April 9, 2025
by Scott Butterfield
Over the past few months, I’ve had the privilege of writing, reviewing, and submitting a record number of Community Development Financial Institution (CDFI) grant applications. It’s been an eye-opening experience that reinforces how essential CDFI credit unions are to their communities. These institutions aren’t just providing financial services—they’re fueling economic revival in neighborhoods that have been overlooked for far too long.
But now, the future of the CDFI Fund is uncertain. A recent executive order aimed at cutting federal bureaucracy threatens to strip away this crucial funding source. Make no mistake—this isn’t just a CDFI credit union problem. It’s an issue for all credit unions.
Why CDFI Credit Unions Matter to the Entire Credit Union Industry
CDFI credit unions are laser-focused on financial inclusion, ensuring that low-income individuals, families, and small businesses have access to affordable financial services. They’re not just serving members—they’re building stronger communities. And they’re proving, time and again, that mission-driven lending is not only sustainable but also a smart business strategy.
CDFI Credit Unions in Action: Real Impact in Real Communities
We work with CDFI credit unions of all sizes—small, mid-sized, and large—in urban centers, rural towns, and everything in between. Each one is committed to creating financial opportunities where none previously existed.
Here’s how they’re making a difference:
- Credit Building & Financial Education: A small credit-building loan can increase a borrower’s credit score by 20–50 points, unlocking better financial opportunities. This isn’t just about getting a loan—it’s about breaking the lack of fair financial access.
- Affordable Auto Lending: Reliable transportation expands job options, allowing members to access higher-paying jobs outside their immediate area. That means workforce growth, improved job retention, and greater financial security.
- First-Time Homebuyer Programs: Homeownership remains one of the most effective ways to build generational wealth. CDFI credit unions provide down payment assistance and affordable mortgages, giving families a real shot at stability.
- Small Business Lending: Small businesses are the heartbeat of local economies. CDFI credit unions provide funding for entrepreneurs who might otherwise be shut out of the financial system, helping to revitalize commercial districts, create jobs, and stimulate economic activity.
Debunking the Myth: Small and Mid-Sized Credit Unions Can –and Do– Thrive
There’s a common narrative in our industry that credit unions under $1 billion in assets are struggling to survive. But CDFI credit unions tell a different story. Many small and mid-sized institutions are thriving, growing membership, strengthening balance sheets, and generating sustainable revenue. And no, it’s not just because of grants—it’s because they’ve built business models that work.
They’re proving that a commitment to community investment isn’t just good for members—it’s good for the bottom line. The CDFI Fund doesn’t create this success; it simply helps credit unions scale and amplify the impact they’re already making.
The CDFI Model: Back to Our Credit Union Roots
Here’s the irony: CDFI credit unions aren’t doing anything new. They’re embodying the original spirit of credit unions, the very reason they were founded in 1934—to promote thrift and provide fair access to credit.
The question isn’t whether credit unions should care about the CDFI Fund. The real question is, why wouldn’t they?
The Looming Threat: What’s At Stake
On March 14, 2025, an executive order was issued to reduce non-statutory components of federal agencies, including the CDFI Fund. This directive calls for the elimination of “non-essential functions” and a reduction of statutory functions to the legal minimum.
Industry leaders—including Inclusiv, America’s Credit Unions, the Defense Credit Union Council, and state leagues—have raised the alarm. Cutting the CDFI Fund would strip away crucial financing for small businesses, homebuyers, and everyday consumers, forcing them to turn to high-cost, predatory alternatives.
Why Every Credit Union Should Fight to Protect the CDFI Fund
If the CDFI Fund is weakened or eliminated, the consequences extend far beyond CDFI credit unions. Here’s why every credit union—regardless of size or certification—should be concerned:
- CDFI credit unions provide the strongest, data-driven proof of the credit union difference. Their measurable impact strengthens our industry’s argument for maintaining our tax-exempt status.
- They lead the way in community investment. CDFI credit unions don’t blend in. They’re deeply involved in partnerships, local initiatives, and financial education efforts—reinforcing the cooperative difference.
- They demonstrate that credit unions are still focused on serving people of modest means. This is critical in countering arguments that we’ve strayed from our roots.
- They prove that small and mid-sized credit unions can thrive. Their success challenges the notion that only large credit unions can be sustainable.
- A strong CDFI credit union presence helps protect all credit unions from taxation threats. Lawmakers who see credit unions making a tangible impact in underserved areas are far less likely to support taxation efforts.
For over 30 years, the CDFI Fund has provided the capital needed to expand programs that uplift low-income communities. Losing it would weaken the entire credit union movement.
The Time to Act is Now
Credit unions must stand together to protect the CDFI Fund. This isn’t just about CDFIs—it’s about defending the foundational mission of credit unions: financial well-being for all.
I want to give a huge shout-out to the organizations leading this fight, including Inclusiv, America’s Credit Unions, the Defense Credit Union Council, state leagues, and others working tirelessly to protect this funding.
But we need more voices. Regardless of CDFI status, credit unions must step up. A strong, well-funded CDFI sector benefits everyone by:
- Strengthening financial resilience.
- Expanding access to affordable credit.
- Reinforcing the cooperative difference.
- Ensuring our industry’s long-term sustainability.
At a time when financial inclusion is becoming a political flashpoint, credit unions must cut through the noise and remind policymakers that this isn’t about politics—it’s about people. It’s about making sure that every individual, regardless of background, has access to fair and affordable financial tools.
The CDFI Fund is one of the most effective ways to achieve that goal, and we can’t afford to lose it.
The stakes are too high to stay quiet. The time to act is now.
