Sydney Diavua

Good afternoon and welcome to Connecting Communities. Thank you for joining us for today’s webinar, CDFIs Unpacked: Trends and Takeaways from Mission-Driven Lenders. I’m Sydney Diavua, assistant vice president of community development at the Federal Reserve Bank of St. Louis, and I will serve as your moderator for today’s session. Today’s webinar focuses on trends and insights on community development financial institutions, as well as how the Federal Reserve’s community development function engages with these entities.

I would now like to take some time to introduce our speakers on slide three. Surekha Carpenter, Senior Research Analyst at the Federal Reserve Bank of Richmond. In her role, she provides data analysis and mapping for community development research initiatives. As a part of her main focuses, she helps lead the Federal Reserve’s National Survey of Community Development Financial Institutions.

Thomas Guerra, Senior Outreach Advisor at the Federal Reserve Bank of Dallas. Thomas focuses on aligning banks, residents, and intermediaries to build ecosystems that maximize investment for economic prosperity of low- and moderate-income people and places.

Taylor Pessin, Intermediate Research Analyst at the Federal Reserve Bank of Richmond. Her main area of focus is community development finance, where she focuses on gleaning new insights from the Federal Reserve’s National Survey of CDFIs.

And Ali Shott, Senior Advisor at the Federal Reserve Bank of Philadelphia. In her role, she builds partnerships with nonprofits, community development financial institutions, and local leaders to promote equitable development and fair and impartial access to credit in underserved communities across the Third Federal Reserve District.

Now, before we get started, let’s move to slide four, where we can take care of a few housekeeping items. The views expressed during the session are those of the speakers and are intended for informational purposes. They do not necessarily represent the views of Fed Communities or the Federal Reserve System. Your microphones have been muted. Please use the Q&A feature throughout the session to submit questions. We promise to get to as many of them as possible during the Q&A portion of the session.

Let’s keep the conversation going. Engage with us on social media using the hashtag #connectingcommunities and visit FedCommunities.org for a variety of community development articles, resources and data across the Federal Reserve System. And finally, this session will be recorded and the presentation, video, and podcast will be available on FedCommunities.org within two weeks of this event.

Now, I’d like to turn over the presentation to my Richmond Fed colleagues, Taylor and Surekha to walk through this year’s findings from the CDFI survey. Taylor and Surekha, the floor is yours.

Taylor Pessin

Good afternoon, everyone. Before I get too far into this, we wanted to ask, are you familiar with the Federal Reserve’s CDFI Survey? Please select yes, no, or not sure. While you’re answering, I’ll tell you a little bit more about myself.

Again, my name is Taylor Pessin, and I’m a research analyst at the Baltimore Branch of the Richmond Fed, and I started back in November of 2024. One of my main responsibilities during my time here has been to help with the CDFI Survey efforts and we’re really excited you’ve all tuned in today to hear about our results and some of the other ways that the Federal Reserve Banks work with CDFIs.

Okay, so looking at your answers, that’s awesome. It’s good to hear that so many of you are familiar with the survey. Could I get the next slide, please?

So, for those of you not familiar with the survey, the CDFIs are mission-driven financial institutions that expand access to financing to historically underserved individuals, businesses, and communities. The Federal Reserve CDFI Survey helps us understand industry conditions and the reach and impact of CDFI activity. This survey has been fielded biennially since 2019, with a special COVID-19 CDFI survey in 2020. It’s conducted by the 12 regional Federal Reserve banks with support from partner organizations, and features several core questions, including questions around demand, ability to meet it, and challenges that impact that ability. We also ask special questions in each iteration of the survey. This year, we asked about CDFI’s short-term goals, public programs that are critical to these organizations, and a variety of other interesting topics. Next slide, please.

So, why does this Federal Reserve Survey CDFIs? Well, the data collected through the survey aids the Federal Reserve Banks in our work to understand economic conditions, inform research and policymaking, and advance access to credit and economic opportunity in communities across the nation. As a reminder, the Fed is an apolitical, nonpartisan institution. We conduct research on the economy and access to credit. We are not connected to the US Department of Treasury, CDFI Fund, or the CDFI certification process in any way. Next slide, please.

So, this year has been an interesting one for CDFIs. There’s been a lot going on that impacts these organizations, and by extension, impacted the way we fielded our survey. What I really want to point out here is that a lot unfolded in March, which was when we were initially going to open the survey up for responses. We wanted there to be some daylight between these events and for some time to pass before we started collecting responses from CDFIs. For that reason, we held off until mid-April. We also used very careful methodology to frame up our questions for respondents. For example, instead of asking about the past as the last 12 months, we instead asked CDFIs about the whole of 2024. So that responses wouldn’t be conflating recent interruptions and changes to the experiences CDFIs had in 2024. Next slide, please.

