DEPARTMENT OF THE TREASURY

WASHINGTON, D.C.

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The Treasury Department’s Approach to Community Finance Policy

The Treasury Department’s approach to community finance policy flows from Treasury’s mission to 

create economic and job opportunities and reflects the view that opening responsible access to capital in 

financially underserved communities will increase competitiveness and support economic growth. 

Treasury’s approach has been informed by considerable public input, including extensive outreach and 

engagement with community finance practitioners and investors, solicitations of public comments on 

proposed policies and information-collection forms, and formal requests for information. 

Community finance is a subset of financial services focused on (1) opening access to responsible capital, 

credit, and financial services to low-income or financially underserved households, small businesses, or 

non-profit organizations; and (2) financing place-based community and economic development activity in 

economically distressed geographies.1 Community finance is often undertaken by community 

development financial institutions (CDFIs) certified by Treasury’s CDFI Fund, minority depository 

institutions (MDIs) designated by financial regulators, or similar community-oriented lenders and 

investors. 

Below is a description of the principles Treasury applies in its community finance efforts, with specific 

examples of relevant Treasury policymaking.

• Establish responsible financing standards for community finance. While community finance is 

broadly understood to have a public purpose – namely, creating access to capital for financially 

underserved people and in economically distressed geographies – a lack of clarity about what 

products, services or business models qualify under the definition of community finance can be 

problematic. Without clear definitions and guardrails, there is a risk that resources intended for the 

benefit of the public could be misused or used less impactfully than intended. With too many 

restrictions, however, there is a risk of limiting innovation and potential for scale. Some investors 

have stated that a lack of clarity about what is defined as socially impactful is also a barrier to 

investments in the field. 

Examples of this principle in action. In the updated CDFI certification application that Treasury 

published in December 2023, and in the State Small Business Credit Initiative (SSBCI) policy 

guidelines, Treasury has substantially clarified what financing activities, services, and business 

models are consistent with its community finance programs. While the CDFI Fund’s previous

certification application reflected the basic statutory requirements for certification, it did not 

adequately differentiate how a mission-oriented CDFI operates from the activities of other lenders. 

For the first time, the revised certification application identifies responsible financing standards, 

including a specific list of products and services that are inconsistent with CDFI certification. The 

application also provides greater clarity about how an organization will be determined to be 

accountable to its target market, where it is required to focus at least 60 percent of its lending in order 

to be certified. Similarly, the SSBCI program guidelines provide clarity by requiring certain 

disclosures to small business borrowers and placing limits on certain fees. Also, while purchasing 

1 Place-based community and economic development includes the development or preservation of community assets 

and community-serving infrastructure that reinforces economic opportunity (such as affordable housing or facilities 

for the delivery of quality childcare, healthcare or education) or economic development efforts that create jobs or 

facilitate business growth (such as small businesses incubators or commercial development in locations that are 

accessible to low-income workers and consumers).
DEPARTMENT OF THE TREASURY

WASHINGTON, D.C.

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ownership interests is generally not an eligible use of SSBCI funding, an exception was carved out to 

support transitions to employee ownership.

These federal funds result in significant leveraging of private capital and may serve as a model for 

private investment strategies. Further, CDFI certification is used by other government programs and 

private-sector investors as a criterion for distributing resources and by regulators to provide 

flexibility, eligibility, exemptions, or waivers.2In addition, given the potential private-sector interest 

in socially motivated investment,3the updated standards associated with CDFI certification could 

meaningfully influence a significant amount of social finance activity in the years ahead.

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• Differentiate “deep impact” lending. Making loans to financially underserved borrowers or in an 

economically distressed community – referred to as “deep impact” loans – can cost a lender more to 

originate and may produce less revenue than other types of loans. Community lenders often need to

spend more time and resources to prepare a borrower that is financially underserved or located in an 

economically distressed community, or to more fully understand the risk associated with the loan. 

Such loans are also often made in smaller amounts or with concessionary terms, which result in less 

revenue to the lender. In some cases, though not all, such loans may also entail greater credit risk. 

For these reasons, there is often a financial disincentive to make deep-impact loans. Policies that 

incentivize such loans help to counterbalance the financial disincentives and increase lending to 

borrowers and geographies that experience the greatest challenges in accessing capital.

