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CDFIs: Crucial Partners in the Public Finance Ecosystem
Abstract: Community development financial institutions (CDFIs) are vital partners with state and local governments in projects aimed at assisting communities of people with low and moderate incomes (LMI communities) across the United States. Serving as intermediaries between public, philanthropic, and private sources of capital, CDFIs help deploy resources to improve economic opportunity in these communities. Government entities at all levels (federal, state, and local) work with nongovernmental actors, and CDFIs have been such partners, particularly for investments related to infrastructure as well as real estate for affordable housing and small business development in LMI communities. In this article, we examine how CDFIs can better leverage public funds and utilize subsidized financing mechanisms, such as loan funds and other debt instruments, to invest in LMI communities. Could CDFIs make investments at a larger and more sustainable scale if they had expanded access to public finance mechanisms? Are there opportunities for CDFIs and public and private actors to work together in new ways to increase the funding needed in the most disinvested places?
Keywords: Financial Economics; Industrial organization; Community development; Rural development;
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Provider: Federal Reserve Bank of Chicago
Publication Date: 2024-11