May 5, 2025

‍

WASHINGTON, D.C. — The Fiscal Year 2026 federal budget proposal includes a provision to eliminate discretionary grants under the Community Development Financial Institutions (CDFI) Fund, a move that risks undermining a financial system that has worked for decades to connect capital to communities often not accounted for by mainstream finance.

‍

To clarify, the budget blueprint does not eliminate the CDFI Fund entirely. It maintains oversight, certification, and key programs such as the Bond Guarantee and New Markets Tax Credit. However, it removes flexible funding that enables CDFIs to expand, innovate, and serve creditworthy borrowers who are excluded from conventional lending.

‍

“CDFIs are not experimental, they’re proven, accountable, and active in every congressional district,” said Marisa Calderon, President and CEO of Prosperity Now. “Without discretionary funding, many of these institutions will have a harder time raising private capital which results in fewer tools to meet rising needs, especially in communities where they’re often the only lenders willing to finance first-time homebuyers and main street businesses.”

‍

The budget proposal also introduces a $100 million rural development initiative through CDFIs, requiring 60% of investments to support rural borrowers. Prosperity Now supports increased capital access in rural areas, but that progress shouldn’t come at the expense of broader community lending infrastructure. CDFIs have a long track record of serving both rural and non-rural communities effectively, including urban, suburban, Native, and other communities where traditional financing remains out of reach. This isn’t an either-or choice – we can and must invest in both.  

‍

Coupled with a proposed 44% cut to the Department of Housing and Urban Development (HUD), these changes raise broader questions about how the federal government plans to support affordable homeownership and small business growth nationwide.

‍

In fiscal year 2024, CDFI Program recipients reported originating $24 billion in loans and investments, supporting small businesses, affordable housing, community facilities, and consumer lending. Their work resulted in nearly 45,000 housing units developed or rehabilitated and over $2.3 billion in funding for small businesses and microenterprises. For every $1 in federal support, CDFIs help attract at least $8 in private investment, amplifying economic growth across the nation.  

‍

“In this economic moment, we need more of what’s working—not less,” added Calderon. “CDFIs are not just part of the solution—they are the backbone of community-driven economic growth.”

‍

###