How to Become a Certified CDFI
CDFI Certification is the U.S. Department of the Treasury’s recognition of specialized financial institutions serving low-income communities. CDFI Certification opens the door to opportunities for CDFIs to excel—both operationally and financially.
The Treasury’s CDFI Fund provides grants and financing to organizations certified as Community Development Financial Institutions (CDFIs). The CDFI designation limits those who can apply for those resources to ensure the program benefits those that most need it by institutions accountable to their communities with a mission to make a difference.
The designation of CDFI certification conferred by the CDFI Fund to indicate that a financial institution provides financial products and services to underserved and economically distressed consumers and communities.
Eligibility Requirements to Become CDFI Certified
To be eligible for CDFI Certification, an organization must meet the following criteria:
• Have a primary mission of promoting community development
• Provide both financial and educational services
• Serve and maintain accountability to one or more defined target markets
• Maintain accountability to a defined market
• Be a legal, non-governmental entity at the time of application (with the exception of Tribal governmental entities.
Fortunately, all credit unions meet most of these requirements. Low-income-designated credit unions generally meet all of them, and its just a matter of documentation. The NCUA has been working on a streamlined process eliminating some of the burden of the application process. However, it is still recommended that credit unions receive assistance.
To apply to become certified as a CDFI an organization must submit a CDFI Certification Application to the CDFI Fund for review.
The application documents how the organization meets the certification requirements. Application steps include:
Submitting a charter to show that the applicant is a legal, non-government entity and not be under the control of any government entity at the time of certification application. Tribal governments are typically excluded.
Submitting a mission statement and/or board resolution documenting a primary mission of promoting community development.
Conducting a loan analysis, mapping and other documentation to show the applicant primarily serve one or more “target markets.” A target market can be either a historically distressed investment area, a low-income population, or an “other targeted population” (OTP). OTPs are vulnerable or underserved populations that have historically been denied credit or lack adequate access to capital.
Demonstrating that the organization is accountable to its designated target markets through the make-up of its board of directors or an advisory board, where the members are representative of the target market or other methods, which may include focus groups, community meetings, if the institution can show that these methods are used in its decision-making process.
Demonstrating that the applicant must be a financing entity. Regulated certification applicants, including CDFI credit unions, are deemed to automatically meet the financing entity criteria.
Document the “development services” the organization provides in conjunction with its financing activities. Development services include technical assistance or training activities that prepare borrowers to access the institution’s financial products. There must be a direct link between the institution’s development services activities and its financial products.
The CDFI certification is maintained annually with a CDFI annual certification report in the CDFI Funds AMIS system. If a certified CDFI fails to submit its annual certification report it will need to complete the entire certification process to be reinstated as a CDFI.