Community lenders fund faces uncertain future

The deal to reopen the federal government earlier this month reversed the mass firings of thousands of federal workers. 

Among those who got their jobs back are the entire staff at the Community Development Financial Institutions Fund. But it’s still an uncertain time for the CDFI Fund and the more than 1,400 community lenders it supports. 

The CDFI Fund awards grants to banks, credit unions, and loan funds that work in underserved parts of the country. The CDFI brand helps those lenders raise private capital. 

“A relatively small investment of the public sector leverages significant funds from the private sector,” said Michael Swack, who directs the University of New Hampshire’s Center for Impact Finance. 

The Trump administration’s move to effectively eliminate the CDFI Fund was met with rare bipartisan pushback in Congress. “The CDFI Fund has supported small business and affordable housing lending in districts blue and red, and a number of red states have benefited,” said Swack.

The CDFI Fund staff has been reinstated — at least through Congress’ Jan. 30 deadline to pass a budget. But lenders fear the fund may be on shaky ground, and some are strategizing to lean less on federal support. 

“This was a great wakeup call that we’re going to have to diversify,” said Pete Upton, CEO of the Native CDFI Network.

Some of the institutions he works with are lending more conservatively as they wait for grant funding held up by the shutdown or anticipate more cuts to CDFI funding and services.