Shutdown of CDFI could hinder co-ops, affordable housing efforts

The Treasury Department building in Washington, June 9, 2025. The Community Development Financial Institutions Fund, a key program within the federal Treasury Department, has long supported local lenders in financing affordable housing, small businesses and essential services in underserved communities. (Eric Lee/The New York Times)

By THE STAR STAFF

In a move that could significantly impact Puerto Rico’s credit unions (known locally as “cooperativas”) and broader community development efforts, the White House has proposed eliminating the Community Development Financial Institutions (CDFI) Fund, a key program within the U.S. Department of the Treasury.

The CDFI Fund has long supported local lenders in financing affordable housing, small businesses and essential services in underserved communities. It provides critical funding to credit unions, nonprofit loan funds, and other institutions that operate in areas where traditional banks often do not.

Critics warn that the CDFI Fund’s elimination could stall projects such as rebuilding homes after hurricanes, opening grocery stores in food deserts, and supporting child-care centers, health clinics and small manufacturers.

“Last week, President Trump released his FY 2026 Discretionary Budget proposal, which recommends cutting all discretionary awards for the CDFI Fund -- totaling $291 million -- as part of $163 billion in proposed federal reductions,” CDFI Puerto Rico stated on its website. “This proposal would effectively eliminate CDFI Fund programs. We encourage our clients to contact their legislators and express support for the fund.”

Following Hurricane Maria in 2018, the CDFI Fund played a pivotal role in Puerto Rico’s recovery. A partnership with the Cooperative Executives Association helped promote CDFI certification among local credit unions, removing barriers to federal funding. Since then, more than $308 million in development funds have been directed to Puerto Rico’s cooperative sector, with 86 credit unions achieving CDFI certification.

CDFIs encompass a range of institutions, including community development banks, credit unions, nonprofit loan funds and venture capital funds. In Puerto Rico, certified CDFIs include the Ceiba Housing and Economic Development Corp., Comerciantes Unidos para el Desarrollo Comunitario de Camuy, and the Trujillo Alto Economic Development Corp., among others.

Established in 1994, the CDFI Fund has been instrumental in revitalizing economically distressed communities across the U.S. by supporting small businesses, creating jobs and expanding access to financial services.

Reports indicate that layoffs of Treasury staff working in the CDFI office began last Friday, part of a broader government workforce reduction. Advocates say the decision marks a major setback for community development, particularly in marginalized areas.

“Eliminating the CDFI Fund will disproportionately affect vulnerable communities and undermine efforts to promote economic equity,” one advocate said.

Supporters are urging lawmakers to oppose the proposal and restore funding to ensure continued investment in underserved regions.