Getting into who we heard from this year, we received usable responses from 448 CDFIs, 95% of which were CDFI Funds certified. You can see the breakdown by CDFI type here. Around half of our respondents were loan funds, followed by credit unions at 36%, and banks at 11%. We received a small number of responses from venture capital funds, holding companies, and other types of CDFIs. Compared to all CDFIs certified by the CDFI Fund, loan funds and credit unions were overrepresented in our sample, whereas banks were slightly underrepresented. 72% of the CDFIs who responded carried special designations, almost a third of these were community development corporations. We also heard from minority depository institutions, cooperativas, which are credit unions specifically from Puerto Rico, and native CDFIs, which specifically serve Native American communities, among others. Next slide, please.

Looking at primary business lines, the top reported this year were consumer finance at almost 40%, small business finance at around 30%, and residential real estate finance at a little over 10%. Breaking this down by CDFI type, exactly half of the loan fund respondents reported focusing on small businesses, followed by residential real estate and home purchase or improvement finance. Over 90% of credit unions said they primarily focused on consumer finance, and almost half of the banks said they offered commercial real estate finance, followed by small business finance. Compared to the most recent Annual Certification and Data Collection Report from the CDFI fund, we were slightly under-sampled by CDFIs offering consumer finance, and slightly over-sampled with small business lenders. Additionally, around two-thirds of respondents had a secondary line of business. Next slide, please.

For geographic reach, more than half of our sample served either multiple counties or one state reservation or territory. 12% of respondents had national service areas, and those have been excluded from this service coverage map. Puerto Rico and Texas had the highest number of CDFIs serving them, as well as having the most responses total and the highest response rates. Around a quarter of CDFIs reported dedicating the most staff resources and time to rural areas specifically. And with that, I’ll pass it over to Surekha to discuss what these organizations told us this year.

Surekha Carpenter

All right, thank you, Taylor. So keeping in mind everything that Taylor just ran through, who answered our survey, we’re now going to shift focus to what our respondents shared. Next slide, please.

So this year, our key takeaways were that CDFI demand remained strong, and respondent CDFIs credited their ability to reach more customers to federal programs, specifically. CDFIs are still facing some persistent challenges that they’ve reported in the past. Specifically though this year, we heard that staffing and technology challenges were bubbling up. As Taylor mentioned, there have been a lot of change and uncertainty for the CDFI industry with regards to continuation of federal funding. So, our respondents were uncertain about that and also a little bit uncertain about the health of the overall economy. But amid this uncertainty, many respondents still expressed that they anticipate demand to continue growing and they expressed hope and being able to meet that demand and expanding their businesses through 2030.

So, we’re going to explore each of these points in more detail, starting with demand. And because I know that we have a broad audience, I want to have another poll question. I wanted to ask how you think demand changed for certain CDFI lenders in our survey? So please use the polling feature, you can select the answer you think is correct to the following question. Which of the following business lines do you think experienced the highest increase in demand? Consumer lenders, small business lenders, home purchase, or mortgage lenders? If you recall from Taylor’s slide, these are not the only business lines that are included in the survey, but these three made up most of our respondents this year, so we’re asking about them. I’ll also note that this is the highest relative to these three choices here. So, just giving a little bit more time for folks to submit answers. Okay, I think we can move on to the next slide and check everybody.

Small business finance got the biggest share of everybody’s votes, and that’s a really good guess. Starting with the overall, 71% of our respondents saw demand for their loans and financial services grow over 2024. But you can see some of that variation across business lines, just like the poll question suggested. Specifically, that a smaller share of consumer lenders saw that increase in demand, while demand for small business lenders and home purchase lenders was comparatively stronger. So good, good guesses all across the board, I’d say.

So, the overall trend of demand growth is consistent with past iterations of the survey. We’ve observed CDFIs consistently reporting strong and increase in demand since the survey started in 2019. In this, we can infer that CDFIs are effectively attracting new borrowers and clients, and the survey data this year backed that up. Almost all of our respondents who saw demand growth attributed that change to business from new customers. Next slide, please.

So, how are CDFIs attracting those new customers and reaching more borrowers? We asked this year in the survey for respondent CDFIs on their perspective about what unique value they add to the finance industry. Focusing on the top three bars in this chart, you can see that some responded that it was their flexible underwriting practices or their loan terms. 18% simply said that their unique value was their ability to expand access to financially underserved customers. Then we asked a follow-up question. What public program enhances your ability to offer that uniquely CDFI value? Two-thirds of our respondents said that the most impactful programs come from the federal level. Many cited the Treasury’s CDFI Fund. They mentioned the funding programs, as well as technical assistance programs. And there are also frequent mentions of small business programs from the Small Business Administration and the Treasury, among others. In a separate question, an even larger share of our respondents said that CDFI certification benefits outweigh the costs. Next slide, please.

So, a core set of questions that we ask every year is, what are the challenges preventing your CDFI from meeting more demand? This year, there wasn’t a lot of daylight between these challenge categories. You can see that staffing at the top, that was cited by 78% of respondents total, whereas lending capital at the bottom is cited by 63%. That’s still more than half of our respondents citing lending capital as an issue. But what was really interesting this year was that staffing and technology were cited most frequently, and I will get to some more specifics on those two challenges in a minute. But I also want to point out that lending capital was cited as a significant challenge, in the dark red, for a third of our sample. So, because these categories are all frequently cited, we can get better detail by looking at this across financial institution type. Next slide, please.

