CDFI Targeted Population Criteria for Certification

A Targeted Population, under the CDFI certification rules, is a group of borrowers a Community Development Financial Institution serves either because they are low-income or because they belong to a demographic group that federal rules recognize as lacking adequate access to loans and equity investments.¹ To claim one as its Target Market, a CDFI has to identify the group precisely, verify each borrower’s status through a method the CDFI Fund has pre-approved, direct at least 60% of its lending to that group by both number and dollar volume, and keep board members accountable to it. Meeting the CDFI Targeted Population criteria is what separates a certified institution that can draw on federal capital programs from one that cannot.

What Counts as a Targeted Population

A CDFI’s Target Market can be defined two ways. An Investment Area is geographic: specific census tracts, counties, or tribal lands that meet federal benchmarks for poverty, unemployment, or low median family income.² A Targeted Population is defined by who the borrower is rather than where they live. A borrower can qualify based on their own income or demographic status even if they live in a neighborhood that would not meet the Investment Area distress thresholds.

A CDFI can claim both an Investment Area and a Targeted Population for flexibility, but each claim must independently satisfy the 60% activity threshold.³

Targeted Populations split into two branches. The Low-Income Targeted Population (LITP) is defined by borrower income. Other Targeted Populations (OTPs) are the demographic categories the CDFI Fund recognizes:

African American
Hispanic
Native American
Native Alaskan
Native Hawaiian
Other Pacific Islander
Filipino
Vietnamese
Persons with Disabilities
Certified CDFIs (for institutions that lend primarily to other CDFIs)⁴

For the disability category, the CDFI Fund uses the Americans with Disabilities Act definition: a person with a physical or mental impairment that substantially limits one or more major life activities, a person with a history of such an impairment, or a person perceived by others as having one.⁵

Low-Income Thresholds

Under 12 C.F.R. Part 1805.104, “low-income” means a person whose family income, adjusted for family size, does not exceed 80% of the area median family income. In metropolitan areas that is 80% of the metropolitan median. In non-metropolitan areas it is the greater of 80% of the local area median or 80% of the statewide non-metropolitan median.⁶ The family-size adjustment is significant. A single borrower earning $45,000 and a family of five earning the same amount are measured against different thresholds.

Low-income status can be established several ways. The most direct is documented proof of full family income together with the borrower’s primary residence, so the correct area median can be applied. The CDFI Fund also accepts programmatic proxies: a borrower who participates in SNAP, Medicaid, HUD public housing, or receives Pell Grants qualifies as low-income on that basis alone, without separate income documentation.⁴ Other approved methods include the borrower’s self-reported income and documented underwriting income used with a default family size of three.

Verifying Other Targeted Population Status

Verification methodology is not a choice the CDFI gets to make freely. Each OTP category has a specific set of pre-approved methods, and using an unapproved approach can cause transactions to be excluded from Target Market calculations.⁴

For African American and Hispanic borrowers, self-reporting is the primary method. On residential mortgage loans taken in person, if a borrower does not self-report, a lender may use visual observation or surname analysis, but only if the lender already uses that approach for Home Mortgage Disclosure Act reporting.

For Native American and Native Alaskan borrowers, self-reporting comes first, with tribal identification cards or Certificates of Degree of Indian Blood as verification alternatives. Native Hawaiian status can be confirmed through a Hawaiian Registry Card. For Filipino, Vietnamese, and Other Pacific Islander populations, self-reporting is the only approved method.

For Persons with Disabilities, verification options are broader: self-reporting, visual or auditory assessment in person or by video or phone, review of documentation, or confirmation that the sole purpose of the loan is purchasing assistive technology or accessibility modifications.⁴

Board Accountability to the Population Claimed

Claiming a Targeted Population is not just a lending question. Federal law requires a CDFI to maintain accountability to its Targeted Population, generally through representation on its governing or advisory boards.¹ The minimums depend on how the organization is governed:

Governing board only: at least 33% of members must be accountable to the proposed Target Market.
Governing board plus advisory board: at least 20% of the governing board and at least 60% of the advisory board.
Advisory board plus credit union membership: at least 60% of the advisory board.
Advisory board only: at least 80% of the advisory board.

Regardless of structure, at least one board member from each board type must be accountable to each specific Target Market the CDFI claims.⁷ A CDFI claiming both a Low-Income Targeted Population and a Native American Other Targeted Population needs at least one governing board member accountable to each. First-time applicants often clear the lending numbers only to fall short on board composition.

The 60% Activity Threshold

At least 60% of both the number and the dollar volume of a CDFI’s eligible financial product transactions closed during a full 12-month fiscal year must go to its designated Target Market.³ Both measures have to clear 60% independently. Meeting the threshold on dollar volume but not on transaction count, or the reverse, is a failure. The CDFI Fund does not round; 59.9% does not qualify.⁸

CDFIs that operate with affiliates carry an added condition: at least 60% of the combined financing activity of the applicant and its affiliates must be directed to their collective Target Market.⁸

What Happens if a CDFI Falls Below 60%

One bad year does not automatically end certification. After a CDFI’s initial certification and its first two Annual Certification Report submissions, missing the 60% benchmark in a fiscal year can be cured by showing the threshold was met over a rolling three-year period ending on the last day of the most recently completed fiscal year.⁸ For newly certified organizations that miss the benchmark on their first ACR, the evaluation window is two years instead of three.

A CDFI that fails the Target Market benchmarks across three full fiscal years of financing activity is decertified with no additional cure period.⁸ Decertification can trigger termination of unused CDFI Fund awards, recapture of past award money, and loss of eligibility for programs that require certification as a prerequisite.⁹

The 2025 Anti-Discrimination Overlay

In 2025 the Treasury Department added a compliance requirement that sits alongside the Targeted Population framework. Certified CDFIs must adopt, implement, and maintain policies ensuring compliance with federal anti-discrimination laws, and may not provide employment or financial preferences based on race, ethnicity, or sex in ways that conflict with federal law. Organizations must certify annually that the policies exist and are being administered, and must make them available for CDFI Fund review on request.⁹

The tension for CDFIs serving Other Targeted Populations is real. A CDFI can still designate a demographic group as its Targeted Population and direct 60% or more of its lending to that group; that is what certification requires. What it cannot do is use set-asides or preferences in a manner Treasury considers inconsistent with federal anti-discrimination law. The CDFI Fund has said it will vigorously exercise its remedies for noncompliance, including decertification and recapture of past award funds.⁹

1
Office of the Law Revision Counsel. 12 USC Ch. 47 – Community Development Banking
2
eCFR. 12 CFR 1805.201 – Certification as a Community Development Financial Institution
3
CDFI Fund. Target Market Webinar Slides
4
CDFI Fund. Pre-Approved Target Market Assessment Methodologies
5
Community Development Financial Institutions Fund. FY 2025 Disability Funds-Financial Assistance Application Guidance
6
Community Development Financial Institutions Fund. Abbreviated Transaction Level Report Data Collection Guide
7
Community Development Financial Institutions Fund. CDFI Certification Accountability Webinar Slides
8
Community Development Financial Institutions Fund. CDFI Certification Application FAQs
9
U.S. Department of the Treasury. Treasury Moves to Prevent Abuse of Community Development Financial Institutions Fund Programs