The Editor's Post: An American nightmare? Trump's threat to CDFIs

One of US president Donald Trump’s latest targets is community development financial  institutions (CDFIs), as Laura Joffre highlights this week. These organisations offer credit to those people and businesses that mainstream banks deem too risky, which often includes many Black Americans and other people of colour, rural communities, and entrepreneurs with big ambitions but no track record. Campaigners are urging policymakers to reject their president’s executive order, but if it succeeds, it will undoubtedly have a devastating effect on a movement which has a rich and proud history of reaching out to help people from all walks of life to realise their own American dreams. 

Today’s movement of CDFIs in the US can trace a good proportion of its roots to the civil rights movement of the 1970s which had drawn attention to how banks refused to offer financial services to people living in black and minority ethnic communities. It was a practice known as ‘redlining’, reflecting the banks’ maps of the neighbourhoods they wouldn’t enter with red lines around them. Protests resulted in the 1977 Community Reinvestment Act, obliging banks to lend to all of the people that they took deposits from. One way to do that was to invest in emerging locally-embedded financial institutions which had community knowledge and trust.

CDFIs in the US get funds not only from the banks, but also philanthropy, corporate donors and the government, which, in 1994, created the CDFI Fund which offers financial support and technical assistance to CDFIs. During the 1990s, the CDFI movement expanded quickly and now there are more than 1,400 across the country collectively managing US$300bn. 

As an emerging CDFI movement in the UK began to spread its wings in the 2000s (as banks in the UK too had their no-go areas), practitioners looked admiringly at their counterparts in the States, highlighting the government support that made all the difference. And they did get UK government backing. In 2001, UK Treasury minister Paul Boateng, serving under Labour prime minister Tony Blair, highlighted an incoming new tax credit for investments in CDFIs (the Community Investment Tax Credit which would be introduced in 2002). He described how a “strong economy means an inclusive economy…Everybody with ideas and initiative, in every community, should have the chance to start and succeed in business.”

CDFIs provide finance where it is most needed, with an aim of creating wealth where it doesn’t yet exist. By offering tailored support to their clients, they help to ensure that even the riskiest-seeming loans stand a good chance of being repaid. By doing this, they help ex-prisoners set up their first businesses, people with spiralling debts get back in control, and start-up social enterprises to take their earliest steps towards sustainability. 

The CDFI movement in the UK has been through tough times too as government interest waned. At its peak there were more than 80 institutions; now it sits around 50, and representative body Responsible Finance is campaigning for increasing acknowledgement of the movement. 

If Trump’s order goes ahead and CDFIs in the US are beaten down, surely it would be an own goal. Laura quotes Harold Pettigrew, CEO of the Opportunity Finance Network, in her story. He said: “We can’t have America First without putting our communities first.” Without fair access to finance, people and enterprises in the most deprived neighbourhoods don’t have a chance of helping themselves out of poverty. The same goes for other countries all around the world too – this sort of capital is vital to helping micro entrepreneurs and social enterprises to get up and running.

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Also this week we’re delighted to publish our much anticipated annual WISE100 list of the leading 100 women in social enterprise, impact investment and mission-driven business alongside our ‘ones to watch’.  We’re also getting excited about the WISE100 awards ceremony which takes place next week. We’re looking forward to seeing lots of you – in person or online –  in Glasgow, Scotland with our partners at NatWest Social & Community Capital. 

This week's top stories:

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

WISE100 Women in Social Enterprise 2025 top 100 and ‘Ones to Watch’ revealed

Opinion: ‘COP30 must listen to the voices that have been historically silenced’

The Impact World This Week: 20 March 2025

Top image: Donald Trump shows his signature on an executive order in January 2025. Source: White House.