Introduction

The Community Development Financial Institutions Fund (CDFI Fund or Fund) was created by the Riegle Community Development Regulatory Improvement Act of 1994 (P.L. 103-325)¹ to promote economic development in distressed urban and rural communities, particularly through certifying and supporting community development financial institutions (CDFIs).² The CDFI Fund, now an agency within the Department of the Treasury, is authorized to certify banks, credit unions, nonprofit loan funds, microloan funds, and (for-profit and nonprofit) venture capital funds as designated CDFIs. Financial institutions that wish to become CDFIs must meet specified eligibility criteria, such as demonstrating that their primary mission is to promote community development by serving economically distressed people and places.³ CDFIs work in market niches in both rural and urban communities that are difficult for traditional financial institutions to serve.⁴ CDFIs can be regulated institutions, such as community development banks and credit unions, as well as nonregulated institutions, such as loan and venture capital funds.

After receiving certification, CDFIs are eligible to receive financial awards and other assistance from the Fund.⁵ CDFIs subsequently provide a range of financial products and services in economically distressed markets, such as mortgage financing for low-income and first-time homebuyers and not-for-profit developers, flexible underwriting and capital for needed community facilities, technical assistance, and commercial loans and investments to small start-up or expanding businesses in low-income areas.⁶

Some stakeholders are concerned that a shortage of capital from CDFIs will reduce opportunities for new entrepreneurs to establish a business, existing businesses to expand and hire new workers, and consumers to acquire the credit they need to buy or make improvements to a property. Others believe that these goals can be better served through other public policy or private means given that many of the Fund's programs and other federal programs (e.g., Small Business Administration capital access programs) have similar missions.⁷ However, the costs paid by targeted beneficiaries for greater capital access may vary by delivery channel. Other federal programs may face more pricing restrictions compared to CDFIs, which may be able to charge their customers somewhat more for the elevated financial risk they tend to pose. In other words, while various programs may have overlapping objectives, differences in the delivery of benefits may allow for some or very little of the costs or risks to be shared with taxpayers. For this reason, determining the extent of substitutability and complementarity among the Fund and other federal programs may be challenging.

This report begins by describing the Fund's history and its current appropriations. Next, the report presents an overview of the various programs the Fund administers to achieve its mission. The final section of the report analyzes selected policy considerations of congressional interest regarding the Fund and the effective use of federal resources to promote economic development.

Legislative Origins and Current Structure

The CDFI Fund was established by the Riegle Community Development and Regulatory Improvement Act of 1994 (P.L. 103-325) with a mission to expand economic opportunity for underserved people and communities by supporting the growth and capacity of a national network of community development lenders, investors, and financial service providers. The legislation intended to improve the supply of capital, credit, private investment, and development services in economically distressed areas. In proposing the Fund, President Clinton stated that "by ensuring greater access to capital and credit, we will tap the entrepreneurial energy of America's poorest communities and enable individuals and communities to become self-sufficient."⁸

Although the Riegle Act created the Fund as a wholly owned, independent government corporation, a supplemental appropriations bill moved the Fund into the Department of the Treasury (Treasury) in 1995.⁹ The Fund was moved within Treasury due to its focus on financial institutions and because other financial regulatory agencies (e.g., Office of the Comptroller of the Currency) were already located within the agency.¹⁰ The Fund is a component of the programs of the Under Secretary's Office of Domestic Finance, and it is directly under the Assistant Secretary for Financial Institutions.¹¹

The Fund is headed by a director who is appointed by the Secretary of the Treasury and not subject to Senate confirmation. Initially, the director served a maximum three-year term. However, the Fund was led by approximately 10 directors in its first 15 years. To bring greater stability to the Fund's leadership, the Secretary of the Treasury made the director's position into a career appointment in 2010, meaning there are no limits on the length of the director's term. Jodie Harris has been director of the Fund since January 2019.¹²

By statute, the Fund also has a 15-member Community Development Advisory Board. The board members include the Secretaries of Agriculture, Commerce, Housing and Urban Development (HUD), Interior, and the Treasury; the Administrator of the Small Business Administration (SBA); and nine private citizens appointed by the President. The advisory board's function is to advise the director of the Fund on policies regarding the Fund's activities. The advisory board is not allowed, by law, to advise the Fund on the granting or denial of any particular applications for monetary or nonmonetary awards.

