3c hapter - Index of

The Biggest- Impact Financial Sector You’ve Never Heard Of 81
Community Development Finance Institution
The Community Development Finance Institution (CDFI) is a class
of fi nancial institution that serves underserved and often low- income
communities. CDFIs, which are certifi ed by the Treasury Department,
can be banks, credit unions, venture capital funds, or loan funds.
They typically focus on a specifi c geographic region, making them a
good option for local investors. Community development loan funds,
in particular, allow individuals to put money to work in their communities
in return for a modest, fi xed rate of return.
In its quarter- century, TRF, a loan fund, has invested $840 million
in more than 2,400 projects like Ramsey’s that have served
to rebuild and revitalize neighborhoods in Philadelphia and,
more recently, the broader mid- Atlantic region. Its Fresh Food
Financing Initiative, aimed at funding grocery stores in so- called
food deserts, has won national acclaim.
The Opportunity Finance Network, a network of more than
170 CDFIs, reports that in 2008 alone, its members collectively
made $2.3 billion in loans, including to more than 51,400 small
and microbusinesses that created or maintained 223,738 jobs. 1
Individuals can open an account at a CDFI bank or credit
union just as they can with any bank, with their money being lent
in their area. Community development loan funds, on the other
hand, raise money primarily through low- cost loans and grants
from commercial banks, foundations, and the government. But
a growing number of loan funds allow individuals to invest as
well, typically for a fi xed rate of return. The money goes to consumer
lending (often the only alternative to predatory loans
in an area), locally active nonprofi ts, affordable housing, fi rsttime
entrepreneurs, microbusinesses, and established Main Street
businesses—“everything that goes into building a healthy community,”
as Donna Fabiani, an executive at Opportunity Finance
Network (OFN), puts it.
CDFIs are the last line of defense—or the fi rst line of opportunity,
as OFN prefers to frame it—for entrepreneurs like Ramsey, for