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CDFI Questions & Answers
What is a CDFI?
CDFI stands for Community Development Financial institution. A CDFI is not a charitable organization in terms of its lending practices (it wants to make good loans) even though its mission is a charitable one! CDFIs are supported in Congress by both Democrats and Republicans and have been since 1995 when the CDFI Fund was created. Even in 2007 when the administration proposed to cut almost all funds from the CDFI Fund, Congress reinstated it.
What is the purpose of a CDFI?
To provide opportunities for housing and business development through loan products, financial education and business coaching.
How does the CDFI fit wtih the Council's vision for the Community?
The CDFI directly aligns with the vision of economic development with the foundation of long-established Salt River Pima-Maricopa Indian Community (SRPMIC or Community) values.
Why do we need a CDFI?
- Leverage untapped private and public funds.
- Re-circulate the dollars within the Community and not in outside lenders' pockets.
- Open up opportunities for micro-business loans and entrepreneurship; see the current successes in the Housing Department where outreach is pro-active.
Where does the start-up money come from?
The Community received a small planning grant, through the Housing Division, to create the conceptual nature of the organization. SRPMIC has partnered with SRFSI and provided initial start up capital for the first 5 years of business. Upon certification by the federal government, the SRFSI will become eligible for additional public and private resources. Overall, and in time, SRFSI will generate its own funding through interest income.
Who does the CDFI serve?
The Community and its members.
What are the pros and cons of a CDFI?
Pros
- Money stays within the Community
- Members have access to more loan and financial opportunities
- Business development
- Improved Community economy
- Each business and member will have fair opportunity to receive a loan
Cons
- Initial funding by the Community
- Self-appointing board, except the 1st year
- Risk of defaults
- Risk of members not qualifying for loan(s)
Who will administer SRFSI? Who decides who gets loans?
The Board and Executive Director will have a variety of staff performing various functions and services to the Community. The staff will make a loan recommendation and the Loan Committe will make the actual loan decision based on underwriting guidelines, policies and procedures.