By Ray Birch
NEW YORK — After years of steady expansion, the Community Development Financial Institution (CDFI) sector is entering a new phase — one that could influence how credit unions approach their community development strategies in the years ahead, according to leaders at Inclusiv.
A recent analysis of CDFI-certified credit unions points to a shift in overall numbers, signaling more than just routine fluctuation and prompting renewed focus on how institutions define, sustain and scale their mission-driven work.
Data cited in a recent report from the Federal Reserve Bank of New York show that after more than a decade of rapid growth, the CDFI industry has entered a modest contraction, with certified institutions and total assets slipping since 2023. The report found that certified credit unions — long the dominant force within the sector — declined from 519 institutions in 2023 to 445 in 2025, while assets held by CDFI credit unions fell by approximately $18 billion during the same period. Even with the decline, credit unions still account for roughly 62% of total CDFI assets, underscoring both their centrality and their vulnerability in the current environment.
For Inclusiv Executive Vice President Pablo DeFilippi, the decline reflects a convergence of operational and policy pressures rather than a retreat from community development missions. He said the CDFI Fund’s revamped recertification process — designed to strengthen standards and verify that institutions meet lending thresholds to qualifying markets — has become significantly more complex, requiring annual reporting and more intensive documentation.
While the intent was to protect program integrity, DeFilippi said the added burden has unintentionally created barriers for smaller institutions with limited compliance resources. Some credit unions, he noted, have chosen to step back from certification not because their mission changed, but because the administrative cost of maintaining status became difficult to justify amid uncertain federal funding and shifting policy signals.
That uncertainty, Inclusiv leaders say, has been magnified by broader political debate around the CDFI Fund itself. Questions over staffing, funding continuity and administrative priorities have caused some institutions to hesitate before investing additional time and resources into certification. DeFilippi argued that the uncertainty carries real consequences for local economies, particularly in rural areas and smaller markets where CDFI credit unions often serve as primary providers of affordable financial services.
Pablo DeFilippi
Inclusiv’s analysis of certification trends between December 2024 and June 2025 found a 9% decline in certified CDFI credit unions over that short period alone. The losses were especially pronounced geographically: Wyoming lost all of its CDFI credit unions, while Idaho and Colorado each lost roughly half; Arkansas and Maine each experienced one-third declines among rural-serving CDFI institutions — credit unions that maintain at least one branch in a rural or non-metro community. Those patterns suggest the contraction may be disproportionately affecting communities policymakers often cite as priorities for economic development.
Despite the decline, Inclusiv leaders emphasized the sector’s foundational impact remains strong. According to Inclusiv’s impact brief, 442 CDFI credit unions continue to operate across 47 states, Washington, D.C., and Puerto Rico, serving more than 20 million members, with 71% of those institutions serving at least one rural county.
CDFI credit unions collectively hold more than 60% of sector assets despite representing only about one-third of certified institutions, and they direct significant capital into underserved markets through mortgage lending, small-business loans, consumer financing and alternatives to payday lending.
DeFilippi said many of the institutions losing certification continue to deliver these services but risk losing the visibility, recognition and funding channels that help sustain specialized programs such as first-time homebuyer initiatives or financial coaching.
Challenge Lies In Implementation
Inclusiv Senior Vice President of Policy and Communications Alexis Iwanisziw added her perspectives, noting that the CDFI Fund’s tighter standards were designed with a legitimate goal of ensuring strong standards and clear definitions for what constitutes a CDFI. The challenge, she said, lies in the implementation — particularly for smaller credit unions balancing compliance demands against staffing and operational realities.
She also stressed that bipartisan political support for the CDFI Fund remains strong, citing congressional letters and appropriations backing from both Republicans and Democrats, even amid broader debates over federal spending. That support, she said, signals widespread recognition that CDFI institutions play a unique role in expanding access to capital and supporting local economies.
Looking ahead, Inclusiv believes the sector may continue to experience short-term declines as recertification applications move through existing backlogs, making it unclear when the number of certified institutions will stabilize.
Yet both DeFilippi and Iwanisziw said the broader trajectory of the credit-union movement remains anchored in community development work, regardless of certification status. CDFI credit unions still represent the largest share of assets and members in the sector and continue to drive investment in rural and low-income communities through cooperative, deposit-based lending models.
For the broader financial services ecosystem — especially banks and credit unions watching changes in federal community-development policy — the key question now is whether the certification process and funding framework can evolve in ways that preserve the momentum built over the past decade without imposing barriers that reduce participation. The answer, Inclusiv leaders argue, will help determine not only the future of CDFI credit unions but also the capacity of community focused finance to address economic inequality in the years ahead.