New State Grant Program Strengthens Partnership with California’s Financial First Responders

CDFI 2022
(Corona Borealis/Corona Borealis -

Early this summer, Gavin Newsom signed the $308-billion budget for 2022-2023 into law. Coming after weeks of negotiations, the budget reflects California’s priorities as it struggles with an ongoing pandemic, aging infrastructure, climate change, rampant inflation and the looming threat of recession.

Tucked inside the budget is a provision to establish the California Investment and Innovation (CII) Program. Modeled on the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund, this one-time, $50-million general fund investment provides resources to CDFIs to offer expanded technical assistance and much-needed access to formal financing to some of the state’s most economically distressed and underserved communities.

The CII Program reinforces the alliance between California and community-based lenders and allows for rapid deployment of state, Federal and private resources to meet the moment. Thanks to this partnership, the state of California and CDFIs will now have the tools and resources to strengthen California’s most underserved individuals and communities.

Fortunately, our elected officials understand the critical role CDFIs play to help underserved communities flourish. Senators Anna Caballero (D-Salinas) and Monique Limón (D-Santa Barbara) worked alongside the over 30 CDFI members in the California Coalition for Community Investment (CCCI) to help create the new fund and ensure our communities are resilient to crisis, healthy, housed, and have access to economic opportunities.

As federally certified nonprofit and for-profit mission-driven lenders, CDFIs provide responsive, affordable credit and technical assistance in places where traditional banks won’t go and offer a financial bulwark to the most impacted and least resourced. CDFIs provide businesses, hospitals, nonprofits, and healthcare facilities with access to essential credit during tough times, too.

Our communities benefited from CDFI assistance during natural and national disasters.

During the Great Recession and successive years of wildfires, CDFIs kept capital flowing to businesses and communities. During the pandemic, CDFIs provided a range of services, including Paycheck Protection Program (PPP) loans, deferred loan payments, business counseling in multiple languages, and assistance to government officials. CDFIs continue to ensure that businesses and communities emerge from the pandemic with tools and resources to accelerate recovery.

As a first-of-its-kind CDFI grant program, the California Investment and Innovation Program will provide grants to community-based lenders to continue providing a wide range of services to communities where it’s needed most. In real-world terms, this means CDFIs will leverage public and private investments to deliver affordable housing, strengthen climate resilience, support small business growth, provide access to safe and affordable drinking water, construct healthcare facilities, expand access to healthy foods and more.

The first round of grants is expected to be distributed no later than February 1, 2024. To apply for funding, CDFIs must be federally certified by the U.S. Treasury with a net worth of at least $25,000 and have made at least five loans in the year prior to application. Applicant CDFIs must also either have a principal office in California, a portfolio comprised of at least 25 percent loans to projects or persons in California, or have provided at least $10 million in financing assistance within the state during the past three years.

The fund is flexible and allows grants to be used to increase net assets for leverage, provide lending capital for commercial and consumer product types, consumer banking services and operations including technology, technical assistance, training or other activities that benefit low-income neighborhoods, undercapitalized business owners, and other socially and economically disadvantaged individuals.

California’s low-income urban, rural and Native communities have long struggled with conditions of economic instability, exclusion, and a dearth of credit and investment opportunities. Since the outbreak of COVID-19, disparities in key social, economic, and health indicators have only increased in scale and scope. There is a long-overdue need for a recovery in California that is both equitable and sustainable and enhances communities’ resilience to survive and even thrive during difficult times. Financial systems can help drive such change, provided they pay attention to and engage deeply with low-income communities.

Thanks to the creation of this important new program, California’s over 100 CDFIs will be better positioned to meet the crisis and be a crucial bridge between the public sector, the private sector and community-led initiatives in underserved regions across the state.

Rachel Smith is the advocacy and membership coordinator for the California Coalition for Community Investment and is the policy and advocacy specialist at Rural Community Assistance Corporation, a CDFI based in West Sacramento, California. To learn more about how to get involved, please email her at