CDFI Strategic Planning Webinar Fall 2024

In an increasingly competitive financial landscape, credit unions are constantly exploring ways to grow their reach and impact in underserved communities. One significant avenue to achieve this is through CDFI (Community Development Financial Institution) certification. This certification not only grants credit unions access to substantial funding opportunities but also enhances their ability to address the unique financial needs of low- to moderate-income individuals.

CUCollaborate recently hosted an insightful webinar on "Understanding the CDFI Opportunity," where industry expert Jeff Bailey, with over a decade of experience in CDFI lending and consulting, shared his expertise. This session covered the critical aspects of CDFI certification, from the benefits and eligibility requirements to strategies for successful certification and award applications. For credit unions aiming to deepen their community impact, CDFI certification provides access to specialized grant programs like the Technical Assistance Award, Financial Assistance Award, and Small Dollar Loan Program.

Throughout the webinar, Jeff outlined the steps credit unions can take to navigate the certification process, align with CDFI requirements, and leverage funding for strategic growth. By focusing on community development, certified credit unions can position themselves as pivotal financial resources for underserved areas, ultimately fostering economic empowerment and stability. Below, you’ll find a full transcript of the webinar for a detailed dive into the strategies, opportunities, and practical guidance shared by CUCollaborate’s CDFI advisory team.

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Opening Remarks

Phyllis Lee
Hello everyone. We still have some folks joining, so we'll be starting in just a minute. I think we can get started.

Hi everyone, I'm Phyllis Lee, the CMO here at CU Collaborate. I'm excited to talk to you today about the CDFI Opportunity, and we have Jeff Bailey here who’ll be walking through the content. Today, we'll be covering certification, benefits, and strategy. Here’s our agenda:

• Quick introduction and background
• Benefits and opportunities of CDFI
• Requirements for certification
• Certification strategies
• Q&A at the end

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You’re welcome to ask questions throughout the webinar. Given that we have quite a large group attending, we ask that you post questions in the chat, and we’ll ensure they get answered.

For those who may be less familiar, CU Collaborate is a data and analytics CUSO. We work with credit unions to maximize growth, impact, and performance. If you have specific questions about our products and services, feel free to reach out. I'll include a meeting link in the chat, which will also be in the materials sent out after the webinar.

Our expertise spans several areas, including growth strategies, field of membership and charter initiatives, low-income designation, certification initiatives, branding, marketing, mergers, and digital acquisition. Now, I’ll hand it over to Jeff Bailey.

Overview of CDFI

Jeff Bailey
Thanks, Phyllis, and thank you all for joining. As Phyllis mentioned, I’m Jeff Bailey, leading CDFI engagements at CU Collaborate. I have over a decade of experience as a CDFI lender and consultant, raising over $22 million in awards from the CDFI Fund for clients. Let’s dive into the benefits, requirements, and opportunities of CDFI certification.

For those new to CDFI, certification can enable credit unions to grow in ways they might not be able to otherwise. For example, CDFI awards can help credit unions reach deeper into their communities with additional capital. In the long run, this certification can be a cornerstone of your community development strategy.

CDFI Fund Grant Opportunities

The CDFI Fund offers three main annual awards:

1. Technical Assistance (TA) Award
   • For smaller or non-certified CDFIs, with awards up to $125,000.
   • Used for capacity-building expenses like staff time, IT, and training.
2. Financial Assistance (FA) Award
   • Available to certified CDFIs for lending capital, loan loss reserves, or capital reserves.
   • Designed to help expand financial products and services in underserved communities.
3. Small Dollar Loan Program (SDLP) Award
   • Grants up to $500,000 to support small-dollar consumer loans.
   • Intended to offset the risk of small loans, providing support for loan loss reserves and technical assistance.

These awards are annual, and while some additional opportunities may arise (e.g., pandemic-related funding), the three core awards are typically available year to year.

CDFI Certification Requirements

To qualify for CDFI certification, credit unions must meet seven requirements:

1. Legal Entity
2. Primary Mission
3. Financing Entity
4. Target Market (at least 60% of lending should be to target markets)
5. Development Services
6. Accountability to Target Market
7. Non-Governmental Entity

For credit unions, some requirements are straightforward, such as legal entity and non-governmental status. However, meeting the target market, primary mission, development services, and accountability requirements requires strategic alignment and planning.

Certification Strategies

Certification and award applications are competitive, and our goal is to help clients maximize their chances. Over the last year, we helped clients win $2.7 million in FA awards, with competitive success rates.

We recommend viewing CDFI certification as an integral part of your credit union’s community impact strategy. By strategically pursuing awards and aligning community development practices, credit unions can see a strong return on investment from CDFI involvement.

Questions and Answers

Phyllis Lee
We have a question in the chat regarding the likelihood of a large credit union qualifying with the 60% target market rule.

Jeff Bailey
There isn’t a direct relationship between asset size and target market qualification. It’s more about your geographic location and who you’re serving. Credit unions in areas with many low- and moderate-income census tracts, like the Southeast, may find it easier to meet the 60% requirement than those in regions like the Northwest, where qualified tracts are less concentrated.

Phyllis Lee
Another question is whether loan participations count towards the 60% requirement.

Jeff Bailey
Yes, but with caveats. For participations, the CDFI Fund only counts the portion financed by the credit union, not the total project amount. For loan purchases, current guidance allows them to count toward target market lending, which can help raise the lending rate if the purchased loans qualify.

Certification Roadmap

For those not yet certified, here’s a roadmap:

1. Target Market Lending Assessment
   Assess if you are ready or have gaps in meeting certification requirements.
2. Apply for TA as an Emerging CDFI
   Apply for technical assistance to support community development programs while pursuing certification.
3. Submit Certification Application
   Once certified, apply for available awards to support ongoing development.

For those already certified, the primary focus should be on meeting ongoing reporting and certification renewal requirements.

Final Thoughts

Phyllis Lee
CDFI certification offers significant benefits for credit unions focused on community development. If you have any questions or would like to discuss your specific CDFI initiatives, please reach out to us. Thank you all for joining today, and we look forward to supporting your CDFI journey!

Jeff Bailey
Thanks, Phyllis. Thanks, everyone. Goodbye!

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