Target Market
To become a Certified CDFI, an Applicant must demonstrate that it serves at least one eligible Target Market (either an Investment Area or a Targeted Population) through its Financial Products and/or Financial Services activity (see Question 43 of this FAQ) in its proposed Target
Markets. In addition, it must direct at least 60% of both the number and dollar volume of arm’s-length, on-balance sheet Financial Products to one or more eligible Target Market(s). To confirm activity to the Target Market, transaction level data will be submitted annually through the Transaction Level Report (TLR)8.
All Applicants must meet the applicable Target Market percentage benchmarks as stated above or as described in Question 48 of this FAQ for certain Investment Areas. If an Applicant falls below the required level for any of the applicable Target Market percentage benchmarks, it will not be eligible for CDFI Certification.
To meet the Target Market requirements, an Applicant may serve multiple eligible Target Market types. (For example, an Applicant may demonstrate compliance with the Target Market percentage benchmarks by serving both an Investment Area and one or more Targeted Populations). However, for the purposes of calculating the overall Target Market percentage of an Applicant’s activity, each Financial Product transaction or Financial Service item shall be counted towards only one Target Market component (even if the transaction or account qualifies
as having been directed to more than one Target Market component), via the ‘Designated Target Market Type’ data point within the TLR.
NOTE: The benchmarks must be met without any rounding of decimal points, i.e., 59.9% will not be rounded to 60% for Certification purposes.
8 For the purpose of the CDFI Certification Application, all references to the Transaction Level Report include the abbreviated TLR (for entities that are not CDFI Fund Financial Assistance [FA] award recipients with a TLR reporting requirement) and the full-length TLR (for entities that are recipients of CDFI Fund Financial Assistance [FA] awards with a TLR reporting requirement).
A Depository Institution that has directed less than 60% but at least 50% of either the dollar volume or the total number of its Financial Products to one or more eligible Target Market(s), also has the option of meeting the Target Market test by demonstrating that at least 60% of its total unique depository account9 holders are members of one or more eligible Target Market(s) AND that it delivers to one or more eligible Target Market(s) at least:
- 60% number of Financial Products and 50% dollar volume of Financial Products; or
- 50% number of Financial Products and 60% dollar volume of Financial Products.
9 Depository accounts are savings/share accounts, checking accounts, and money market accounts.
A unique depository account holder is an individual or other legal entity, other than a government entity, that can be identified through the use of a unique identifier - such as a Taxpayer Identification Number; a passport number and country of issuance; an alien identification card number; or a number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard – and that holds a depository account (e.g., share, checking, certificates of deposit, money market) at a depository institution.
Each unique depository account holder should be counted only once, regardless of the number of depository accounts held by the account holder, when measuring an Applicant’s or CDFI’s level of Target Market unique depository account holders.
A Depository Institution Applicant that chooses to meet the Target Market test using the Financial Services option must demonstrate that at least 60% of its total unique depository account holders are members of a Target Market, regardless of when the account holder opened their first depository account with the Applicant.
Once Certified, to maintain Certification, Certified CDFIs must demonstrate compliance with the Target Market percentage benchmarks each fiscal year. After initial certification (or recertification) through the current Application and a Certified CDFI’s first two ACR submissions, a Certified CDFI that fails to meet the Target Market benchmarks, based on its Financial Products and/or Financial Services activity, over its most recently completed fiscal year may maintain its Certification by demonstrating that it met the benchmarks over a three-year period through the last day of its most recently completed fiscal year – as measured by the data submitted in the CDFI’s three most recent TLRs, including as part of its Certification Application if necessary(a Certified CDFI that fails to meet the Target Market benchmarks for the previous fiscal year in its first ACR submission will have the option to be evaluated over a two-year period through the last day of its most recently completed fiscal year). Certified CDFIs that still fall below the Target Market benchmarks over three full fiscal years of financing activity in their TLR (or over two full fiscal years for those with less than two years of Certification under the current Application) will be decertified and no additional cure period will be granted.
The revised Application no longer requires Applicants to submit a map for a pre-qualified Investment Area consisting only of individual census tracts that the CDFI Fund has determined meet one or more of the statutory economic distress criteria, or for a pre-qualified Targeted Population (either Low-Income Targeted Population or Other Targeted Population).
However, Target Market maps must be created for each proposed customized Investment Area Target Market, Non-Metro counties/parishes, and for any newly requested Other Targeted Populations not currently on the CDFI Fund’s list of currently recognized Other Targeted Populations. Any customized Investment Area Target Market map, including Non-Metro counties/parishes, must be created BEFORE submitting the related transaction level data in the TLR ahead of the Certification Application Submission and/or ACR.
Applicants creating maps must utilize the most recent set of eligible census tracts deployed for use by the CDFI Fund. (Refer to the CIMS user guidance for further information on creating Target Market maps.)
