The Federal Reserve's 2023 CDFI Survey, conducted between April 24 and June 2, revealed that community development financial institutions have generally been successful in meeting increased demand for financial products over the past year. However, challenges vary among CDFIs, with loan funds citing rising lending capital costs and operational funding limitations, while credit unions face issues related to hiring, borrower qualifications, and technology.
"CDFIs are diverse institutions in how they operate and respond to community needs," Carrie Cook, the community affairs officer at the Federal Reserve Bank of Richmond, said.
On August 30, 2023, the Federal Reserve's 2023 CDFI Survey revealed that community development financial institutions have enjoyed considerable success in addressing the increased demand for financial services over the past year. However, these institutions have encountered a range of challenges that have restricted their ability to fully serve their communities. Three-quarters of CDFIs observed a surge in demand during the past year, with a similar percentage anticipating continued growth in demand in the coming year. While CDFIs have managed to meet a significant portion of this demand, some have faced limitations in their capacity to do so. Among those experiencing heightened or stable demand, 40% reported full fulfillment, 42% substantial fulfillment, and 18% partial fulfillment.
The specific challenges impeding the full fulfillment of demand varied across CDFIs. Loan funds frequently cited rising lending capital costs as well as constraints related to operational funding. Credit unions were more inclined to point out difficulties with hiring and retaining staff, along with challenges tied to borrower qualifications and technology. Carrie Cook, the community affairs officer at the Federal Reserve Bank of Richmond, highlighted the diversity of CDFIs in their operations and responsiveness to community needs. She emphasized the importance of the 2023 CDFI Survey in spotlighting these diverse challenges, enabling policymakers and community development stakeholders to target solutions that foster innovation and industry growth.
CDFIs have exhibited adaptability in tackling these challenges. Their strategies have included accessing new federal funding to expand their range of loan products, recruiting specialized personnel to address operational requirements, integrating online platforms with back-office technology, and adopting unconventional approaches to underwriting. Encouragingly, many CDFIs expressed optimism about their ability to meet the growing demand in the upcoming year. Additionally, CDFIs expressed a strong interest in expanding their impact measurement capabilities. While nearly all CDFIs currently track operational output metrics such as client counts and the monetary value of financial products, measuring outcomes such as clients' financial performance and the creation of high-quality jobs has proven more challenging. The survey highlighted limited staff resources and difficulties in collecting client data as primary obstacles to advancing impact measurement in the industry.
