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38. For the CDFI Certification Financing Entity test, how does the CDFI Fund define “predominance” when measuring whether an Applicant’s predominant business activity is the provision, in arms-length transactions, of Financial Products and/or Financial Se

FAQ Question

38. For the CDFI Certification Financing Entity test, how does the CDFI Fund define “predominance” when measuring whether an Applicant’s predominant business activity is the provision, in arms-length transactions, of Financial Products and/or Financial Services?

FAQ Answer

The CDFI Fund’s regulations state that a “CDFI shall be an entity whose predominant business activity is the provision, in arms-length transactions, of Financial Products and/or Financial Services.”⁷ To be predominant, the provision of Financial Products and/or Financial Services does not have to be the majority of the Applicant’s overall activity, but must be the activity that reflects the greatest use of the Applicant’s assets and staff time when compared to any other separate and distinct type of activity in which the Applicant engages. No other single activity type should claim more of an Applicant’s assets and staff time.

⁷ 12 CFR § 1805.201(b)(2)