Reaching the People and Places Markets Left Behind: The Role of Community Development Financial Institutions in American Public Policy

In the United States, private credit supports both welfare provision and economic growth, so the people and places that credit markets have left behind are excluded from both at once. Political economy has yet to develop an integrated account of this, as analyses of welfare and growth models treat the two spheres separately and assume that credit reaches all communities. This Perspective argues that community development financial institutions (CDFIs) answer that double exclusion with a double remedy, financing projects that serve welfare and development within a single transaction. CDFIs also reverse the familiar sequence of state policy design and private delivery, having developed several of the financial practices that federal policymakers later adopted. Yet the politics of CDFIs, though repeatedly contested, remains under-conceptualized. We close by asking who decides where that double remedy reaches, and whether the communities affected have sufficient influence over those decisions.