CHICAGO, November 23 (Reuters) – When you are deciding how
to allocate your charity dollars before the end of this year,
you might want to consider investing in a community development
financial institution (CDFI).
There are nearly 1,000 private-sector community development
financial institutions that operate in all 50 states, according
to the CDFI Coalition. They range from local credit unions to
community loan funds and they perform a variety of roles from
providing venture capital to funding affordable housing.
What’s compelling about CDFIs is that they can combine
innovative social missions with service to low-income
communities. They are community partners that provide financing
for projects that have social value or may be neglected by
larger institutions. They can target underserved neighborhoods
and even develop sub-specialties such as sustainable development
and green businesses that have environmental missions.
When you put money into a CDFI as an individual, your
contributions are tax deductible, as most are registered 503(c)
organizations. Like a conventional charity, your money is pooled
with other donations and capital. The difference is that the
money is then lent out, usually to organizations within
In the case of a community loan fund, you receive a small
return on investment. The institution does the screening and
tracking of the recipients. You don’t get to cherry-pick
specific projects you want your dollars to fund since the money
comes out of a pool, but you can pick institutions that
specialize in funding projects in defined geographic areas.