Trump order threatens to ‘cut legs out from’ CDFI Fund, say campaigners

Campaigners are urging US policymakers to push back on an executive order that could deal a blow to community lenders across the country. 

The CDFI Fund, which provides funding and technical assistance to community development financial institutions, is among a number of government entities whose “non-statutory components and functions… shall be eliminated to the maximum extent consistent with applicable law,” according to an executive order issued by US President Donald Trump on 14 March.

The order continues: “Such entities shall reduce the performance of their statutory functions and associated personnel to the minimum presence and function required by law.”

Community development financial institutions (CDFIs) provide affordable credit, capital and financial services to underserved and low-income people, social enterprises and small businesses which would otherwise struggle to access mainstream finance. Part of the Department of the Treasury, the CDFI Fund was given a $324m budget for the financial year 2025.

There are currently more than 1,400 CDFIs in the US, which collectively manage more than US$300bn, according to CDFI representative body the Opportunity Finance Network, which numbers 470 members. 

We can’t have America First without putting our communities first

Advocates of CDFIs were taken aback by the order. “We were more than shocked,” Virginia senator Mark Warner, the co-chair of the CDFI Caucus, a cross-party group of 28 senators that advocates for the development of CDFIs, said yesterday. The order “basically tried to cut the legs out from CDFIs. It is outrageous,” he added. 

“It is one more example of the kind of Trump chaos-on-steroids approach oftentimes hurting communities that really affect people’s lives,” Warner continued. “This is not just an [executive order] that would have no effect. Literally, folks who are trying to get a new housing development in place or a business off the ground, their lives will be negatively affected if this executive order stands.”

Campaigners have urged for the executive order to be reconsidered. Harold Pettigrew, CEO of the Opportunity Finance Network, said: “We can’t have America First without putting our communities first.

“For decades, CDFIs have been a driving force in bringing capital to communities that traditional financial institutions have left behind. We are fighting to ensure that federal support continues for the vital work that community development financial institutions deliver to Main Street.”

Cross-party support

“Elimination of the CDFI Fund would deal a devastating blow to our economy, including small businesses and homeowners,” the CDFI Coalition, which represents and advocates for CDFIs, said in a statement. “We urge the Administration – and members of congress from both parties – to reaffirm their support for the CDFI Fund, a pillar of the financial services sector and a vital agency supporting underinvested communities across the country.”

Politicians from both sides of the political divide voiced their support. The co-chairs of the CDFI Caucus, Virginia’s Senator Warner, a Democrat, and Idaho senator Mike Crapo, a Republican, issued a joint statement saying they were “proud to reaffirm [their] bipartisan commitment to support the CDFI Fund’s mission.”

Agencies like the CDFI Fund are integral to the way that the private sector and government work together to spur innovation and economic growth

In a statement, the US Impact Investing Alliance said: “Community development financial institutions are essential to enabling those investments. They are the financial lifeblood of so many US communities, giving the economy a competitive edge and helping so many fulfil their own American dream.

“We strongly urge the Administration to rescind the Order and to support efforts to preserve and expand the CDFI Fund… Agencies like the CDFI Fund are integral to the way that the private sector and government work together to spur innovation and economic growth in local Main Streets and rural communities across America.”

Reassurance and uncertainty

Concerned entities were given seven days to report back to explain “which components or functions of the governmental entity, if any, are statutorily required and to what extent”.

Supporters insist that the CDFI Fund, which was established in 1994 by the Riegle Community Development and Regulatory Improvement Act, is entrenched in law and as such should be shielded from much of the order. “There is a clear statutory basis for the programs of the CDFI Fund,” according to the CDFI Coalition.

Treasury secretary Scott Bessent (pictured) offered some reassurance earlier in the week, stating that the administration recognised the “important role” played by the CDFI Fund and CDFIs, adding: “CDFIs are a key component of President Trump’s commitment to supporting Main Street America in the pursuit of job growth, wealth creation, and prosperity.” 

But he didn’t give any further certainty on the fate of the CDFI Fund, saying the Treasury would “provide a response” as required by the order and looked forward to future engagement with “CDFIs and other stakeholders”. 

CDFIs are a key component of President Trump’s commitment to supporting Main Street America

Even if the fund is not scrapped altogether, the order requires a reduction of its activities and staff to a minimum, threatening the organisation’s work. In a joint letter sent to senators on Tuesday, sector representative organisations said the order in effect called for a “reduction in force”.

“The [executive order] has raised concerns regarding the future capacity of the CDFI Fund to effectively administer its programs that were not fully addressed in [Bessent’s] statement,” the letter, published on the CDFI Coalition’s website, added.

The executive order is part of a drive to cut down government spending, spearheaded by Elon Musk’s Department of Government Efficiency (Doge). Its stated purpose is to continue “the reduction in the elements of the Federal bureaucracy that the President has determined are unnecessary”. Other government entities at risk include the United States Interagency Council on Homelessness, the United States Agency for Global Media and the Minority Business Development Agency.

Top image: a worker in a warehouse supported by First Step Staffing, a non-profit which employs people facing homelessness and other barriers to finding jobs. The organisation has received investment from Philadelphia-based the Reinvestment Fund, a CDFI.