On this slide, we have a side-by-side view of loan fund top challenges and deposit taking institutions’ top challenges. Because loan funds don’t have the same revenue streams as banks and credit unions, they are more dependent on outside funding and capital sources. And you can see that the plurality of loan funds reported challenges accessing operational funding and lending capital. 40% of loan funds said that lending capital challenges pose a significant barrier to their ability to meet more demand. This likely means that the uncertainty around funding sources would impact this segment of the industry the most. And in fact, in our survey, loan funds did tend to be more pessimistic about the health of their own organization compared to deposit taking organizations or institutions.

So on the flip side, on the right side of the screen, you can see that three-quarters of depository institutions cited challenges with technology as limiting their operations, that was their most frequently cited challenge. But you can see still, more than half faced issues with funding and capital as well.

Okay, on the next slide, we’re going to zoom back out to all the respondents, where I want to spend a little bit more time talking through specific challenges that CDFIs reported. There was a clear theme around skills gap this year, related to staffing. Respondents expressed that they have had challenges finding and hiring qualified workers, and also that they lack resources to train up their existing staff or maybe a new hire that does not come with the required skills. Another common theme was around cost, this was pervasive across a couple of the different challenge categories. Respondents mentioned the cost of technologies and capital. Many mentioned price and rate changes as an obstacle both to their organization but also to their borrowers. And on that note, I’ll mention that last box on the far right, we did ask this year if and how challenges around borrower qualifications were limiting CDFI’s ability to serve more customers. And a lot of our respondents mentioned that some borrowers were dropping off and not being able to afford loans at the terms offered over this last year.

Okay, so considering these challenges that CDFIs are facing, some of them are evergreen and some of them are newer. Combined with the recent strong growth in demand, we wanted to know what CDFIs expect in the near future and over the longer term, what do they expect? Next slide, please.

So to start, we asked respondents to rate their optimism about the overall US economy. Our respondents were split on that. So, just over 21% were optimistic, over 21% were neutral, and 56% were pessimistic about the overall economy. So despite this mix, this kind of uncertainty leaning pessimism, and because CDFIs have historically been critical lenders in weaker economic environments, and the fact that CDFI demand has been growing steadily over the last few years, more than 60% were optimistic about the health of their own organization. With all that said, more than three-quarters of CDFIs anticipate that their overall demand for their products and services would continue to rise over the remainder of 2025, which is the chart that we’re seeing here on the slide. You can see how expectations vary a little bit by business line, but overall, everyone is expecting demand for their loans and financial services to grow. And there’s a little bit less variation in this chart than that previous one that we saw asking about demand growth in 2024.

So, large shares of respondents said they expect to be able to meet more demand over 2025, due to anticipated increase in staff capacity and additional technological resources. It sounded like some CDFIs were optimistic about being able to meet those challenges that they have identified to be able to meet more demand. Next slide, please.

What about expected changes over the longer term? So we specifically asked our respondents about their organizational goals over the next five years to understand their ambitions and expectations. And almost all of our respondents anticipate bringing in more customers, continuing to bring in more customers, and offering more financing through 2030. And a smaller but still notable share of our respondents hope to expand their geographic reach or the types of loans and services that they offer. And while our respondents shared these pretty clear ambitions for growth and a general optimism, I think you guys can tell about their own organization’s own financial health, the theme of uncertainty of funding still came up within several respondents, specifically loan funds. Of the respondents who reported that they would not be able to meet rising demand through 2025, 80% of them said that their decreased capacity, a driving factor, would be loss of lending capital. So, that strong demand growth that CDFIs are seeing could outpace funding if capital sources dry up or shift, especially for loan funds.

All right, and on the next slide, I’ll wrap us up, and let you guys know that obviously you can hear from these findings or you may already know, you may be in the CDFI industry yourself, but there is a lot of diversity in this industry. And on top of that, things have been and they continue to change quickly for the industry over the rest of this year. So, you can read more in our full Key Findings Report. We have more detailed breakouts for different loan funds versus credit unions versus banks. And you can stay tuned to richmondfed.org and follow-up posts that we will continue to produce over the remainder of this year and through 2026 that will focus on different segments of our respondents specifically.

Again, my name is Surekha Carpenter, and Taylor and I would like to thank you again for dropping in to listen about the key findings from our 2025 CDFI survey. If you have questions, we’re happy to address them in the Q&A after the rest of our program. And with that, I’ll turn it back to Sydney.

Sydney Diavua

Thank you Surekha. Thank you, Taylor, for walking through those survey findings and helping our audience understand a little bit more about what you learned about CDFIs over the past year. And I know that there are probably a lot of questions about those survey findings. I encourage our audience, please use the Q&A function, drop your questions in. When we come to that section of the presentation, we’ll be glad to take them.

