TACOMA, Wash. — A change by the Community Development Financial Institutions Fund could make it easier for some credit unions and other financial institutions serving rural communities to obtain or maintain CDFI certification by lowering the amount of activity that must occur in economically distressed portions of certain target markets, according to an analysis by CU Strategic Planning.
The change, effective Aug. 6, applies to non-metropolitan Customized Investment Areas, or CIAs, used as CDFI Target Markets.
A Customized Investment Area is a Target Market geography created by combining contiguous qualified and non-qualified geographic areas. To qualify, more than 85% of the area’s population must live in geographic units meeting the CDFI Fund’s economic-distress criteria, the company explained.
Non-metro CIAs can be constructed using contiguous census tracts or contiguous non-metropolitan counties or parishes.
What Has Changed
CU Strategic Planning said the CDFI Fund has not changed the 85% population requirement for determining whether a geography qualifies as a CIA. Instead, it changed how much of a CDFI’s eligible activity within a non-metro CIA must occur specifically in qualified census tracts.
Under the revised policy:
- 85% of the population must continue to reside in qualified areas for the non-metro geography to qualify as a CIA.
- 60% of a CDFI’s eligible activity within the non-metro CIA must occur in individually qualified census tracts.
- Once the 60% threshold is met, eligible activity occurring in non-qualified portions of the same approved CIA also can count toward the institution’s overall Target Market benchmark.
Previously, the activity threshold was 75% and had been scheduled to increase to 85% in October 2027, according to CU Strategic Planning.
The change applies only to non-metro Customized Investment Areas. Other CIAs remain subject to the 85% activity threshold.
The Practical Impact
CU Strategic Planning said the practical impact could be limited for many credit unions because relatively few have service areas suitable for an entirely non-metro CIA Target Market. Many credit unions serving rural communities also serve metropolitan areas, making other Target Market configurations more appropriate.
The change, however, could provide additional flexibility for institutions whose Target Markets are predominantly rural.
Example is Shared
For example, CU Strategic Planning said a credit union serving a largely economically distressed rural area might also make some loans in census tracts that do not individually qualify. Under the revised policy, those loans can be counted toward its Target Market benchmark once the credit union has met the 60% activity threshold in qualified census tracts within the CIA.
The revised policy took effect immediately. New applicants for CDFI certification must use the 60% threshold. Currently certified CDFIs using affected Target Markets will be evaluated under the revised standard the next time they submit their Annual Certification and Data Collection Report, according to CU Strategic Planning.