Although the Fund is organized within Treasury's Office of Domestic Finance, in recent years Congress has provided the Fund with its own budget authority line in annual financial services appropriations bills.¹³ These appropriations go toward the Fund's administration, programs, and program awards. The Fund's appropriations cover administration of approvals for allocations of the New Markets Tax Credit (NMTC); however, the actual tax credit is awarded through the Internal Revenue Code, not through the Fund's appropriations.

Budget

As shown in Table 1, the Fund's total expected budget authority for FY2021 was $270.0 million. Of this total, 61% ($165.0 million) was appropriated for the Fund's core CDFI financial and technical assistance programs; 11% ($29.0 million) was appropriated for administration of the Fund's programs, including the NMTC; 10% ($26.0 million) was appropriated for the Bank Enterprise Award (BEA) program; and the remaining 19% ($50.0 million) was appropriated for set-asides for other specific programs.

In the FY2023 budget request, the Administration requested an additional $50.4 million to increase the amount of financial assistance (FA) and technical assistance (TA) awards¹⁴ and $5.0 million to be directed toward Native American communities. An additional $6.0 million in administration funding was requested to increase compliance, data collection, and IT systems development.

Entity Certification

To be eligible for certain CDFI Fund-related programs, an organization must be certified as a CDFI or Community Development Entity (CDE). CDFIs are eligible for CDFI Program FA and TA. CDEs are eligible for the NMTC.

Certified Community Development Financial Institutions

Community Development Financial Institution certification is a designation overseen by the CDFI Fund. CDFIs include regulated institutions such as community development banks and credit unions, and nonregulated institutions like loan and venture capital funds. By building the capacity of a nationwide network of CDFIs, the CDFI Fund works to empower low-income and underserved people and communities to expand economic opportunity.

An applicant eligible for CDFI certification must be a legal entity; have a primary mission of promoting community development; maintain accountability to and provide financial and educational products or services to targeted communities or other targeted populations that have historically lacked adequate access to capital; and be a nongovernment entity and not under the control of any government entity (except tribal governments).¹⁵

Certified CDFIs are eligible to apply for awards through a variety of programs offered by the CDFI Fund.¹⁶ These awards enable CDFIs to finance a wide range of activities—including mortgage lending for first-time homebuyers, flexible underwriting for community facilities, and commercial loans for businesses in low-income areas. Through varying strategies, each CDFI contributes to the cultivation of a healthy and stable local economy.

Figure 1. Certified CDFIs, by Location

Source: Community Development Financial Institutions Fund, at https://www.cdfifund.gov/programs-training/certification/cdfi/Pages/default.aspx.

As of November 17, 2021, there were 1,271 certified CDFIs.¹⁷ As shown in Figure 1, at least one CDFI is located in each of the 50 states, the District of Columbia, Guam, and Puerto Rico. Mississippi, California, and New York each contain more certified CDFIs than any remaining U.S. state or territory. Of the 1,271 certified CDFIs, 564 (44%) are loan funds, 389 (31%) are credit unions, 168 (13%) are banks or thrifts, 134 (11%) are depository institution holding companies, and 16 (1%) are venture capital funds. Of the 1,271 certified CDFIs, 70 (6%) are certified Native American CDFIs.