And the survey is just one way that we learn from and about CDFIs. The Fed’s community development work focuses on lower income populations and it’s an important responsibility rooted in its mandates from Congress. Our community development research and outreach efforts help promote a healthy economy and financial system in which all can participate. We work to learn more about community lenders through direct engagement, which looks different at all of the Federal Reserve banks.

To share a little bit more about the Fed engages with CDFIs, I’d like to invite Ali and Thomas to join me. Ali, Thomas, thank you for joining me today. Thanks for sharing more about your work within community engagement at the Fed. In your roles, you’re often engaged in outreach with stakeholders to understand community conditions, and with CDFIs being a key sector of that work. Ali, can you tell me a little bit about how you’ve connected with CDFIs at the Philadelphia Fed?

Ali Shott

Absolutely. Thanks, Sydney, and thanks everyone for being here today. So as Sydney mentioned, I’m Ali Shott, I am a Senior Advisor at the Philadelphia Fed’s community development function. And if we move to the next slide, I can talk through some of the ways that we engage with CDFI partners across our district, which covers the eastern two-thirds of Pennsylvania, South Jersey, and the State of Delaware.

So starting with this kind of continuum of engagement, the Philadelphia Fed’s in a little bit of a unique position because we have relatively few CDFIs compared to the other 11 Federal Reserve districts. So we have fewer than 30 in our entire district, which allows me to do one-on-one outreach and have direct conversations with each CDFI in our district, at least once a year. And this really provides us with insights on conditions and challenges and opportunities that those CDFIs are facing. And we have a range of CDFIs in rural communities, urban communities, and a mix of primarily small business, but a number of other loan functions as well. And these conditions really help us understand and respond to what’s going on in the CDFI sector in our district.

We also, in addition to these one-on-one meetings, we’ll co-host roundtables or events or convenings with CDFI partners based on the conditions that they are facing. So for example, in two weeks we’re going to be hosting two listening sessions with the CDFI in South Central Pennsylvania, that is focused on helping them understand the conditions that their clients are facing. And so, we’re doing one for small businesses and one for nonprofits, just to understand how the policy and economic conditions right now are impacting their work so the CDFI can be more respondent to the needs of their potential clients.

And then at the deepest level of engagement, we work with CDFIs through our longer term, they may be multi-month or multi-year initiatives. And one of those is our Reinventing Our Communities, our ROC cohort program, which is a year-long capacity building program for communities from across the country, so from across the range of Federal Reserve districts, to identify and respond to a challenge in their community. So if we walk to the next slide, I can talk through how we’ve worked with some CDFIs through that program specifically.

So, we had an emerging CDFI join our 2021 program that was focused on really serving a CDFI desert. And this was built out of an economic development agency, and they had identified that there was a desert for CDFI lending specifically to small businesses in their community. And so, we worked with them through training and technical assistance and coaching and mentoring, connecting them with CDFI leaders from across the country to help build out the BLOOM Business Empowerment Center serving York, Pennsylvania. And they’ve continued to evolve that, focusing largely on what they’ve identified as childcare needs, and offer a number of lending products for new childcare centers and expanding childcare centers in the community.

And then a second example that’s come out of a CDFI partnership through those longer-term engagements is a loan product that was developed out of another different CDFI in South Central Pennsylvania, that was really looking at responding to the COVID-19 pandemic and for businesses that were trying to grow in response to the economic shock of the pandemic. And so, they had developed a up to $10,000 fixed rate loan at 1% with a matching grant, and they distributed that loan product in 2022 through 2024, based on community conversations that they were having with their partners around that need for small dollar capital that would help businesses really move to that next step and continue their growth. So, I’m grateful for these opportunities to have a range of connections from those one-on-one conversations to the longer-term engagements with CDFIs on our district.

Sydney Diavua

So Ali, it sounds like you all are listening, but also you’re taking what you hear and you’re fitting it back and you’re helping to build capacity and make some connection points for those CDFIs that you’re working with.

Ali Shott

Yeah.

Sydney Diavua

Thomas, what about you?

Thomas Guerra

I mean, great work, of course. So glad to be able to chat a little bit about the Dallas Fed. My name is Thomas Guerra, I’m a Senior Advisor in our CD function, and I’m based out of the San Antonio branch. And my portfolio is community development finance with a focus on infrastructure and small businesses. I also support FOMC analysis through Beige Book contributions for the LMI economic conditions. But the thing here today to share about is how we connect with the advice in the 11th District. High level, I want to share that monitoring economic conditions, research, and community development are all part of the priorities that CDFIs help us to do our work. So, the work can be fit in each one of those buckets.

Now the examples that I have here as examples, one is sharing that we serve as an advisory member for the Texas CDFI Coalition, and I’ll talk a little bit more about that in a second. The second example here is that we curate and co-lead a CDFI track at the annual Texas Community Development Conference. Now, both of those examples are more big picture, getting people together, but the following three really helped to serve our President Logan. So, every six weeks or so, she has her FOMC meetings to make decisions, and CDFIs play an important role in that. And so these examples, district roundtables, district outreaches to executives, one-on-one calls, and then topical focus groups. Those are sources of really great qualitative data that we feed up every FOMC cycle to our president. The last one though, about focus groups, that one also supports our research and community development work, and I could share a little bit more about that, but I’m pass it back to Sydney.

