Independent Banker - July 2024 - 34

PORTFOLIO CHECKS & BALANCES
MDI and CDFI designations elevate
community banks' influence
A Treasury Department report shows the positive effect minority depository institutions
and community development financial institutions have on their served markets. Does your
community bank qualify for certification? By Kianga Lee and Michael Emancipator, ICBA
hile community banks across
the nation dedicate themselves
to serving local communities
and their unique needs, minority
depository institutions (MDIs) and
community development financial
institutions (CDFIs) specialize in
promoting economic growth in
underserved and minority markets.
A recent Treasury Department
report-which highlights a
W
pandemic-era program designed
to help MDIs and CDFIs lend to
financially underserved borrowers-
demonstrates the deep impact these
mission-driven institutions can have
on local communities.
Background on MDIs and CDFIs
MDIs are depository institutions of
which 51% or more of the voting stock
is owned by minorities-or have a
majority-minority board of directors-
and that serve a community with a
predominantly minority population.
These are generally smaller banks that
hire from within their community,
speak the languages spoken there and
understand the culture and traditions
of their customers. MDIs provide
more mortgages to minority families
than any other lending institution.
CDFIs are financing entities with
a primary mission of promoting
community development in areas
with a high concentration of low- to
moderate-income (LMI) individuals.
Among other requirements, CDFIs
must demonstrate that 60% or more
of their activities serve target markets,
such as LMI census tracts.
The common characteristic between
MDIs and CDFIs is that their mission
is to serve communities in need.
Naturally, there is some overlap,
with roughly 40 institutions carrying
both designations.
While banks pursue MDI or CDFI
certification for various reasons,
one key reason is accessing federal
programs designed to help them
serve their communities more deeply.
The Emergency Capital Investment
Program, or ECIP, is a good example.
Emergency Capital Investment
Program overview
The Treasury Department launched
the ECIP in 2021 to help MDIs and
34 // ICBA Independent Banker // July 2024
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Independent Banker - July 2024

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