Examples of this principle in action. In the Emergency Capital Investment Program (ECIP) Rate 

Reduction Guidelines and the CDFI Equitable Recovery Program (CDFI ERP) Notice of Funding 

Availability (NOFA), Treasury has prioritized types of loans made to financially underserved 

borrowers that may be more difficult or costly for the lender to deliver, but that produce economic 

opportunity in the most financially underserved communities and that Treasury has identified as more 

impactful in achieving the statutory purposes of these programs. In ECIP, the dividend or interest 

rate that participating institutions pay Treasury will be reduced if they achieve specified benchmarks 

for increasing their qualified lending to targeted populations. When ECIP participants engage in 

deep-impact lending, Treasury provides additional credit toward this rate reduction. Deep-impact 

lending includes loans to low-income borrowers and underserved small businesses, for deeply 

affordable housing, and in persistent-poverty communities, Native communities, and U.S. territories. 

Treasury published examples of ECIP applicants that have demonstrated strong track records in deepimpact lending. The first round of ECIP reporting shows that, over approximately six months in 

2022, about one third of total originations by ECIP participants were deep-impact loans.

The CDFI Fund has also taken action to incentivize deep-impact lending. The CDFI ERP prioritizes 

awards to institutions that have a strong track record of deep-impact lending. In the application for 

the CDFI Fund’s New Markets Tax Credits (NMTC) competition, the CDFI Fund revised the 

definition of areas of economic distress to include Native areas and U.S. territories. The CDFI Fund

2 For example, the October 2023 rulemaking amending the regulations implementing the Community Reinvestment 

Act included incentives for covered institutions to invest in and through CDFIs; the Consumer Financial Protection 

Bureau provides an exemption from its Ability to Repay/Qualified Mortgage Rule for certified CDFIs; and in 2022, 

the Small Business Administration made certain changes to the Community Advantage Pilot Program to make it 

more accessible to mission-based lenders, including CDFIs.

3 The Global Impact Investing Alliance (GIIN) 2022: Sizing the Impact Investing Market report estimates the size of 

the worldwide impact investing, or socially motivated investment, market to be $1.2 trillion.

4 The CDFI Fund’s FY 22 Annual Financial Report indicates that CDFIs made over $90 billion in loans or 

investments since the start of the pandemic. The CDFI Fund estimates that CDFIs leverage funding they receive 

from the CDFI Fund by a multiple of eight to one. 
DEPARTMENT OF THE TREASURY

WASHINGTON, D.C.

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also sought public comment on whether ECIP’s deep-impact lending definition should be 

incorporated into the CDFI Fund’s flagship Financial Assistance Program. 

• Collect disaggregated demographic data. Extensive research demonstrates that the experience and 

outcomes for consumers in the U.S. financial services and real estate markets are shaped 

fundamentally by race, gender, and other demographic categories. Understanding the demographics 

of borrowers is essential for understanding which segments of a financially underserved market a 

community lender is serving. In the case of ECIP and CDFI ERP, Congress required Treasury to 

study and report on program impacts disaggregated by ethnic group, to the extent possible.

Examples of this principle in action. In the applications and reporting requirements for SSBCI, ECIP,

and CDFI ERP, as well as in the new CDFI certification application, Treasury requires applicants or 

program participants to report to Treasury disaggregated data on the beneficiaries of their community 

finance activities or their organizational leadership. Jurisdictions participating in SSBCI will report 

demographic information collected from small businesses that receive capital through the SSBCI 

program, including data on race, ethnicity, sexual orientation, and gender identity. Applicants for 

ECIP and CDFI ERP were required to provide information on their track record of lending, and 

projected lending, to minority communities. Participants in both programs are required to report 

annually their lending to minority borrowers, disaggregated by race and ethnicity. The revised CDFI 

certification application requires applicants to report on the race, ethnicity, and gender of the 

applicant’s board of directors and executive staff and on the race and ethnicity of borrowers. 

Certified CDFIs also submit information annually on the race and ethnicity of their borrowers. These 

data will provide greater transparency into the ultimate beneficiaries of community finance programs. 

• Encourage equitable community engagement. Community engagement is essential for ensuring that 

government policies and programs are aligned with the needs of the targeted beneficiaries. 