Certified Community Development Entities (CDEs)

Community Development Entity (CDE) certification is another designation administered by the CDFI Fund. A CDE can be either a for-profit or a not-for-profit entity that acts as an intermediary vehicle for the provision of loans, investments, or financial counseling in a low-income community (LIC). The primary benefit of CDE certification is eligibility to apply for a New Markets Tax Credit (NMTC) allocation.¹⁸

An applicant eligible for CDE certification must be a legal entity and a domestic corporation or partnership for federal tax purposes; have a primary mission of serving or providing investment capital to low-income communities or low-income individuals and target at least 60% of activities to these groups; and maintain accountability to low-income communities through representation on a governing or advisory board. As of July 31, 2012, there were 5,780 certified CDEs (including their subsidiaries) located throughout the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.¹⁹

CDFI Fund Programs: General Purpose

Throughout the 1980s and early 1990s, geographically targeted community development policies were a feature of federal policy debates.²⁰ The CDFI Fund's statutory mission, therefore, was designed to increase economic opportunity and promote community development investments in low-income and distressed communities in the United States. All of the Fund's numerous programs use geographically targeted incentives to increase community development in underserved and distressed communities where certain types of economic activity might not otherwise occur. For example, the Fund's programs encourage qualified entities to provide financial and technical assistance to meet the needs of local businesses, potential homebuyers, community developers, and potential investors in low-income and distressed communities. The Fund's range of incentives includes equity investment in program awardees, tax credits, grants, loans, and deposits and credit union shares in insured CDFIs and state-insured credit unions.²¹ This section presents summaries of the Fund's primary programs.

CDFI Monetary Awards

The Community Development Banking and Financial Institutions Act of 1994, included in the Riegle Community Development and Regulatory Improvement Act of 1994 (P.L. 103-325), authorized the Fund's core CDFI program. The CDFI program provides two types of monetary awards, financial assistance (FA) and technical assistance (TA). These awards are given to CDFIs to build their capacity to serve low-income people and populations that lack access to affordable financial products and services and are located in a distressed community.²²

A CDFI must be certified or be in the process of being certified by the Fund before it is eligible for an FA award. Both certified and noncertified CDFIs are eligible to apply for TA awards. Applicants that are not yet certified must submit a separate certification application to be considered for an FA award during a funding round.²³ If a noncertified organization receives a TA award, then the organization must obtain certification within two years.

The Fund awards grants for several types of FA purposes. Maximum amounts for FY2022 range from $300,000 to $5 million, depending on the FA component.²⁴ A CDFI may use an FA award for lending, investing, enhancing liquidity, or other means of financing.²⁵

The Fund also awards grants for TA awards, with a maximum amount of $125,000 for FY2022. TA awards are intended to build a CDFI's technical capacity to provide affordable financial products and services to low-income communities and families. TA grants may be used for a variety of purposes, including purchasing equipment, materials, or supplies; procuring for consulting or contracting services; paying the salaries and benefits of certain personnel; training staff or board members; and conducting other activities deemed appropriate by the Fund.²⁶

FA and TA awards are both generally subject to two restrictions. First, the Fund typically requires an applicant to demonstrate that it can match award funds with those from other sources. With regard to FA awards, the Fund is authorized to make awards to applicants in a like form to the matching funds secured by the awardee.²⁷ For example, the Fund can only match a nonfederal grant with an FA grant—not a loan. Second, the Fund generally limits any one entity or its affiliates from receiving more than $5 million in awards from the Fund within a three-year period.²⁸

The Fund awarded 248 organizations FA awards and 174 organizations TA awards totaling $188.5 million in FY2021.²⁹ The recipient organizations were headquartered in 43 states, Puerto Rico, and the District of Columbia.

Native American CDFI Assistance

The Native American CDFI Assistance (NACA) component of the CDFI program originated in the Riegle Act of 1994. The Riegle Act mandated that the CDFI Fund conduct a study of lending and investment practices on Indian reservations. The study was directed to identify and determine the impact of private-financing barriers on Native American populations.³⁰ Since the November 2001 release of the Native American Lending Study, the Fund certifies Native CDFIs and provides assistance through the CDFI program's authority. These programs are designed to reduce barriers that prevent access to credit, capital, and financial services in Native American, Alaska Native, and Native Hawaiian communities (collectively referred to as Native Communities).³¹

Under the NACA component of the CDFI program, the Fund receives a separate appropriation and issues FA and TA awards to organizations with the primary mission of increasing access to capital in Native Communities.³² In addition, the NACA component provides TA grants to certified Native CDFIs, emerging Native CDFIs, and sponsoring entities (see below). TA awards may be used by the recipient to become certified as a Native CDFI or to create a new Native CDFI.

