Low income investment funds, or CDFIs, are financial institutions in the U.S. dedicated to supporting revitalization and inclusive growth in low income areas. They provide funding and financing for affordable housing, infrastructure, businesses, financial services and more in underserved communities. Investors can support CDFIs through purchasing bonds, notes, equity instruments, while foundations provide low interest loans. Major institutions like Google and Paypal have invested in CDFI projects. CDFIs fill a critical gap, linking capital to social needs.
CDFIs focus on low income communities and inclusive growth
Community development financial institutions or CDFIs were created to provide funding and support to distressed and underserved areas in the U.S., with a mission of community investment and revitalization. They provide loans, financing and other services for affordable housing construction and renovation, infrastructure like schools, childcare and health clinics, minority-owned businesses and startups, and basic financial services. So CDFIs aim for both financial sustainability and positive social outcomes.
CDFIs provide measurable community benefits
Research on CDFIs has shown they create significant socioeconomic value. From 2003-2012, 333 certified CDFIs helped create over 63,000 permanent jobs and 47,866 construction jobs. They also developed or renovated over 159,000 units of affordable housing, in addition to building schools, medical clinics, childcare and community centers. So they have increased access to housing, jobs, education, healthcare and other services for low income groups.
Investors can purchase CDFI bonds or notes
Larger CDFIs have started issuing rated bonds on public markets, creating an opportunity for ESG investors. As of mid 2020, 11 CDFIs have obtained S&P ratings, with 9 successfully raising over $1 billion via bonds and notes. Some qualify as sustainable bonds under ICMA principles. For example, the Low Income Investment Fund (LIIF) issued well-received sustainability bonds in 2019. Investors saw LIIF bonds as impact investments providing both financial return and social value. Smaller CDFIs also issue notes to individual and accredited investors.
Institutions use innovative approaches with CDFIs
Major corporations have partnered with CDFIs for community development funds. In 2020, Google created a $175 million loan fund to help small businesses and nonprofits affected by COVID, managed via the CDFI Opportunity Finance Network. Paypal and partners also launched a $250M fund focused on supporting Black-led organizations and businesses, administered by LISC, another national CDFI. Banks have provided financing to CDFIs through Equity Equivalent Investments to help them leverage more capital with less dilution.
In the U.S., community development financial institutions or CDFIs provide critical financing and funding to underserved, low income areas and populations. Investing in CDFIs allows investors to support inclusive growth and community revitalization while earning financial returns.