Community engagement can help identify challenges early in the program design or implementation 

process, supporting timely and cost-effective solutions. When deploying emergency resources, there 

is typically far less time for planning, and community engagement can help federal, state, and local 

agencies quickly assess community needs and market conditions. 

Examples of this principle in action. Treasury has strongly encouraged community engagement in its 

numerous community finance programs. In ECIP, Treasury required applicants to provide a plan 

describing how the applicant will engage in community outreach and communication with borrowers 

and other community members. These plans could include community benefits agreements and were 

required to include quantitative details about the applicant’s planned community outreach and 

communication approach. 

The CDFI ERP NOFA required an applicant to submit a business plan that “demonstrates that the 

Applicant has engaged with and obtained input on its business strategy from geographies and 

populations that it proposes to serve with a CDFI ERP Award and that the Applicant proposes 

culturally and linguistically relevant marketing and/or outreach efforts that will support the 

deployment of CDFI ERP Award consistent with its business strategy.”

The CDFI Fund also published new FAQs for the NMTC Program with additional guidance on how 

applicants should discuss the benefits to low-income persons and residents of low-income 

communities in their applications. The FAQs also state that applicants should discuss their track 

record of project-specific community engagement, including the specific methods used and how the 

input received shaped those investment decisions.
DEPARTMENT OF THE TREASURY

WASHINGTON, D.C.

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• Support capacity building. Opening access to capital for the most financially underserved borrowers 

often requires significant investments in building the capacity of those borrowers. CDFIs are 

statutorily required to provide development services for their borrowers and potential borrowers. 

Further, many institutions that focus on lending to the most financially underserved may themselves 

benefit from capacity building funding, training, and other resources. 

Examples of this principle in action. The SSBCI Technical Assistance Grant Program has made 

available funding to support legal, accounting, and financial advisory services to very small and 

underserved businesses applying for SSBCI or other small business programs. Treasury also 

provided resources to the Minority Business Development Agency (MBDA) to support the Capital 

Readiness Program (CRP), which targets incubators and accelerators that provide services to 

underserved businesses. Most recently, Treasury announced the new competitive SSBCI Investing in 

America Small Business Opportunity Program, under which Treasury will award grants to support 

programs that propose innovative and high-impact models for delivering technical assistance.

The CDFI Technical Assistance Program makes available funding to CDFIs explicitly to build their 

own capacity. Both of the CDFI Fund’s COVID emergency funding programs (the Rapid Response 

Program and CDFI ERP) provided applicants the option to seek a minimum award size, which did not 

include lending performance requirements, so that they could function as technical assistance awards 

for institutions that were not prepared to take on higher compliance requirements associated with 

larger awards. The CDFI Fund is also implementing a Native NMTC Technical Assistance Initiative

aimed at increasing the number of Native Community Development Entities that are well positioned 

to compete for an NMTC allocation.

• Coordinate with interagency partners and the private sector. The resources that flow from 

Treasury’s community finance programs do not operate in a vacuum. These programs complement

resources from other agencies and private investors. Coordination across federal programs with 

aligned purposes can promote the effectiveness of targeted activities. In addition, alignment of 

federal data-collection requirements can reduce reporting burdens and improve the government’s 

ability to measure and evaluate aggregate impacts across multiple programs. Federal community 

finance resources can facilitate private investment to financially underserved borrowers and in 

economically distressed places by helping to mitigate risk. 

Examples of this principle in action. In July 2022, Treasury and five other federal agencies 

established the Interagency Community Investment Committee (ICIC) to foster collaboration and 

alignment in the implementation of programs that benefit underserved communities. Treasury led the 

release of a request for information to solicit public input on how the ICIC can promote economic 

conditions and systems that reduce racial disparities and produce stronger economic outcomes for all 

communities. The ICIC has now expanded to seven agencies, and in June 2023 the ICIC published 

the results of the request for information and an action plan, which Treasury is now working to 

implement. 

Also in July 2022, a coalition of private-sector companies and foundations working to make 

investments in underserved communities in alignment with federal community finance investments

formed the Economic Opportunity Coalition (EOC). At Treasury’s 2023 Freedman’s Bank Forum, 

the EOC announced a $3 billion deposits commitment by its members to make deposits in CDFIs and 

MDIs, after having achieved the $1 billion commitment that they announced at the 2022 Freedman’s 

Bank Forum.