How Latino-Serving CDFIs Can Shape a Thriving American Economy

Among the nation’s roughly 1,500 CDFIs, many are well-situated to serve Latino communities. However, our analysis reveals that CDFI lending activity is low in majority Latino neighborhoods compared with other racial and ethnic groups.

Overall business lending in majority Latino neighborhoods remains disproportionately low, which can pose challenges for new and existing businesses seeking to scale and grow. This gap could stem from limited engagement by Latino-serving CDFIs in federally backed small business loan programs. In contrast, majority Latino neighborhoods are better represented in multifamily and consumer lending activity.

Relatively, fewer CDFI banks actively lend in Latino-dense areas, suggesting a need for geographic and strategic expansion. Given the size and reach of these institutions, there is considerable room for growth. CDFI credit unions show relatively more strength in majority Latino communities, presenting a potential model for broader engagement.

Our analysis revealed disparities in lending patterns across neighborhoods, as neighborhoods with larger shares of Latino households received less CDFI lending, especially majority Latino neighborhoods. Loan patterns are also striking, as majority Latino neighborhoods receive half the number of CDFI loans as neighborhoods that are 0 to 9 percent Latino.

Our interviews with experts yielded insight into these discrepancies. CDFIs serving Latino communities are generally younger or have emerged more recently, interviewees said. We also heard that CDFIs are less represented in regions with higher shares of Latino people.

In addition, we heard about cultural factors related to accessing capital or credit, noting that Latino entrepreneurs may prefer to rely on family or friends for financial support rather than banks or other institutions. This preference seems to be grounded in an aversion to debt within Latino culture, which may arise from negative experiences with unreliable or extractive financial institutions either in the US or in other countries. This aversion can help safeguard against overextension but can also limit opportunities for wealth building.

CDFIs did excel in terms of microlending to Latino communities. Microloans, or business loans of less than $50,000, can help entrepreneurs cover day-to-day business expenses and access working capital. CDFI microloans often serve as an alternative to predatory payday lending or merchant cash advances.

By offering fewer barriers and more flexible terms, such as relaxed credit history or fewer bookkeeping requirements, microloans align with the financial realities and preferences of many Latino borrowers. As one interviewee noted, smaller-value loans are common in Latin America and feel familiar and accessible to many Latino entrepreneurs in the US.

Microloans, along with other CDFI lending, sometimes come with advisory services. One Latino CDFI microlender said, “we often created financial projections with our customers that ultimately became a part of their loan applications, and this was often all conducted in Spanish. Just the application itself from a bank or non-culturally or linguistically competent institution can be a nonstarter.”

Microloans, however, can fall short of meeting the full capital needs of growing businesses. CDFI business lending is comparatively weak in Latino communities making it a key area of need for the sector. Similarly, single-family home lending—a key avenue for wealth creation—is more limited in Latino communities, as are certain types of consumer lending, such as personal loans and credit cards.

These trends suggest that there are opportunities for these CDFIs to expand their offerings, especially of products that are critical avenues for asset building. By diversifying lending criteria and pairing loans with robust technical support, CDFIs can help Latino entrepreneurs take full advantage of a broader range of financial tools, positioning communities for growth.

Latino communities are growing across the United States, but access to financial services through CDFIs varies widely by geography. Historically, Latino populations were concentrated in California, Illinois, New Jersey, New York, Texas, and states in the Southwest, but Latino populations have expanded significantly in recent years. Washington, North Carolina, Georgia, and Virginia are now home to significant Latino populations. However, not all Latino communities are equally well served by CDFIs.

Our analysis of CDFI lending data among states with at least 30 neighborhoods where at least 30 percent of residents are Latino (including 37 states and Puerto Rico) shows striking disparities. (Unfortunately, data largely do not capture the race or ethnicity of borrowers, so while we describe lending to Latino communities, we cannot describe lending to Latino people.) Lending per capita in Latino neighborhoods is highest in Minnesota, North Carolina, and Florida while it is lowest in Georgia, Idaho, and Puerto Rico. On average, lending per capita in the five states with the most lending to Latino neighborhoods is 8 times higher than in the bottom five.

Variability in lending among states may result from the strength of local institutions, as several interviewees pointed out. Nebraska, for example, demonstrates strength in microlending, while Connecticut and Missouri excel in multifamily housing lending. Factors such as state and local funding availability, banks’ compliance with Community Reinvestment Act responsibilities, philanthropic support, and the presence of strong community development organizations can all shape the reach and impact of CDFIs in a state.

Geographic differences are also evident at the metropolitan level. CDFIs lend $8 per capita in Latino neighborhoods in the Austin area, for instance, while Latino neighborhoods in New York City receive roughly six times more from CDFIs. Addressing regional inequities can help ensure that Latino communities across the country have equitable access to financial services that support growth and prosperity.

