Read time: 3 minutes
Reforms have been a long time coming and are necessary to safeguard the industry and ensure it stays true to its mission
Back in February, OFN made the case for CDFI certification reform. At the time, the CDFI Fund had just announced that it would extend the timeline for implementing these changes. It sought more time to review the large volume of public comments from industry experts and stakeholders, most of whom recognize the need to strengthen this critical credential.
It has been nine months and 2023 is drawing to a close. We call on the U.S. Treasury Department to finalize the updated certification process before the end of the year to safeguard the CDFI industry and ensure it continues to serve as a beacon of financial inclusion for underserved communities.
A Critical Moment for Reform
The pending reforms come at a critical moment for the CDFI industry, which has emerged from its most productive period helping to support U.S. small businesses from the economic impact of the pandemic and benefitting from unprecedented public and private investment. Recognized as a vital segment of the financial system, CDFIs need a credential that is in line with the evolving financial landscape and the industry’s commitment to responsible lending practices.
The proposed changes are not merely administrative. They are changes designed to protect consumers from predatory lenders and reinforce the CDFI industry’s reputation as a trusted partner in economic and community development. The updated application process will enhance transparency, strengthen accountability, and protect borrowers from questionable or unscrupulous practices. These measures will ultimately strengthen the industry’s credibility in service of its mission to foster economic opportunity in historically disadvantaged communities.
A Credential the Banking Industry Can Rely On
In October, federal bank regulators released the final rule updating the Community Reinvestment Act (CRA) regulations, a landmark civil rights legislation with big implications for the community development finance industry and determining how capital flows to low- and moderate-income people and places for decades to come.
The final rule gives automatic favorable consideration to bank loans and investments in certified CDFIs, calling CDFI certification “a critical guardrail” to ensure inclusive community development. The regulation’s explicit recognition of the importance of CDFI certification underscores the need to strengthen and reform it.
Through these reforms, the CDFI Fund has the opportunity to uphold the industry’s reputation for responsible lending while fulfilling its true potential as a driver of economic opportunity and justice. We welcome and encourage the rollout of updated CDFI certification before the end of the year.
Stay Connected with OFN
Subscribe to OFN newsletter to receive regular updates straight to your inbox and check out the OFN blog for the latest coverage from OFN and the CDFI industry. Follow us on X, Facebook, Instagram, and LinkedIn.