About Community Development Loan Funds
Community Development Financial Institutions (CDFIs) are mission-driven banks, credit unions, venture capital funds, and loan funds that provide capital and financial services to underserved communities to increase economic development and opportunity. They are certified by the U.S. Treasury Department CDFI Fund. Community Development Loan Funds (CDLFs) are the most common type of CDFI, providing financing and technical assistance for microenterprises, businesses, commercial real estate, housing development, and community facilities, all in economically distressed locations across the country. Most are nonprofit organizations, focused on a particular state or region, and most rely on grants and contributions in addition to returns from lending to fund their operations. LOCUS Impact Investing’s parent company, Virginia Community Capital, is a $323m CDLF.
Impact Investors typically weigh fund performance, risk, and the impact achieved in their investment decisions. Average interest rates paid by CDLFs on notes have been very stable at 2.9% over the period; average interest paid on the less-common lines of credit was also relatively stable at 3%. Housing-focused funds paid the highest interest rates on notes, averaging at 3.0% or above. Microenterprise funds paid the lowest interest rates on notes, with rates of 2.1% – 2.6% over the period.
Despite their long tenure, CDLFs have been somewhat under the radar in the impact investing space. This report highlights the strong opportunities that CDLFs provide for institutions and individuals interested in place-based impact investing in their U.S. region.
The full and original article can be viewed on LocusImpactInvesting.org
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