A CDFI must be certified by the Fund as one of three types of entities to become eligible for NACA's FA and TA awards:³³

• certified Native CDFIs, which are organizations that direct at least 50% of their activities toward serving Native Communities;
• emerging Native CDFIs, which are organizations that demonstrate to the satisfaction of the Fund that they have a plan to achieve Native CDFI certification within a reasonable timeframe; or
• sponsoring entities, which are organizations (typically tribes or tribal entities) that pledge to create separate legal entities that will eventually become certified as Native CDFIs.

Figure 1 identifies the locations of Certified Native CDFIs by state. Hawaii, Oklahoma, and South Dakota each contain more certified Native CDFIs than any of the remaining 47 U.S. states.

Small and Emerging CDFI Assistance

The Small and Emerging CDFI Assistance (SECA) component of the CDFI program is designed to assist small or emerging CDFIs. SECA provides the same type of FA and TA awards as the general CDFI program. It distinguishes small or emerging CDFIs from other CDFIs using two eligibility criteria, as announced in the annual notice of funds availability.³⁴ Since FY2009, the Fund's appropriations have waived the matching funds requirement under the general CDFI program for SECA FA applicants.³⁵ Awards provided through the SECA application are subject to caps. For FY2022, these caps included $700,000 for general FA funds and $125,000 for TA funds for capacity-building activities.³⁶ In FY2021, the SECA component made 68 awards totaling $19.9 million.³⁷

New Markets Tax Credit

The New Markets Tax Credit (NMTC) program was authorized by the Community Renewal Tax Relief Act of 2000 (P.L. 106-554) to provide a tax incentive to stimulate stable private-sector investment in low-income communities (LICs).³⁸ Although the NMTC is a part of the Internal Revenue Code, the competitively awarded NMTCs are administered by the CDFI Fund. All CDEs are eligible to submit applications for NMTCs to the CDFI Fund, where they are evaluated across four areas: the CDE's (1) business strategy to invest in low-income communities, (2) capitalization strategy to raise equity from investors, (3) management capacity, and (4) expected impact on jobs and economic growth in low-income communities where investments are made. After the Fund ranks the qualified applicants, the available NMTCs are allocated until exhausted. As of January 2022, 17 rounds of NMTC Allocations have been completed with $66 billion awarded, of which $60.8 billion has been invested.³⁹

The CDFI Fund contracted with an independent third party to evaluate the NMTC. Although activities consistent with achieving the CDFI's goals were identified, the study was unable to directly attribute those achievements to the NMTC program.⁴⁰ The CDFI Fund has not contracted for similar evaluations of its other programs.

Bank Enterprise Award

The Bank Enterprise Award (BEA) was originally authorized by the Bank Enterprise Act of 1991 in the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1992 (P.L. 102-142). Prior to the CDFI Fund's creation, the BEA was administered by the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC). Section 114 of the Riegle Community Development and Regulatory Improvement Act of 1994 (P.L. 103-325) moved the BEA under the Fund's operations.

