They catalyze change, support economic recovery, and build trust and relationships in ways that are unique to their communities and regions.

Development and capitalization

Standard across most loan funds, the mission-driven lenders raise and aggregate grants and debt capital from various public, philanthropic, and private sources.

Technical assistance

Loan funds offer training, coaching, and capacity-building services to help clients take on debt, succeed in their projects, and repay their loans. Beyond lending, they offer services to build their clients’ capacity, help mitigate risk, and enable positive outcomes for the people and communities they serve.

Learn more and spread the word!

Now that you know a bit about the structure and goals of CDFI loan funds, use the resources below to explore the report’s findings further. Then, share what you learn with others!

Download BMLF Paper

Download BMLF 2-Pager

Download the Toolkit

Watch Webinar