The size of the community development financial institutions (CDFIs) sector has expanded significantly in the past five years to exceed $450 billion in assets, according to new research.
Since 2018, the number of certified CDFIs has risen from 1,066 to 1,487, with assets increasing almost threefold to at least $452 billion as of the first quarter of 2023, according to a research report from the Federal Reserve Bank of New York.
Credit unions have emerged as dominant contributors to overall CDFI numbers, the research showed, holding around $300 billion (66%) of total assets. Bank CDFIs hold $118 billion (27%), while loan funds comprise $35 billion (8%).
Despite credit unions' prominent position in terms of asset share, loan funds take the lead in sheer count among certified CDFIs, constituting 39% of the total (582 out of 1,487).
The New York Fed’s research found that 402 new CDFI entities have been registered since 2019. Notably, 239 of these new entrants were credit unions, a trend primarily driven by the 88 new Puerto Rican credit union CDFIs. Many of these were registered as part of an organized effort to increase access to financing in the wake of Hurricane Maria in 2017.
In addition, CDFI banks and credit unions certified between 2018 and 2023 collectively command a substantial $190 billion in assets, as of Q1 2023.
One potential factor driving the sector’s growth, according to the researchers, is the $9 billion Emergency Capital Investment Program introduced in 2021 to support low- and middle-income households during the COVID-19 pandemic.
The New York Fed plans to conduct further research into the CDFI sector to understand challenges faced by these institutions and how successful they have been in meeting their goals of improving access to financial services for low- and middle-income households.