The Fund's BEA program provides formula-based grants to FDIC-insured banks and thrifts to expand investments in CDFIs and to increase lending, investment, and service activities within economically distressed communities. The Fund evaluates how an applicant's lending, investment, and service activities may have increased relative to a baseline of similar, qualified activities conducted by the applicant in the previous application cycle. BEA rewards are retrospective, awarding applicants for activities they have already completed, in contrast to the Fund's primary CDFI program, which typically awards applicants based on their future plans.⁴¹

The BEA formula-based grants are based on the following three categories:

• CDFI-related activities, such as equity investments (e.g., grants, stock purchases, purchases of partnership interests, or limited liability company membership interests), equity-like loans, and support activities (e.g., loans, deposits, or technical assistance), to certified CDFIs.
• Distressed community financing activities, such as loans or investments for home mortgages, housing development, home improvement, commercial real estate development, small businesses, and education financing in distressed communities.
• Service activities, such as financial transaction services (e.g., check-cashing or money order services, electronic transfer accounts, and individual development accounts).⁴²

FDIC-insured financial institutions that are dedicated to financing and supporting economic development in qualified communities are eligible for the BEA. No applicant may receive a BEA if it has (1) an application pending for assistance under the current round of the awards under the CDFI program; (2) been awarded assistance from the Fund under the CDFI program within the 12-month period prior to the date the Fund selects the applicant to receive a BEA; or (3) ever received assistance under the CDFI program for the same activities for which it is seeking a BEA.⁴³ Applicants may apply for both a CDFI program award and a BEA program award in a given year; however, receiving a CDFI program award removes an applicant from eligibility for a BEA in the same year.⁴⁴ In FY2021, 158 depository institutions received $26.0 million in BEA program awards in 23 states and the District of Columbia.⁴⁵

Bond Guarantee Program

The CDFI Fund's Bond Guarantee Program was authorized by The Small Business Jobs Act of 2010 (P.L. 111-240).⁴⁶ The program is designed to provide long-term, "patient" capital to CDFIs at below-market rates.⁴⁷ Through the program, CDFIs (or their designees) issue bonds that are guaranteed by the Treasury and use the proceeds to make investments for eligible community or economic development purposes. Treasury guarantees up to 10 bonds per year, each at a minimum of $100 million.⁴⁸ The total of all bonds guaranteed cannot exceed $1 billion per year. Each bond is fully guaranteed by the United States and offered at a cost equivalent to the current Treasury rates for comparable maturities. The bonds cannot exceed a maturity of 30 years, are taxable, and do not qualify for Community Reinvestment Act (CRA) credit.⁴⁹

Authorized uses of the loans financed may include a variety of financial activities that constitute community or economic development in low-income or underserved areas (e.g., the provision of basic financial services, housing that is principally affordable to low-income individuals, and businesses that provide jobs for low-income people or are owned by low-income individuals).⁵⁰

By legislative design, the Bond Guarantee Program is a zero-subsidy credit program and does not require annual appropriations funding. Because the bonds will be guaranteed by the United States, in accordance with federal credit policy, the Federal Financing Bank (FFB), a U.S. government corporation under Treasury's general supervision and direction, will purchase the bonds issued by qualified issuers.⁵¹ Qualified issuers will lend the bond proceeds to eligible CDFIs. The FFB finances obligations that are fully guaranteed by the United States, such as the bonds or notes issued by CDFIs under the CDFI Bond Guarantee program.

Small Dollar Loan Program

The Small Dollar Loan Program (SDL) was authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203). The SDL Program was created to help certified CDFIs expand consumer access to mainstream financial institutions and provide alternatives to high-cost small-dollar loans. The program was also created to help unbanked and underbanked populations build credit and access affordable capital. The first round of SDL awards to 52 CDFIs totaling $10.8 million were announced on September 23, 2021.⁵² The recipient CDFIs are headquartered in 30 states, the District of Columbia, and Puerto Rico.

Capital Magnet Fund

The Capital Magnet Fund (CMF) was established by the Housing and Economic Recovery Act (HERA) of 2008 (P.L. 110-289). The CMF is intended to encourage CDFIs and other nonprofits to expand financing for the development, rehabilitation, and purchase of affordable housing and other related economic development projects in distressed communities. Through the CMF, the CDFI Fund provides competitively awarded grants to CDFIs and qualified nonprofit housing organizations. The awardees can use the award funds to create financing tools, such as loan loss reserves, loan funds, risk-sharing loans, and loan guarantees that result in housing and community development investment of at least 10 times the size of the award.