Sydney Diavua

So Thomas, it’s similar to the CDFI survey collecting that information, but you all are using that to inform your broader understanding of the economy and what’s happening in and around the Dallas Feds district.

Thomas Guerra

Exactly, and so we have an example of that if we’re willing to talk about it.

Sydney Diavua

Yes, please. I’d love to hear more about examples of these engagements and what you all have done recently.

Thomas Guerra

Excellent. So if we can advance, I think, two slides. Thank you. So, this one is impact investing. For the Dallas Fed, I just want to highlight that impact investing is a portion of the work that we have heard from CDFIs. The struggle I think in the survey results earlier in this session talked about funding and that being a core point of struggle. So the Dallas Fed is working to determine whether or not there’s interest among Texas investors to form an impact investing collaborative. All of that would be to accelerate learning and implementation of investment strategies across the state’s urban and rural areas. The existing group as it is, it’s still in an exploratory phase. And so, I just want to emphasize that first. There are identifying investment strategy models right now and looking at what they could potentially pilot statewide.

Aside from that, the CDFIs, I want to bring back into perspective here. So CDFI capital is instrumental in driving economic development for all. And CDFIs have helped to prove different lending tools, different models for community engagement, and those pieces of insights have helped to inform this new coalition. Now, one way that we’ve heard from these focus groups as well, about a potential avenue for investments is to address the increasingly complex capital stacks. How can we simplify, share best practices, etc.?

So in 2023, the Dallas Fed began working with coalition experts to convene interested investors. With the Dallas Fed’s ability to really convene cross-sector partners, over the last year and a half, this group has together completed an impact investing learning series. They are now informing landscape analysis, I think it’s almost done. And then moving forward, this network is going to be deciding its priorities for then what to pilot. Now, the Dallas Fed’s pretty excited to see what they’ll do this next iteration, but we’ll likely have to step back from that part of it. Emphasize again, CDFIs and their role in all of this. They helped to play instrumental roles in focus groups. They have a seat at the table for strategic planning discussions, and they’re working to inform these collaborative goals. So, just a couple of examples of how we’re putting all of that insight into action to do something bigger. Next slide, please.

All of that would not be possible without the Texas CDFI Coalition. So, a major shout out to the coalition. I saw on the map that Texas was the darkest of all the states, meant highest count in survey responses. Again, Texas CDFI Coalition really should be lauded here. When I joined the Dallas Fed in 2021, I quickly learned that there wasn’t a go-to group of CDFIs in Texas. But after asking a number of CDFI executives, it did appear that there were a few that kept in touch, but that there wasn’t an active group or a coalition. So upon learning more, I was able to find out that they did have an informal group in the past. And I asked what was going on, how would you do it better? And one of the things that budded to the surface was needing to broaden the invitation. So in doing so, we finally established enough interest for folks to come together, one was even willing to lead. And in 2023, we launched the current Texas CDFI Coalition.

One of the prior lessons learned beyond that is that the backbone support would be instrumental. And so, I want to take a moment to highlight Texas Association of Community Development Corporations, TACDC, and Texas Community Capital, for their role in being backbone support for this coalition. But Texas, as much as, yes, we got a good amount of results for the survey, we actually don’t have a large number of CDFIs in our state compared to others. So the coalition today includes close collaborators, that’s what I call them. They’re community development corporations, foundations, and other LMI service providers, for instance. The coalition also includes community banks. Community banks sometimes have CDFI designations, some don’t. But for those who are interested, this is a great place for them to learn. And so we very much have broadened those who come to the table. And these together, all these folks work to amplify CDFIs, help to expand CDFI funding, grow technical assistance, and share best practices.

Now, the last thing I’ll share here are some examples of the activities that you all may see or could see in action. But quarterly meetings, the coalition, if you decide to join one, every quarter there’s the full coalition meeting, very well attended still, so that’s fantastic, over these years. There are small topics, mostly focus groups on small business, housing, and policy. And then we also help to curate the CDFI track at the Texas Community Development Conference. But again, all of that would not be possible without TACDC and Texas Community Capital as backbone. So, shout out to them. And if you thought any of this was interesting, wait until you hear Ali’s story next.

Sydney Diavua

Ali, I think you’ve just been set up to tell a great story. Thomas, thanks for walking us through that, and thanks for giving that example of, even though the number of CDFIs is not great, the opportunity to build across sectors and bring in other partners who can really inform from CDCs to also community banks to really make the load a little bit lighter in answering those questions around conflicts, capital stacks, and what CDFIs can do together and leverage in Texas. All right, Ali, I think you’ve been set up to share a lot more about how you’re engaging with CDFI networks. How do you engage in the third district?

