CDFI is probably not an acronym most people use every day. But if you are a Black entrepreneur who has struggled to get a traditional bank loan, a contractor who needs working capital to take on a larger job, or a community trying to finance housing, childcare, or a health center, there is a good chance you know and appreciate the problem CDFIs were created to solve.
Community Development Financial Institutions, commonly referred to as CDFIs, are community banks, credit unions, loan funds, and other mission-driven lenders that invest in communities and businesses that traditional financial institutions have historically failed to serve or have been frankly underserved.
Right now, the federal government is attempting to eliminate or restrict a $289 million investment Congress appropriated for the CDFI Fund for fiscal year 2025. The fiscal year ends on September 30. The federal government has not completed the steps necessary to get that money in the hands of the institutions Congress intended to fund and without unauthorized conditions. Yesterday, I, alongside our co-counsel Crowell & Moring, filed a lawsuit against the federal government on behalf of the Freedom Economy Business Association seeking to stop that from happening.
As a lawyer who’s been doing this work for decades, this is one of the most straightforward legal cases of baseless government inaction, but the implications are far-reaching. We talk frequently about Black entrepreneurship and closing the racial wealth gap. Many Black entrepreneurs have the talent and ideas but lack access to capital. CDFI’s are one part of the infrastructure designed to address that reality. This administration’s actions have unnecessarily introduced the one thing that impedes business growth: uncertainty.
In fact, members of the Freedom Economy Business Association are already reporting reducing staffing and operations, taking on additional debt, and limiting their capacity to serve borrowers while they wait for federal funding. So, the harm to the plaintiffs is not theoretical – the damages are already here and mounting.
Further, the damage to our constitutional separation of powers may be even more consequential.
The Constitution gives Congress authority over federal spending. Once Congress appropriates funding consistent with the law, the executive branch cannot substitute its own policy preferences through obfuscation and delay. By deliberately failing to act, they subvert the will of the people.
And if nearly $289 million disappears after September 30, Black businesses and communities will not see it as a technical question about federal appropriations. They will experience it as capital that never reached the institutions positioned to invest in them.
We cannot say that we want more Black-owned businesses while weakening institutions that finance entrepreneurs.
We cannot say that we want to close the racial wealth gap while ignoring where capital flows.
And we cannot spend years encouraging people to become entrepreneurs without paying attention to whether they can access the financing necessary to survive and grow.
Economic opportunity requires infrastructure.
CDFIs are part of that infrastructure.
They are not the entire answer to racial disparities in access to capital. They are not exclusively Black institutions. And they do not replace the responsibility of traditional banks to serve communities fairly.
But they matter.
They matter in cities where community lenders have deliberately invested in Black-owned businesses that conventional capital has too often overlooked.
And they matter because wealth is built when people can turn opportunity into ownership.
That is why we filed a federal lawsuit.
Congress already made its decision.
Nearly $289 million has already been appropriated.
The federal government has until September 30 to issue and distribute the funds.
The federal government cannot be allowed to achieve through delay what it could not achieve through the legislative process.
If the clock runs out, that investment disappears.
And Black communities will feel the consequences long after the deadline passes. We are fighting to make sure that does not happen.
—–
Alphonso David is a civil rights attorney and President and CEO of the Global Black Economic Forum. He serves as co-counsel defending the Congressional Black Caucus Foundation, lead counsel in Freedom Economy Business Association v. United States Department of the Treasury et al., and co-lead counsel representing Texas businesses challenging the dismantling of the state’s Historically Underutilized Business program.
You May Not Be Familiar With the Term ‘CDFI,’ But Black Communities Will Feel the Impact if $289 Million in Investment Disappears
