​CDFI Certification Becoming Easier

Credit unions, especially smaller credit unions, can find substantial benefits from becoming certified as Community Development Financial Institutions, and the application process is becoming easier.

CDFIs are specialized organizations providing financial services and products in low-income communities to people and businesses who lack access to financing. The Community Development Financial Institutions Fund, a division of the U.S. Treasury Department, determines CDFI certification.

The CDFI Fund's mission is to generate economic growth and opportunity by assisting people and businesses in economically distressed communities in accessing financial products and services. The fund offers tailored resources and innovative programs that invest federal dollars alongside private capital.

The CDFI Fund and NCUA in January signed a Memorandum of Understanding to streamline the CDFI application process. The change will increase the number of CDFI-certified credit unions, primarily from the ranks of existing low-income-designated credit unions. Our near-term goal is to add 265 new CDFI credit unions by the end of 2016. NCUA's Office of Small Credit Union Initiatives will identify and reach out to eligible credit unions.

What Are the Benefits of CDFI Certification?

CDFIs are eligible to apply for multiple programs offered by the CDFI Fund that provide direct funding through awards or grants and indirect funding, such as through a bond guarantee program. For CDFI credit unions, this could mean access to grant awards that can help grow capabilities and further the mission of serving members and their communities. CDFIs also can access resources such as technical assistance, training and capacity-building initiatives to support their mission.

The CDFI Fund provided more than $200 million in grants and awards in 2015, with more than $31 million going to CDFI-certified credit unions. The more credit unions that become CDFI-certified and successfully apply for funding, the more available CDFI Fund dollars can flow into credit unions and help them improve members' financial lives.

CDFI Eligibility Requirements

An organization must meet seven criteria to be certified as a CDFI:

  • Be a legal entity,
  • Be a financing entity,
  • Primarily serve one or more target markets,
  • Have a primary mission of promoting community development,
  • Provide development services in conjunction with its financing activities,
  • Maintain accountability to its defined target market, and
  • Be a non-governmental entity and not be under the control of any government entity (typically excluding tribal governments).

An overview of CDFI certification is available on the Fund's website at http://go.usa.gov/x4Erj.

Fortunately, all credit unions meet a couple of these requirements, such as being a financing entity. Low-income-designated credit unions generally meet most of them. As of May, 276 credit unions, 27 percent of all CDFIs, had this designation. But more of the 2,348 low-income-designated credit unions could take advantage of CDFI Fund resources.

New Streamlined Process for Credit Unions Available Soon

CDFI certification application materials are available online now, but NCUA and the CDFI Fund are working to further streamline the application process for eligible credit unions. Under the streamlined process that will become available in the near future, NCUA will perform a substantial portion of the data collection and reporting on behalf of eligible credit union applicants.

NCUA, not the credit unions, will use data submitted through the Automated Integrated Regulatory Examination System, otherwise known as AIRES, and assume responsibility for initially analyzing membership and lending activity necessary for CDFI pre-qualification according to the seven eligibility requirements. NCUA will conduct other analyses toward requirements that in the past was performed by applying credit unions. NCUA then will provide eligible credit unions with many of the data points required for the application, making that application easier.

Working with NCUA assistance, interested and eligible credit unions will still be responsible for completing the few remaining data requirements and for directly submitting their applications to the CDFI Fund.

What Happens Next?

In late summer or early fall, NCUA will identify and begin contacting credit unions eligible for the streamlined CDFI application process. Several online resources are available to help you learn more about the new process and CDFI certification:

  • CDFI Certification—More Than One Way to Get There: An archived recording of the June 23 joint agency webinar explaining the two methods a credit union can use to become certified. To learn more, go to http://go.usa.gov/xgq8T.
  • CDFI Fund Certification: A video explaining the benefits of CDFI certification and guidance from the CDFI Fund for credit unions using the traditional application. Watch this video at http://bit.ly/2adRPud.
  • CDFI Low-Income Designation Fact Sheet: A quick reference on the differences between and benefits of the CDFI Fund's certification and NCUA's designation. To learn more, go to http://go.usa.gov/xgq9Q.