We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Economy

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Community Development Bank?

John Lister
By
Updated: May 16, 2024
Views: 6,021
Share

A community development bank is a type of bank that operates as a business, but also has the goal of promoting economic development in less wealthy areas. Internationally such banks often offer microfinance services aimed at helping people start businesses. Within the US, a community development bank is one that is certified by a specific Treasury-backed scheme.

The main aim of a community development bank is to provide services in areas where banking is otherwise limited. This is usually because such areas are home to people on lower incomes who are not seen as attractive to major banks. This tends to be a comparative rather than absolute measure of wealth. For example, areas in major developed nations that are served by community development banks may be considerably better off than areas in poorer nations, but residents may be comparatively poor and un-served by banks.

The profitability of a community development bank can vary widely. In some cases the bank remains a commercial operation aiming to make a profit. In other cases the aim is to make little profit or simply break even, making financial services more affordable. For example, in some set-ups the bank can get away with offering cheap loans by paying low rates or even no rates to savers. This is because such savers often couldn't even get an account elsewhere, or are prepared to accept low interest in order to be able to access the borrowing facilities when needed.

Within the United States, a community development bank is formally classed as a community development financial institution. As such it must be certified by the Community Development Financial Institutions Fund, which is part of the US Treasury. The fund provides both financial assistance and information and advice to the banks.

Internationally, the concept of a community development bank often exists under different names and set-ups. For example, in developing nations such services are often known as microfinance establishments as they offer very small business loans that wouldn't be seen as worthwhile for a major bank. In developed nations, there is a variant known as a credit union which offers savings accounts and affordable loans to people on lower incomes. Technically a credit union isn't a bank as it is legally owned by the people who use the services. The legal regulation of community development banks and similar institutions can vary widely from country to country.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
John Lister
By John Lister
John Lister, an experienced freelance writer, excels in crafting compelling copy, web content, articles, and more. With a relevant degree, John brings a keen eye for detail, a strong understanding of content strategy, and an ability to adapt to different writing styles and formats to ensure that his work meets the highest standards.
Discussion Comments
John Lister
John Lister
John Lister, an experienced freelance writer, excels in crafting compelling copy, web content, articles, and more. With...
Learn more
Share
https://www.smartcapitalmind.com/what-is-a-community-development-bank.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.