CDFIs Face Strong Demand but Growing Strain, Says Richmond Fed Survey

A newly released report from the Federal Reserve Bank of Richmond sheds light on the evolving landscape of Community Development Financial Institutions (CDFIs), revealing strong demand, shifting capital strategies, and increasing operational strain. The findings come from the 2025 Federal Reserve CDFI Survey and compare results from prior years to identify how these mission-based lenders are adapting.

Demand Remains High, But Not Unlimited

CDFIs continue to see strong appetite for their services. In the 2025 survey, 71% of respondents reported increased demand, a robust figure, though down slightly from 75% in 2023. However, only 33% of CDFIs said they were able to fully meet demand, a sharp drop from 46% just two years earlier. That signals potential capacity constraints and growing pressure on their resources.

Who Are Today’s CDFIs?

The composition of CDFIs has changed over time. The survey shows a rise in credit union respondents, while CDFIs focused primarily on commercial or residential real estate have declined. Small business lending remains a cornerstone, about one-quarter to one-third of CDFIs continue to identify it as their primary product line.

This evolving makeup suggests a broadening of the CDFI landscape, as traditional lenders, depository institutions, and hybrid models all find a role in community finance.

Capital Sources Are Shifting

When asked about their top sources of capital, most CDFIs still pointed to earned income and federal funding. However, deposit-based funding, which historically wasn’t as prominent, has become more common, likely due to the growing number of credit unions in the CDFI mix.

At the same time, the use of funding from other financial institutions (like banks and impact investors) has steadily declined. This could indicate that CDFIs are either becoming more self-reliant or finding alternatives that offer more stability.

Secondary Market Activity Is Growing (Modestly)

About 24% of CDFIs now report selling loans on the secondary market, up from 21% in 2023. Still, most loan sale volumes remain small, often under $50 million in total. This suggests early experimentation with liquidity strategies, but not yet widespread adoption of loan sale pipelines.

Institutional Stress Is Building

The most notable takeaway may be the drop in the number of CDFIs that say they can fully meet demand. While many still report being able to meet most needs, the decline in full satisfaction rates suggests growing constraints, whether in capital, staffing, technology, or compliance.

As mission lenders seek to scale, many will likely need to rethink their tech stacks, capital strategies, and potentially their institutional structures.

What to Watch Next

The Richmond Fed survey points to several short-term trends and areas of focus for anyone in the small business finance or impact lending space:

• Federal funding stability: Given the importance of government sources, any changes in policy or appropriations could have outsized effects on CDFI operations.

• Fintech partnerships: As CDFIs look to scale operations and cut costs, collaborations with financial technology firms could help modernize systems and extend reach.

• Depository models on the rise: With more credit unions and deposit-based strategies entering the space, regulatory frameworks could shift.

• Innovation in loan sales: As secondary market activity increases, we may see new platforms emerge to help community lenders pool and offload loan risk.

• Potential consolidation or realignment: Smaller CDFIs feeling capacity strain might look to merge or align with regional networks or umbrella groups to access shared resources.

CDFIs remain a vital part of the small business lending and community development ecosystem. This latest Richmond Fed report offers a clear picture of a sector under pressure, but also full of potential. As demand for inclusive financing persists, how these institutions adapt in the coming years will shape the future of underserved business and borrower access across the U.S.