Best Practices for Equitable Lending White Paper
CDFA Foundation’s 2023 Caren Franzini Fellowship
First published December 2023
Development finance agencies (DFAs) are tasked with providing financial services to underserved communities in order to see them grow and thrive. DFAs are defined here as community lenders including but not limited to community development financial institutions (CDFIs), credit unions, banks, private firms, finance authorities, and public agencies across both the private and non-profit sectors. Furthermore, this paper addresses issues faced by commercial lenders in the DFA space. Because no two communities are exactly alike, DFAs often differ in how they address the unique challenges to capital access that small businesses in their communities face. DFAs should consider the unique needs of their communities and borrowers while maintaining focus on responsible lending and risk management.
Individually DFAs can’t address every capital access barrier small businesses face. DFAs each have different risk tolerances, access to technology, are based in different locations, and have different community handicaps. They can, however, focus on similarities and tackle the most prevalent issues plaguing the development finance industry.