Partnering for Progress: How CDFIs and Banks Strengthen Wisconsin Communities

By Elizabeth Fenton, WBA Communication Coordinator 

Wisconsin banks help families buy homes, small businesses open their doors, and communities prosper. Traditional financing, however, is not within reach for some borrowers — which is where Community Development Financial Institutions (CDFIs) save the day. These lenders often work side by side with banks to fill gaps in access and expand capital to neighborhoods that are under-resourced.

CDFIs have entered the national spotlight in recent months amid reports of significant staffing reduction within the U.S. Treasury’s CDFI Fund — the very program that supports these critical community lenders. This conversation is a palpable threat for bankers and CDFI leaders in Wisconsin. Cuts in technical assistance or delays in federal awards could ripple through local economies where every penny of flexible financing counts. As a result, CDFIs are turning to new partnerships and funding models in order to keep economic opportunity within reach for all Wisconsinites.

CDFIs in Wisconsin
CDFIs take many forms — banks, credit unions, loan funds, venture capital funds — but they share a common objective: expanding economic access. In order to be certified by the U.S. Treasury’s CDFI Fund, an organization must serve a target market, demonstrate that community development is its primary purpose, and pair financing with technical assistance. The Fund supports its members through competitive grants, capacity-building programs, and the CDFI Bond Guarantee Program. Wisconsin is home to 20 certified CDFIs that support affordable housing, small business startups, community buildings, and financial literacy initiatives. These programs serve as indispensable partners in bolstering self-sustaining local economies — especially in under-resourced neighborhoods and rural communities. CDFIs across Wisconsin have funneled billions of dollars into the state through loans, grants, and federal awards. Forward Community Investment in Madison has deployed more than $287 million toward projects like community health centers and affordable housing. The Wisconsin Native Loan Fund based in Lac du Flambeau helps families build stability and generational wealth through housing and small-business loans within tribal communities. Impact Seven, headquartered in Rice Lake, offers flexible financing for housing and community facilities across Wisconsin.

WBA sat down with Kathryn Dunn, president and chief visionary officer of the Wisconsin Women’s Business Initiative Corporation (WWBIC) — a statewide economic development organization and a WBA associate member. The organization was founded in 1987 and has provided more than $140 million in small business loans. This capital has helped thousands of entrepreneurs — many of them women, veterans, and people of color — start their businesses.

“WWBIC is a statewide economic development organization that provides small-business training and access to capital for start-up and early-stage businesses,” Dunn explained. “We partner with a number of banks across the state. The key to our successful partnerships is valuing what each partner brings to the work.” This very spirit of collaboration is pervasive across Wisconsin CDFIs. These investments help individuals build credit, increase available jobs, and set the stage for long-term community stability.

Why Banks Partner With CDFIs
For community banks, CDFIs can be trusted allies in reaching a customer base who might otherwise be overlooked. CDFIs specialize in serving under-resourced borrowers and often take on smaller or high-risk loans that traditional banks cannot carry alone. Partnerships between community banks and CDFIs can take different forms:

• Referrals and co-lending: Banks can refer clients who aren’t yet ready for conventional financing or share risk through loan participations.
• Investments and deposits: Banks may strengthen a CDFI’s lending capacity by providing capital through deposits, equity-equivalent investments, or targeted grants.
• CRA credit: Many CDFI-related activities qualify for Community Reinvestment Act (CRA) consideration, helping banks meet regulatory goals while directly supporting community development.

WWBIC leans into this partnership model with a quippy mantra: “Don’t Say No, Say WWBIC.” The program urges banks to refer clients to WWBIC instead of turning them down completely.

“Banks are our greatest referral source and we truly value that partnership,” Dunn noted. “We also invite our bank partners to serve as speakers at our classes, particularly around financial literacy, business planning, and understanding financials.”

Beyond financing, CDFIs provide coaching and technical assistance that help borrowers build credit and experience. Many CDFI customers eventually graduate to traditional bank financing — a trajectory that mutually benefits the borrower and the bank. “Our goal is to help businesses get to a point where they can access traditional bank financing and services,” Dunn said. CDFIs and banks mutually complement each other: Banks gain future customers while CDFIs fulfill their mission of expanding access to opportunity.

Challenges Ahead
CDFIs face ongoing challenges: limited access to capital, reliance on federal funding, and the logistical complexity of serving rural and low-income markets. Many CDFIs often operate with lean staffing and must juggle compliance.

The possibility of dwindling federal support has only intensified these pressures. Earlier this year, national reports suggested that staff reductions within the U.S. Treasury Department could weaken the CDFI Fund’s ability to administer grants and technical help.

CDFIs in Wisconsin continue to evolve in the wake of uncertainty. Many are exploring new partnerships with banks and philanthropic investors to diversify their funding sources. Banks, in turn, are discovering that strong CDFI relationships allow them to participate in the development of their own communities without shouldering all of the risk.

These important collaborations finance daycare centers, grocery co-ops, first-time entrepreneurs, and affordable housing initiatives — investments that make neighborhoods livable and local economies self-sustaining.

What Lies Ahead
Partnerships between banks and CDFIs benefit both the community and the banking industry. More families and small businesses gain access to capital, in turn making the local economies and banks that serve them stronger.

The CRA already encourages banks to invest in low- and moderate-income communities, but working with a CDFI often magnifies the output. A loan participation with a CDFI can transform a high-risk undertaking into a manageable one by combining the CDFI’s local connections with the bank’s balance sheet.

CDFIs also introduce valuable community outreach opportunities to banks. Many invite bankers to teach courses or serve on advisory boards. WWBIC and other organizations frequently invite bankers as guest speakers for classes on business planning and financial literacy, which gives bank employees a chance to strengthen community trust.

The health of the CDFI ecosystem depends on both federal support and on the strength of its partnerships, especially with local banks. The mutual respect between banks and CDFIs, as Dunn describes, lies in “valuing what each partner brings to this work.” At a moment when national headlines raise questions about the future of federal support, Wisconsin’s banking community offers a reassuring counterexample: collaboration between organizations drives success.