CDFIs must dedicate 60% of their financing activities to eligible Target Markets. For Applicants wishing to use a customized Investment Area or a non-Metro county or parish Investment Area, activity in individually non-qualifying census tracts may be counted toward the 60% threshold if certain additional conditions are met.
An Applicant with a customized Investment Area Target Market must direct at least 85% of its customized Investment Area financing activity, in both number of and dollar volume of transactions (or unique account holders if relying on the Financial Services option), within the individually qualified census tracts of that customized Investment Area. If the 85% threshold is met, then the Applicant can count activity in the non-qualifying tracts of the customized Investment Area toward the 60% Target Market benchmark..
The requirement to direct at least 85% of customized Investment Area activity within the individually qualified census tracts of the Investment Area geography ensures an Applicant serving such a geography still directs at least 51% of its financing activity within qualifying census tracts, given that the Applicant’s financing activity outside of its Investment Area geography may be directed entirely to non-qualifying census tracts. For example, if the Applicant directs 60% of its Target Market activity within a customized Investment Area, and 85% of that activity within the individually qualified census tracts of the customized Investment Area, 85% x 60% = 51%. This means that up to 49% of the Applicant’s combined Target Market and non-Target Market investments may be directed to non-qualifying areas. The benchmarks must be met without any rounding of decimal points, i.e., 84.9% will not be rounded to 85% for Certification purposes.
While the overall Target Market threshold is still 60% when using a customized Investment Area, the 51% in the example above represents the minimum amount of an Applicant's total activity that would need to be within qualified tracts if an Applicant had a Target Market consisting only of customized Investment Areas and had no eligible activity outside of those Investment Areas, either in pre-qualified tracts or directed to a Targeted Population.
Non-Metro customized Investment Area, county, or parish: Prior to October 1, 2027, an Applicant that serves a non-Metro customized Investment Area,10 county, or parish must direct at least 75% of its Financial Product and/or Financial Services activity, in both number of and dollar volume of transactions (or unique account holders if relying on the Financial Services option), in such Investment Area within the individually qualified census tracts of the respective non-Metro geography in order for activity in the non-qualifying tracts of the Investment Area to count towards the 60% Target Market benchmark.
Beginning October 1, 2027, an Applicant that serves a non-Metro customized Investment Area, county, or parish Target Market must direct at least 85% of its Financial Product and/or Financial Services activity in such Investment Area(s) within the individually qualified census tracts of the respective non-Metro geography in order for activity in the non-qualifying tracts of the Investment Area(s) to count towards the 60% Target Market benchmark.
See Question 51 for additional discussion on options if an entity is unable to direct the minimum level of financing activity to individually qualified census tracts within a customized Investment Area or non-Metro county or parish Investment Area.
10 A non-Metro customized Investment Area must consist exclusively of non-Metro geographic units.
Prior to October 1, 2027, an Applicant that serves a Metro customized Investment Area and also serves a non-Metro customized Investment Area (or a non-Metro county or parish Investment Area) must:
- direct at least 85% of its Metro customized Investment Area financing activity within the individually qualified census tracts of any Metro customized Investment Area for activity in the non-qualifying tracts of the Metro customized Investment Area to count toward the 60% Target Market benchmark; and
- direct at least 75% of its non-Metro customized Investment Area, county, or parish Financial Product and/or Financial Services activity within the individually qualified census tracts of the respective non-Metro geography for activity in non-qualifying tracts of the non-Metro geography to count toward the 60% Target Market benchmark.
Beginning October 1, 2027, an Applicant that serves any customized Investment Area, regardless of Metro status, or any non-Metro county or parish Investment Area, must direct at least 85% of its customized Investment Area or non-Metro county or parish Investment Area Financial Products and/or Financial Services activity within the individually qualified census tracts of the respective geography for activity in the non-qualifying tracts of the geography to count toward the 60% Target Market benchmark.
See Question 48 for additional discussion about customized Investment Area Target Market benchmark requirements.
Yes, an Applicant may be certified to serve both a pre-qualified Investment Area and a customized Investment Area and/or a non-Metro county-wide or parish-wide Investment Area. In such cases an Applicant must submit a map of any Customized Investment Areas and/or non-Metro county-wide or parish-wide Investment Areas in CIMS and meet the accountability requirements for each Investment Area type. For the purposes of measuring Target Market activity, the Applicant may count all eligible activity within the Customized Investment Area and/or non-Metro county-wide or parish-wide Investment Area, as well as all financing activity that falls within qualified census tracts anywhere within the United States.
If a CDFI fails to deliver at least 85% of its financing activity within the individually qualified census tracts of a Metro customized Investment Area or, prior to October 1, 2027, at least 75% (and at least 85% beginning October 1, 2027) within the individually qualified census tracts of a non-Metro customized Investment Area or county-wide or parish-wide Investment Area, it will still be able to treat the activity within the individually qualified census tracts of the respective geography as Investment Area Target Market activity, but will not be able to recognize the activity within non-qualified tracts as such. In such situations, the CDFI may still retain CDFI Certification if that CDFI’s customized Investment Area and/or county or parish Investment Area activity – in combination with activity to any other of the CDFI’s Target Market components – meets the 60% Target Market threshold necessary for CDFI Certification.
