Advancing Community Development in 2025

2025 is here, and like many of you, I find myself reflecting on where we are and where we’re headed in community development finance. Over the past decade, I’ve had the privilege of working in this field, focusing on community facilities and federal programs such as New Markets Tax Credits (NMTC) and the Bond Guarantee Program (BGP) at LIIF. These experiences have shaped my understanding of the challenges and opportunities we face as a sector. Innovation and impact are terms we use often, but what do they truly mean in practice? As I’ve wrestled with this question, here are a few thoughts and ideas that I hope will spark discussion and action.

1. The GGRF + NMTC: The Greenhouse Gas Reduction Fund (GGRF) and New Markets Tax Credits (NMTC) are both powerful tools. How can we effectively layer them and also think more critically about how to make these programs work together effectively. By leveraging GGRF's low-interest rates as leverage loans within NMTC structures, we can enhance project economics and maximize impact. The key lies in crafting deals that meet both programs' criteria, focusing on green initiatives like community solar projects, energy-efficient affordable housing, and resilient community facilities that deliver tangible benefits such as job creation, reduced energy costs, and improved air quality.

However, what truly excites me is the prospect of embedding long-term community ownership into these combined GGRF and NMTC projects. CDFIs can explore innovative models like phased ownership transfers, where projects start with traditional structures but gradually transition to community control. This could involve Employee Stock Ownership Plans (ESOPs) for green businesses, Community Land Trusts (CLTs) for real estate developments, or cooperatives for community solar initiatives.

For instance, a community solar project could use GGRF funds as a low-interest leverage loan within an NMTC structure, reducing overall financing costs and allowing for more competitive energy pricing for low-income residents. By prioritizing community ownership, we not only ensure that the benefits of these investments remain local but also build capacity and resilience within these communities. This approach requires careful structuring to ensure investors receive their expected returns while maximizing community ownership. For example, we might use longer compliance periods or innovative exit strategies that prioritize community acquisition.

Additionally, incorporating social justice considerations into these projects is critical. While addressing environmental and economic goals, we must also ensure that these initiatives directly confront racial and gender inequities. This means designing programs and structures that intentionally address systemic barriers and promote inclusion at every stage.

2. CDFI Certification: Data and Community Engagement: The new certification guidelines are prompting essential conversations about data and community engagement. Collecting disaggregated demographic data is critical. While aggregated data shows broad trends, it often hides disparities. Disaggregated data allows us to see inequities by race, gender, geography, and income—providing a clearer picture of who we serve and where gaps persist.

Take this example: A CDFI operating in multiple counties might find its lending volume strong overall. But by breaking down data by zip code and race, it might uncover that predominantly minority neighborhoods have lower loan penetration rates. Research shows that bank branches have disproportionately disappeared from majority-Black neighborhoods. By analyzing barriers like transportation access or broadband connectivity, CDFIs can design better interventions to address inequities.

Implementing this level of analysis isn’t easy. Challenges include privacy concerns, increased reporting burdens, and the need for better data systems. But investments in technology and staff training can help. Ultimately, this work is about accountability: Are we truly meeting the needs of our communities?

Equally important is ensuring community voice in the process. While data can reveal inequities, direct engagement with community members ensures that solutions are designed with their needs and aspirations in mind. Empowering local leaders to participate actively in planning and implementation fosters trust and accountability.

3. Tech-Enabled Community Development Finance: Technology is transforming community development finance, and 2025 will only accelerate the trend. To integrate these tools thoughtfully and ethically, we need to ensure technology enhances equity and doesn’t replace the human relationships central to our work. Here are key opportunities and challenges:

Opportunities

• Streamlining Operations: AI-powered tools can make loan applications faster and more efficient. For instance, algorithms can assess credit risk using alternative data, expanding access for borrowers with limited credit history. Similarly, automated systems can handle payment processing and compliance, freeing staff for high-value activities.
• Community Engagement: Digital tools—like virtual town halls or mobile voting platforms—can democratize decision-making, allowing communities to weigh in on investments in real time.
• Impact Measurement: Technology can facilitate granular data collection, enabling us to analyze trends and measure program effectiveness more accurately. Blockchain could improve transparency, while predictive analytics could optimize lending strategies.
• Technical Assistance: Online training modules and AI chatbots can make technical assistance more accessible and personalized, helping borrowers navigate complex processes.

Challenges

• Algorithmic Bias: AI tools are only as unbiased as the data they’re trained on. Without careful testing, they could perpetuate inequities.
• The Digital Divide: Not all communities have reliable internet or digital literacy skills. Implementing tech solutions inclusively is critical.
• Data Privacy: As we collect more sensitive data, robust security measures and transparency are non-negotiable.
• Depersonalization: Technology must complement, not replace, the trust and relationships at the heart of community development finance.

The Path Forward

To harness technology’s potential, we must:

• Develop industry standards for data collection and sharing to promote collaboration and learning.
• Foster partnerships with fintech companies, researchers, and community organizations to co-create inclusive solutions.
• Prioritize training for CDFI staff in areas like data analytics, cybersecurity, and AI ethics.

Technology offers incredible opportunities, but it’s not a silver bullet. By integrating it thoughtfully, we can build a more efficient and equitable future for our sector.

Closing Thoughts

As we implement these ideas, we’re not just improving operations—we’re laying the groundwork for a more equitable financial system. By 2030, I envision a landscape where community ownership is the norm and technology has bridged, not widened, the financial inclusion gap.