Ali Shott

Yeah, great. Thank you, and thanks for the tee-up, Thomas, I appreciate it. If we go to the next slide. So I think from both Thomas and my perspective, just the strength of having a statewide CDFI network and the impact that that can have on its members, but also very importantly, the communities that those members serve. So, Pennsylvania is also a state that has a strong CDFI network. Similar to Thomas’s story, it was founded in pre-pandemic times, so the one in Philadelphia was founded in 1987, but really rallied as an organization and a network in 2020 in response to the COVID-19 pandemic. And was really at the forefront of getting funding and attention and advocacy around the work that was being done by small businesses in the district to preserve small businesses and the communities that they serve.

So in 2020, again, really came together as a network. Pennsylvania network currently has 18 members, which is representing, I believe all of, if not all but one of the CDFIs in our state. And then in 2021, was able to get the funding and the collaboration from the members to hire a full-time CEO for the network, which has made a real difference in having that staffing and support with some additional staffing now. And in 2022, was able to secure a $45 million SSBCI allocation, which has made a real stabilization for the network and the work that it does.

And you’ll see here, that the network is really committed to building the capacity and expanding the reach of CDFI members. And so, they’ve identified that Pennsylvania had a number of CDFIs that were quite small and really had the opportunity to grow and more expansively serve the communities that they were in. And so they focused a lot of their early work on building the capacity of those smaller CDFIs, and having the larger CDFIs in Pennsylvania really provide mentorship and technical assistance and training to help those smaller CDFIs grow their businesses and support more small businesses and homeowners in their communities.

And so, two of the programs, one is the Small Business Growth Program, and they have partnered with the Pennsylvania State Department of Community and Economic Development to do loans, grants, and technical assistance to small businesses through the CDFI. So because they’re located in these communities, they’re often trusted partners in communities that the small businesses can go directly to them and have this state money administered through the CDFIs.

And the second one is really a focus effort in Philadelphia. So it is working with Philadelphia area CDFIs to increase opportunities for underserved small businesses, again through technical assistance, but also offering loan loss reserves and patient capital and patient debt for those CDFIs. And so, really, this kind of catalyst of the pandemic has really helped build a strong and stable and growing network that’s really serving from across Pittsburgh and Philadelphia, but also rural communities across our state and helping them stabilize the communities where they serve as well.

Sydney Diavua

I’m hearing a couple of key themes from both of you all. One is that the pandemic served as a big catalyst for bringing together and accelerating some of the work around the CDFI networks, but I also hear a lot, Ali, what’s interesting, that some of the larger CDFIs are also supporting the smaller CDFIs grow their footprint, and it seems to be some building through peer networks.

Ali Shott

Yeah, the peer network has been really exciting and I think the CDFIs in Pennsylvania have done a really great job of identifying, for lack of a better term, what each of their lane is. And so, with some of those larger CDFIs are primarily working with larger housing developers or larger grocery chains and helping them establish in communities. And the smaller CDFIs are doing those kind of micro loans or small dollar loans, but helping them provide the technical assistance and the underwriting assistance there. And so, that they’re helping across the spectrum of community development need and really helping each community development financial institution find their niche within the communities that they serve.

Sydney Diavua

So, I’m learning a lot already today that I’m ready to take back to the CDFIs we support in the St. Louis Fed’s district. I’m wondering, how do you all facilitate connections and learning between CDFIs across different Federal Reserve districts? How does that happen?

Ali Shott

I can start, and then pass it over to Thomas. So actually, I think Thomas and I are joined by CD colleagues across the Federal Reserve system and we have quarterly meetings for folks who work with CDFIs, but we’re also in regular communication between those meetings. So it’s been really helpful to say, “This CDFI in my district has been facing this challenge, or they have this opportunity, are you familiar with the CDFI that’s been in a similar situation?” And facilitating those connections, and I’ve never reached out to a CDFI that has said anything, but “Yes, let me help.” And they’re there to really advise and provide guidance for other CDFIs. And so, having that network of CDFI working staff across our Federal Reserve system, I think has been a great resource to be able to make those connections and help folks make connections between CDFIs.

Thomas Guerra

In addition to the internal connections, I’d say larger conferences are ways that we also engage with CDFIs. So, I’ll be at the OFN Conference next month if anyone wants to say hello in person, but that’s another example of pulling together those who may not have a chance to connect from one state to another but are working in similar spaces. Those, we play weaving roles, very much a connector, and sometimes the insights from those conversations we take back and then proliferate for our work. So, it’s also, I would say the external convenings too.

Sydney Diavua

Thanks. So now it’s time to turn to our audience to answer some of the questions that we’ve got from our audience. I’m going to invite Surekha to come back as well, I’m sure that there are questions about the survey. So, the first that I have is just wanted to open up this conversation. How do the different types of CDFIs, such as depository and non-depository, uniquely contribute to serving financially underserved communities?

