The opportunity finance industry of community development financial institutions (CDFIs) and other private-sector financial intermediaries is a critical engine for our nation’s economic growth.

CDFIs are public-purpose institutions that combine private market discipline with public missions. They are committed to identifying market gaps and delivering products and services to people and communities not adequately served, and to providing technical assistance that makes customers better able to function in the market economy.

What distinguishes opportunity finance from conventional finance is that it is profitable but not always profit maximizing. What differentiates opportunity finance from community development is that it is accountable to financial and consumer markets—that is, to its investors and its consumers—and is not subsidy driven like many government programs.

And what sets it apart are results—CDFIs’ net charge-off rate in fiscal year 2006 was only 0.46 percent, which compares favorably with the 0.39 percent net charge-off rate for all FDIC insured financial institutions. Opportunity finance has resulted in significant numbers of new jobs, preserved jobs, quality affordable housing units, and new commercial and community facility space in all 50 states. Investors get solid fixed-income returns. People and communities that want to succeed get the opportunity to do so. And critical market segments, many of which will drive our future economic growth, will expand and prosper. CDFIs target these critical market segments, including inner cities, remote rural communities, Native American reservations, first-time homebuyers, and minority and immigrant populations.

Unlike other programs dependent on federal spending, CDFIs leverage $19 in nonfederal funds for each federal dollar invested. CDFIs use this “seed capital” from the federal government to attract private-sector capital, ensuring continued community investment well beyond the initial federal funding. Currently, approximately 1,000 CDFIs operate in low-wealth communities in all 50 states, the District of Columbia, and Puerto Rico.