Two types of organizations are eligible to apply for a CMF award. An organization applying for a CMF award must either (1) be certified as a CDFI by the Fund; or (2) be a nonprofit organization having as one of its principal purposes the development or management of affordable housing. In FY2020, 48 organizations received CMF awards totaling $175.4 million in awards.⁵³

CDFI COVID-19 Responses

The Consolidated Appropriations Act, 2021 (P.L. 116-260) included $3 billion for the CDFI Fund to provide emergency support, through two direct grant programs, to communities negatively affected by the COVID-19 pandemic.

CDFI Rapid Response Program

The CDFI Rapid Response Program was authorized to provide $1.25 billion in grants to deliver immediate assistance in communities impacted by the COVID-19 pandemic through an expedited application and review process. On June 15, 2021, Treasury announced awards to 863 CDFIs for the entire $1.25 billion authorization.⁵⁴ The recipient CDFIs are headquartered in 48 states, the District of Columbia, Guam, and Puerto Rico, and 58 are organizations that committed to direct their awards to investments in Native American, Native Alaskan, and Native Hawaiian communities.

CDFI Equitable Recovery Program

The CDFI Equitable Recovery Program (ERP) was authorized to provide $1.73 billion in grants for CDFIs to enhance their response to the economic impacts of the COVID-19 pandemic. The CDFI grants were intended to expand lending, grant making (by CDFIs), and investment activity in low- or moderate-income communities and to borrowers (including minorities) who had significant unmet capital or financial service needs and were disproportionately impacted by the COVID-19 pandemic. The CDFI ERP FY2022 funding round opened on June 23, 2022.⁵⁵

CDFI Fund Programs: Specific Purposes

Rather than providing financial support to a CDFI to use at its discretion for mission goals, the CDFI Fund also provides awards for specific initiatives.

The Healthy Food Financing Initiative

The Healthy Food Financing Initiative (HFFI) has roots in 2010 with an announcement of federal efforts to improve access to healthy food in underserved urban and rural areas.⁵⁶ The HFFI is part of a multiagency effort to combat food deserts.⁵⁷ It aims to expand the supply and demand for nutritious foods, including increasing the distribution of agricultural products, developing and equipping grocery stores, and strengthening producer-to-consumer relationships. Through its role in the HFFI, the CDFI Fund provides grants for organizations serving low-income neighborhoods with limited access to affordable and nutritious food, by way of CDFIs. Since 2015, the HFFI has made 84 awards totaling $155.1 million to CDFIs in 18 states.⁵⁸ In FY2021, 10 CDFIs received $23 million in HFFI awards.⁵⁹

Persistent Poverty Counties

The CDFI Fund has adopted administrative procedures to ensure that at least 10% of funds designated for its BEA are used to support persistent poverty counties (PPCs).⁶⁰ PPCs are defined as any county, including county equivalent areas in Puerto Rico, that has had 20% or more of its population living in poverty over the past 30 years, or any other territory or possession of the United States that has had 20% or more of its population living in poverty over the past 30 years, as measured by the U.S. Census Bureau.⁶¹ PPCs do not need to be located in a CDFI's approved target market, but only qualified activities that occur in areas determined by the CDFI Fund to be distressed communities will count toward eligibility for a BEA award.⁶² In FY2021, 125 CDFIs received $18.6 million in FA awards and 57 CDFIs received $7.1 million in TA awards targeted toward PPCs.⁶³

Disability Fund

The CDFI Fund initiated a capacity-building program to expand credit and other financial services to people with disabilities, including people with autism, veterans, elderly people, and people who may generally be impaired from working.⁶⁴ Disabilities may increase the difficulty of maintaining gainful employment, thus increasing the difficulty of qualifying for financial loan products provided by traditional financial institutions. In FY2021, 14 CDFIs received $6 million in Disability Fund awards.⁶⁵