Surekha Carpenter

Well, I can start and offer up some thoughts and I think maybe Thomas and Ali might have a little bit to add. I think, and Taylor, if you’re not off mute, feel free to come off mute too, because Taylor and I have both been working to write up some additional posts and articles on our findings this year. And as she mentioned, large share of our respondents this year that were loan funds had a particular focus on small business. I think that that tends to be true, and obviously it tends to be true that credit unions focus on consumer finance, specifically.

I think the other finding that she shared where banks are more in real estate, I think more than I tended to know before I got into the survey and heard from our respondents that community development banks play a large part in helping to finance community… I’m sorry, real estate development, but both residential, multifamily housing, and commercial. That was also informative to me. I think that that was something that I learned coming out of this survey.

One more quick thing that I will add, especially in the loan fund space serving small businesses, the Richmond Fed has spent a lot of time over the last few years focusing specifically in rural spaces and understanding capital and development opportunities in rural places. And we have learned that CDFIs are really great connectors for small businesses in rural places specifically. Now, that is focused a lot on our district in Richmond. That’s who we connect with, as Thomas and Ali are talking about connecting in their districts. The Federal Reserve’s Fifth District surrounding Richmond and Virginia, is where I’m mostly thinking about having these conversations with CDFIs acting as connectors for things like the Small Business Credit Initiative funding that comes out of the Treasury. And just generally playing a very pivotal role for communities that don’t often have, I think, historically have had less access to capital like rural places.

Sydney Diavua

Surekha, you’re right, CDFIs do play a really critical role, especially in rural communities who have less access to capital, have just a lot of different and differentiating challenges around how you access and leverage capital. And so, CDFIs have played a really significant role. Ali, Thomas, where do you see that CDFIs play a role in underserved communities?

Thomas Guerra

I’ll go ahead and go. One of the, I would say stories that is most used here, be able to underwrite in a different way. So, take different sets of payments, let’s say Fidelity, and use that as a way to determine level of risk. And so if for instance, paying your utility bills on time is proven, then that can be a substitute or an augment for areas that you may not have as much information. So, I think being willing to try alternative methods for credit determination I think is one of the ways CDFIs have been able to get new business.

Ali Shott

I think that’s a great example. I think another one that comes to mind is closing the gap on some of the larger community development projects that we see in place. And so, and we hear a lot from the affordable housing development side around challenges getting financing for things like pre-development or more patient capital, and CDFIs being able to come in and close some of those gaps to get projects across the finish line, I think is a really important way that they can serve communities. So it’s not that they’re going at these projects alone, but they’re a part of those capital stacks to make sure that projects can go forward as well.

Sydney Diavua

Yeah, so it’s that gap financing, it’s providing some more responsive and tailored products to the communities and really just closing the gaps where they exist.

All right, we have a specific question around the survey. Does the new report include longitudinal trends analysis, incorporating past Fed system-wide surveys? Taylor, Surekha?

Taylor Pessin

So, I can jump in to answer this one. The new report does not, but we do have a post coming out tomorrow that discusses survey results over time. So, it looks back to 2019, 2021, and 2023 results and compares them to now.

A couple of the trends that we’ve noticed that I can just go ahead and give you a preview for the post on, is that credit unions have represented an increasing number of respondents over the past three surveys. And along with that, the number, the share of CDFIs that report consumer finance as their primary business line, that has followed that trend as well. Meanwhile, commercial real estate and housing finance have declined as a share of the primary business lines.

And then in 2019, we asked a question about funding sources. We didn’t ask it in 2021 or 2023, but comparing that to now, earned income from fees and interests and then as well as federal funding, those have remained the top two reported funding sources for CDFIs. So yeah, that’s just a little preview, and then I think Surekha has something to add as well.

Surekha Carpenter

And yeah, I just wanted to add a little bit more about a longitudinal look that will compare individual CDFIs’ responses over time, which is I think a little bit more rigorous of a longitudinal understanding of how our data and how our respondents have changed. We are hoping to do that, but I am looking forward to reading and seeing Taylor’s upcoming post about the comparisons for now, just to get a baseline to understand how things have shifted in the industry, and for our respondents over the last few years.

Sydney Diavua

Okay, Taylor, we’ll be looking out for that post.

So Ali, a specific question to you about the Pennsylvania CDFI network. So do the members, are they only headquartered in Pennsylvania and serve markets in Pennsylvania? Can you tell us a little bit more about that membership there?

Ali Shott

Yeah, absolutely. So the 18 members are all headquartered in Pennsylvania, but they don’t all serve only Pennsylvania. So, some of them cross state lines, and we’ve got a couple that have more of a nationwide lending portfolio. And so, they are all headquartered in the state, but they do again, cross those boundaries as well. So, some flexibility there in the lending that they do.

Sydney Diavua

So, this next question is a little bit more about Thomas and Ali, how you all engage. So, how does your bank utilize the information you collect through outreach? Thomas, you shared a little bit about how you all feed up to President Logan’s work. Ali, how does your bank use that information from outreach?