Latino voices remain underrepresented in CDFI leadership roles, presenting both a challenge and an opportunity for the sector. Latino-led organizations, defined as those with a Latino chief executive officer or at least 50 percent Latino board representation, make up 13 percent of all CDFIs. Among these, 93 percent have a Latino CEO and 80 percent have boards with at least 50 percent Latino representation.

All Puerto Rico-based CDFIs have Latino leadership, comprising about half of all Latino-led CDFIs. Excluding Puerto Rico, just 7 percent of CDFIs are Latino-led.

Credit unions dominate the landscape of Latino-led CDFIs, making up 61 percent of these institutions—a trend largely driven by credit unions in Puerto Rico. Of all CDFI credit unions, almost a quarter are Latino-led institutions (but just 7 percent of credit unions outside of Puerto Rice are Latino-led). Meanwhile, 12 percent of CDFI loan funds are Latino-led, and only 1 percent of CDFI banks are Latino-led.

Representation varies by lending type, aligning with trends seen in lending activity. Latino-led institutions account for 19 percent of microlenders, 16 percent of multifamily lenders, and 14 percent of consumer lenders, but only 5 percent of single-family lenders.

In interviews, practitioners frequently cited the value of representation, especially in terms of language capacity, cultural competency, and lived experience. Interacting in Spanish is helpful for effective service delivery and for building trust among some Latinos. But interviews with experts also highlighted several barriers to Latino CDFI leadership.

Limited awareness of CDFIs as a career path was cited as a significant challenge, stemming from insufficient recruitment efforts within Latino-serving institutions and networks. Additionally, smaller CDFIs often struggle to invest in comprehensive staff training and development because of resource constraints. These organizations also have a harder time offering competitive salaries, making it more difficult to retain trained leaders. One CEO pointed to a generational turnover that will take place over the next five years in the CDFI field as a key way to expand opportunities for aspiring Latino leaders.

Although there are comparatively few Latino-led CDFIs, the ones that do exist span a wide range of sizes, specialties, and lending capabilities. Not all Latino-led CDFIs are small and community-based—though several meet that definition.

Latino-led CDFI loan funds who are Opportunity Finance Network members have a median of $45 million in assets compared with $29 million for non-Latino-led CDFI loan funds. The median for loans outstanding is $24 million for Latino-led CDFI loan funds and $13 million for non-Latino-led CDFI loan funds. The median self-sufficiency ratio—earned revenue compared with expenses—for Latino-led CDFI loan funds is 0.53 for Latino-led CDFI loan funds versus 0.48 for non-Latino led CDFI loan funds.

Our study does reveal that Latino-led CDFI loan funds rely more heavily on bank debt compared with other CDFIs, highlighting a disproportionate lack of philanthropic, government, and other equity-based support. Data show that for Latino-led CDFI loan funds, 43 percent of borrowed funds came from banks, compared with just 21 percent for non-Latino-led CDFI loan funds. And federal sources of funding may have high barriers of entry that present significant challenges for new or emerging CDFIs.

Latino-led CDFI credit unions and banks are often larger than their non-Latino CDFI counterparts. (These data do not include credit unions in Puerto Rico because of data availability.) At the median, Latino-led CDFI credit unions have more assets than non-Latino CDFI credit unions ($194 million to $172 million), but fewer loans outstanding ($114 million to $120 million). Latino-led CDFI banks are larger than their counterparts at the median for both measures, with roughly double the assets ($679 million to $337 million) and double the loans outstanding ($402 million to $206 million) of non-Latino-led CDFI banks.

Despite being larger in size, Latino-led CDFI banks have less income than non-Latino CDFI banks ($0.5 million vs. $3.4 million)—an important imbalance that may reflect different lending sectors, lower interest rates, or fees charged. Median net asset ratios (the share of total assets that an institution owns free and clear) are somewhat higher for Latino-led CDFIs than their non-Latino-led counterparts: 11.8 percent for Latino-led CDFI credit unions compared with 10.6 percent, and 9.2 percent for Latino-led CDFI banks compared with 8.7 percent.

Interviewees emphasized that all types of Latino-led CDFIs can fill a critical gap in the market by providing culturally informed financial services tailored to Latino families. These organizations prioritize technical assistance, credit-building programs, and flexible lending products to address the unique needs of their communities, often taking on higher-risk portfolios and longer timelines. Although they face visibility and resource constraints, Latino-led CDFIs remain dedicated to adapting their offerings and leveraging local partnerships to meet the needs of underserved Latino communities.