Future Of CDFI Fund And MBDA, Uncertain With Their Planned Ouster

Yahoo

21-03-2025

The Community Development Financial Institutions Fund (CDFI Fund) has invested over $8 billion through various monetary award programs, helping underserved people and communities.
The Minority Business Development Agency (MBDA) helped wrap up $3.8 billion in contracts for minority businesses in 2023. That drive is significant as it can help those firms, including Black-owned businesses, to scale up and potentially fuel revenue growth.
However, the downside now is the CDFI Fund and MBDA — deep-rooted and bipartisan supporters of Black entrepreneurs and individuals, among others — are being cut by President Donald Trump.
They are among seven agencies proposed for elimination as part of a new executive order that continues Trump's actions to cut federal government spending.
The CDFI Fund supplies financial backing to Community Development Financial Institutions (CDFIs) via grants, bond guarantees, and tax credits. CDIFs were created to spur community development in local communities. Their work includes funding affordable housing and small minority-owned businesses. They provide loans and other financial products in underserved communities, often with lower fees than rivals like mainstream banks and payday lenders.
The CDFI Fund 'plays an important role in generating economic growth and opportunity in some of our nation's most distressed communities,' per its website. The order commands the fund to trim personnel and operations. Started in 1994, the CDFI Fund is part of the U.S. Treasury Department.
Industrywide, CDFIs had roughly $452 billion in assets as of the first quarter of 2023. That consisted of $300B for credit unions, $118B for banks, and $35B for loan funds, according to the Federal Reserve Bank of New York.
According to its 2024 annual report, the 'CDFI Fund award recipients successfully leverage billions in private sector investment to create jobs, build affordable housing, build essential community facilities, and provide financial counseling.' That includes investing in 'distressed and underserved communities lacking access to traditional lending or banking institutions.'
The report also stated that $81 billion has been supplied through the fund's New Markets Tax Credit program. The CDFI Fund declared that since its start, it has helped build the capacity of 1,400 Certified CDFIs in all 50 states along with the District of Columbia, Guam, and Puerto Rico.
Trump's order occurred the same day he signed a continuing resolution into law that calls for $324 million in funding for the CDFI Fund for fiscal 2025. It's unknown if prior approved grants will be paid for financial institutions now utilizing CDFI Fund grants.
In an email to BLACK ENTERPRISE, U.S. Treasury Secretary Scott Bessent stated, 'This Administration recognizes the important role that the CDFI Fund and CDFIs play in expanding access to capital and providing technical assistance to communities across the United States. 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.'
He added, 'As required by President Trump's March 14, 2025, Executive Order, the Treasury Department will provide a response to the Director of the OMB on this matter and looks forward to future engagement with CDFIs and other stakeholders to strengthen the impact of these statutory programs and incentivize economic opportunities for all Americans.'
As for the MBDA, Trump's latest dictate marks the second time since 2017 he has tried to erase the agency catering to minority firms for over 50 years. The MBDA's efforts have included providing access to capital, contracts, and market opportunities as part of the U.S. Department of Commerce.
Two years ago, the agency also brought access to $1.5 billion in capital to empower minority businesses and helped them generate or protect over 19,000 jobs, according to its website. Efforts to get a comment from the MBDA were unsuccessful.
William Michael Cunningham, an economist and founder of Creative Investment Research, told BLACK ENTERPRISE by email that his firm has long recognized the CDFI Fund's significant role in strengthening Black economic empowerment. For a decade (2013 through 2023), Cunningham estimates that at least $219 million from the CDFI Fund has supported Black-owned banks and businesses through targeted programs.
Specifically, he says around $31 million has benefited Black-owned banks via the fund's Bank Enterprise Award program, directly enhancing their capacity to serve communities often overlooked by mainstream financial institutions.
Further, Cunnigham mentioned about $188 million has flowed to Black-led Community Development Financial Institutions, fueling lending and investment in Black-owned businesses nationwide. He stated notable recipients include institutions like Hope Credit Union, TruFund Financial Services, and Community First Fund, whose critical efforts drive economic justice, equity, and opportunity in underserved Black communities.
'Ongoing disparities underscore the need for significantly increased funding and new, innovative support mechanisms.'
Cunningham shared that the potential reduction in support from the CDIF Fund and MBDA poses significant risks to minority businesses. He says it could lead to reduced access to capital and funding shortages, severely limiting the businesses' growth and sustainability.
He expressed that the scarcity of business development support, including strategic guidance and capacity building, could impact competitiveness. Another potential snag: The loss of networking and market access facilitated by these agencies could negatively impact revenue generation.
The Small Business Majority advocacy group criticized Trump's latest order.
The group's research showed that the institutions play a large role in benefiting women BIPOC-owned small businesses. Some 24% of respondents polled last year declared that a government program geared to help a specific demographic group prevented their business from closing, and 14% stated a demographically targeted program helped them gain contracts. Of small businesses that got publicly funded support, roughly 25% had help from MBDA.
In a statement, Small Business Majority Founder and CEO John Arensmeyer touched on the impact of shattering the CDIF Fund and MBDA. Among his comments, he noted that between 2021 and 2024, there were 21 million new business applications. But he added that these fledgling small businesses cannot succeed or survive without support.
'President Trump may well succeed in undermining our smallest and most under-resourced businesses, but in doing so, our economy and our communities will be devastated. Instead of searching for ways to cut small business programs no matter their size or purpose, President Trump should be looking for ways to boost entrepreneurship.'
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