Ali Shott

Yeah, absolutely. So we similarly feed up the information that we collect to our president. We also have a new president in the Philadelphia Fed who started July 1st, and so we regularly update as part of our general outreach and engagement updating to our senior leadership. But we also do, in times where there’s rapid change within the CDFI industry, we’ll do, for lack of a better term, special topic updates to our leadership to say, “This is a really rapidly rising challenge,” and we’ll brief senior leadership. It also informs, as I mentioned, the outreach and programming that we do so that the upcoming roundtables that were co-leading with the CDFI came out of them expressing to us in our regular outreach and engagement that they were really trying to understand the conditions that their members were facing. And so, it’s really a mix of informing our senior leadership as they think about the monetary policy, and then also the work that our own CDFI team does as well.

Sydney Diavua

So, this question is a little bit more specific, but it’s for the group. How is the partnership for the CDFI coalition with native CDFIs on tribal reservations? How do you have requests or do you have any requests for collaboration with native CDFIs?

Ali Shott

I can go quickly to say, so our Federal Reserve district is actually the only of the 12 that doesn’t have any federally recognized tribal nations. And so, we don’t have any native CDFIs, but I’ll pass it over to everybody else if they have had other requests as well.

Sydney Diavua

And I do know the Minneapolis Fed Center for Indian Country does have a lot of engagement with tribal country and really working with native CDFIs. And so, that’s another Federal Reserve who has that engagement and that outreach.

Surekha Carpenter

This does not answer the question, but I will quickly add, we in the Richmond Fed, while we drive a lot of the actual administration of the survey, we work obviously with the other reserve banks to develop the survey questionnaire and think about what we should be asking. And so, we are in constant contact with the Minneapolis Fed so that we can better understand and better survey native CDFIs specifically. We also have partnered with them on writing short articles, just focusing specifically on native CDFIs, and we’re hoping to do that again next year.

And I regretted not saying on the question about longitudinal looks at our data. We are also hoping in 2026, we asked a question about, just a quick question to our respondents this year if they would be comfortable with being reached to be included in follow-up focus groups. And so, that is something where we have an opportunity to have follow-up focus groups with specific segments of our respondent pool. Native CDFIs is definitely on the table, in conjunction in collaboration working with the Minneapolis Fed so that we can understand two things. One, connect the dots between the two years that we run the survey since we only run it every two years. There’s a lot happening obviously in between, and so being able to provide a little bit more rigorous research, qualitative research in between those two survey periods will be important. And then we’ll also be able to get a little bit more specific about challenges and opportunities facing these specific segments of the population.

So, while I don’t have a particularly specific answer to that question, I do hope that we’ll have more information and more specific reports coming out on native CDFIs and other cuts of the respondent pool soon.

Sydney Diavua

And that means it’s important for all of the CDFIs who are here on the call, we want to hear your voice and so, please respond to the survey. And for those who’ve been a part of those survey pools, look forward to those opportunities to participate in those focus groups.

We’ve got one more question and it’s to the full group. I’m wondering, in your outreach or even through the survey outreach, have you heard about if CDFIs have contingency plans if there are federal funds being reduced significantly.

Thomas Guerra

I mean, I’ll say for the Dallas Fed, that’s part of the reason our impact investing work to stand up a collaborative of a multitude of investors, regardless of CDFI designation, might be helpful to make sure that we as the Fed are still meeting our mandate for maximum employment and stability of the economy and prices.

Ali Shott

Yeah, also say in Philadelphia, we have heard of CDFIs starting the process of doing contingency planning, so I don’t have any specific details on what those plans will look like. We’ve also heard of some CDFIs that we’re planning to expand geographically and are putting those plans on hold because of the uncertainty here. And so, I’m seeing those potential impacts from uncertainty as well. But yes, definitely folks are in the process of doing some contingency planning as well.

Sydney Diavua

Well, Ali-

Surekha Carpenter

Can I-

Sydney Diavua

Oh, go ahead, sorry.

Surekha Carpenter

Can I add one really quick note? We found one interesting data point in our survey responses. Again, we asked this question around optimism, both for an organization’s own financial health and then also the health of the overall US economy. We found that respondents who receive funding from specific sources tended to be a little bit more pessimistic about their own financial health, the organization’s financial health. And I believe those included, Taylor, correct me if I’m wrong, organizations who receive major funding flows from philanthropy. And we heard a lot of folks mentioning uncertainty for those who receive major funding flows from federal sources.

Thomas Guerra

I think taking the survey into account, one of the newer questions was the value add or the unique components that CDFI has in its face. Capitalizing on that is a way to potentially provide backup options for it. So, understanding it’s unique value add and doubling down on it.

Sydney Diavua

Well said, Thomas.

Well, thank you for all of your insights. Ali, Thomas, Surekha, Taylor, thank you for first just walking through the survey with our audience, helping us to better understand what you’ve learned. But also, Ali, Thomas, thank you for talking to us about how you activate that work and connect and build with the CDFIs that are active in your district and with other Federal Reserve System partners. So, thank you again to our speakers for all of the information you provided. Attendees, thank you for spending your valuable time with us today.

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