If a CDFI has started a TLR and discovers that it does not meet the threshold requirements to count the non-qualifying census tract financing activity for any of its customized Investment Areas or non-Metro county or parish Investment Areas, it will need to go back into the uncertified TLR and retag any transactions in qualified tracts of that geography as “IA—Pre-qualified” instead of ”IA-Customized,” “IA-Non-Metro Customized,” or “IA-Non-Metro Counties/Parishes” for the “Designated Target Market Type” data field in order to still count that activity towards its Target Market benchmarks. In such cases, transactions in non-qualified tracts may still be recognized as Target Market activity if tagged as “LITP” or one of the various “OTP” types based on a determination using one of the pre-approved Target Market assessment methodologies. If a transaction cannot qualify for a Target Market component, then it should be tagged as “Non-Target Market.”
The process will be slightly different for the Consumer Loans TLR involving regulated entities. For the Consumer Loans TLR, the number and dollar amount of the transaction(s) needs to be removed from Investment Area data fields and added to the data fields for LITP or OTP if appropriate or not included for any Target Market component data field at all.
If an entity acquires another entity, the financing activity of the acquired entity may count toward the Target Market requirements of the acquiring entity only if that activity is included in the non-consolidated financial statements of the acquiring entity at the end of the acquiring entity’s fiscal year. Generally, such activity may not count toward the Target Market requirements of the acquiring entity if the acquired entity remains a separate legal entity, even if its financing activity is included in the consolidated financial statements of the acquiring entity. However, if the acquiring entity is a DIHC, an Affiliate of a DIHC, or a Subsidiary of an IDI, the financing activity of the acquired entity will be included as part of the collective review of the acquiring entity.
TM07 asks Applicants to attest “that only a CDFI Fund-approved Target Market assessment methodology(ies) was and will continue to be used to determine whether or not Financial Product transactions and/or depository accounts have been directed to an eligible Target Market,” while TM08 asks Applicants to identify the Target Market assessment methodology(ies) used by the Applicant. The list of approved Target Market assessment methodologies was announced on December 7, 2023, and can be found on the CDFI Fund’s website. Applicants that seek to use a Target Market assessment methodology other than one that appears on the list of approved methodologies may request separate approval of that methodology through Section Zero of the Application.
For a Non-Certified CDFI Applicant, the attestation in TM07 must signify that all of the Target Market activity reported in its TLR was assessed using one or more of the approved methodologies that it identifies in its response to TM08.
Currently Certified CDFIs that have been using a Target Market assessment methodology other than one that appears on the list of pre-approved methodologies may use the grace period until their application submission deadlines either to request approval of that methodology or to adopt one or more of the pre-approved methodologies. For such a currently Certified CDFI, the attestation in TM07 must signify that the CDFI has begun using – and will continue to use – only one or more of the approved Target Market assessment methodologies that it identifies in its response to TM08 by the time it submits its application for CDFI Certification under the revised standards.
Yes, a wholesale lender that purchases loan participations (i.e. a portion of a loan originated by a retail lender) from other Certified CDFIs may be designated as serving an OTP-Certified CDFIs Target Market. In addition, wholesale lenders that engage in such participation lending by providing the loan capital to a third-party entity that delivers the loans to and maintains the relationship with the end-borrowers has the option of selecting a Target Market based on that of the end-borrowers that it serves through its participation loans, as well as selecting an OTP-Certified CDFIs Target Market. Regardless of which Target Market(s) a wholesale lender selects, it also must be able to demonstrate accountability to each Target Market component it selects to receive approval of that Target Market for Certification purposes. The wholesale lender also must be able to demonstrate that at least one of its Development Services is directed to members of at least one of its Target Market components in conjunction with its Financial Products.
Yes, it does matter. Part of the TLR’s Target Market Calculator’s logic is based on the names given to a Target Market in AMIS and CIMS. For AMIS, the relevant data field is the “Market Name” data field on the “CDFI Certification Market” object. For CIMS, the relevant data field is the “Map Name” data field for each Target Market map created. In order for the Target Market Calculator to work correctly when analyzing Target Market activity in any type of customized Investment Area, the name of each customized Investment Area map created in CIMS must match the name of the “Market Name” data field entered into the CDFI Certification Market. If the names do not match exactly and an Applicant has more than one type of customized Investment Area or multiples of the same type, then the Target Market Calculator may not correctly calculate Target Market activity—which affects whether a CDFI Certification Application can be submitted.
For example, if an Applicant enters “NonMetro CIA Fulton County” for the “Map Name” field in CIMS when they create their non-metro county-wide customized Investment Area, then they must enter “NonMetro CIA Fulton County” for the “Market Name” data field on the “CDFI Certification Market” object and select “IA – Non-Metro counties/parishes” for “Market Type” data field.