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Virginia Becomes the Latest State to Create a CDFI Fund

One of the fund’s goals is to double the number of CDFIs in Virginia. 

By Erica Sweeney

Virginia is betting big on CDFIs to help support small businesses and disenfranchised communities. In March, Virginia Governor Glenn Youngkin signed a law to codify and continue funding the Virginia Community Development Financial Institution Fund, also known as the VA CDFI Fund. 

“Big picture, we hope we can double the number of CDFIs in Virginia,” says Leah Fremouw, board president of the Virginia CDFI Coalition and CEO of nonprofit community lender Bridging Virginia. “More of us need to exist, because the work that we do is dynamic and risky.” 

The goal is to support more small businesses in the Commonwealth of Virginia, help more people become homeowners through home down payment assistance, and expand affordable housing and inclusive economic opportunities, she adds. 

The VA CDFI Fund was created in 2021 when a $10 million budget amendment was passed to support CDFIs in Virginia. Soon after, the CDFI coalition formed to give a collective voice to the community development and investment community, represent their interests, and focus on making the CDFI law, Fremouw says. 

The Virginia Department of Housing and Community Development will oversee the fund and provide annual reports on how the fund is being used and its impact. 

“We wanted it in statute at the state agency because then it’s a program and ideally, you get funding for the program,” Fremouw says. The exact budget for the VA CDFI program hadn’t yet been allocated yet as of April 2023. 

Codifying the VA CDFI Fund into law makes Virginia one of just a few states that incorporate CDFI funding into their state budgets. 

Last year, California included $50 million in its 2022-23 state budget to establish the California Investment and Innovation Program (CIIP). The funding will be distributed via several rounds of grants starting in 2024. 

New York created the New York State Community Development Institutions Fund via legislation in 2008, but it hadn’t allocated any funding until 2020. That year, $25 million was devoted to CDFIs in the state for financial counseling and education for borrowers, capital reserves or loan loss reserves.

Other states are broadening their support for CDFIs, but haven’t yet put it into law. For instance, Washington received $163.4 million from the U.S. Treasury Department to fund small business loans. The state plans to launch an updated version of its State Small Business Credit Initiative (SSBCI) program. Kentucky was awarded $117 million to expand its SSBCI program and will support CDFIs.

Getting Virginia’s state-level program “across the finish line” was a collaborative effort, Fremouw says. The Virginia CDFI Coalition, which is made up of all volunteers, met regularly, worked to ensure legislative support, and kept showing up to do the work. 

“We kept at it,” she says. “Establishing a consistent funding source allows CDFIs to not only address the most urgent issues, but to coordinate on long-term, sustainable solutions.” 

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is developed in partnership with Next City.