Economic Mobility Corps

The Economic Mobility Corps (EMC) is a joint initiative of the CDFI Fund and AmeriCorps, an independent federal agency that encourages citizens to serve as volunteers in communities, particularly to help those who are elderly, are poor, or face challenging disadvantages.⁶⁶ The EMC program is designed to enhance the capacity of CDFIs to provide financial literacy, financial planning, budgeting, saving, and other financial counseling activities.⁶⁷ EMC volunteers will receive training in financial counseling and financial literacy and then be placed in various CDFIs to assist residents in specific markets. Any organization—not limited to CDFIs—can apply for EMC awards to facilitate placement of AmeriCorps service volunteers in a CDFI.

Policy Considerations

Members of Congress concerned about the size or efficient management of federal budgetary resources have long-standing interest in identifying duplicative federal programs. CDFI Fund programs, similar to many federal programs and initiatives, are generally aimed at expanding access to capital in distressed communities that have historically lacked access to the capital needed to spur economic development and provide alternatives to predatory lending.⁶⁸ In 2011, GAO identified economic development programs where effectiveness may be compromised due to overlap and arguably insufficient coordination.⁶⁹ The potential for duplication may be seen by the existence of at least 130 economic development programs overseen by over 20 offices and agencies, including the Fund, with some examples listed below.⁷⁰

• The Community Development Block Grant program, administered by the Department of Housing and Urban Development (HUD), allocates federal assistance to state and local governments, as well as to eligible CDFIs, to support neighborhood revitalization and community and economic development efforts.⁷¹ The Federal Home Loan Bank System provides grants on a competitive basis to membership institutions, which may include CDFIs, to support the acquisition, construction, or rehabilitation of affordable rental housing as well as to support single-family housing needs for veterans and those with disabilities.⁷²
• Certain SBA programs for small business (e.g., HUBZone program, technical assistance grant programs) overlap with Fund programs.⁷³
• The Fund's retrospective BEA program arguably has similarities to government guarantee programs, which typically reimburse lenders for some or all of the losses associated with higher-risk mission lending, administered by numerous federal agencies (e.g., HUD, USDA, SBA, Bureau of Indian Affairs) and certain federally related government sponsored enterprises. After receiving awards from the Fund, CDFIs may also originate loans that meet the eligibility requirements for various federal guarantees and be reimbursed for losses.
• Some of the direct lending programs that USDA, SBA, the Bureau of Indian Affairs, and the Farm Credit System administer may overlap with certain Fund programs.⁷⁴ Furthermore, the SBA's 504 Loan program provides long-term, fixed-rate financing, which is also provided by the Fund's Bond Guarantee Program.⁷⁵

Although various Fund programs are duplicative with other federal programs in terms of their stated purpose, pricing differences could differentiate them. For example, rather than price for the above-normal risks, some federal agencies that directly offer financial loans and guarantees must follow statutory price-setting rules, which arguably may not fully cover the higher default risk posed by higher-risk borrowers.⁷⁶ By contrast, CDFIs may have greater flexibility to charge higher interest rates and fees, thus generating additional revenue that can be used to offset losses associated with higher loan delinquencies and charge-off rates. For this reason, if Congress were to consider the extent of duplication among development programs provided by the Fund and other federal agencies, Members may also wish to consider how risk-based pricing is implemented by CDFIs compared to other federal programs to see if this practice results in significant benefit and cost differences for both underserved individuals and taxpayers.

In addition to concerns about duplication of federal programs, Members of Congress have a long-standing interest in understanding the effectiveness of federal programs. A common challenge in conducting formal evaluations is that the enacting legislation may not state a specific program goal, define what would constitute success, or require data collection that may be necessary to aid in future evaluations.⁷⁷ If Congress were to consider the effectiveness of programs provided by the Fund, Members may want to clearly articulate the purpose of the program and specific measures for success.