Community Development Financial Institutions as a Means to Overcome Market Failures

Surekha Carpenter and Borys Grochulski

Richmond Fed Economic Brief, 2026, vol. 26, issue 14

Abstract: Neighborhood and information externalities can lead to market failures, leaving communities underinvested and underprovided with financial services. Community development financial institutions (CDFIs) can serve as a means of implementing government subsidies aimed at overcoming these market failures. To spur positive externalities, however, CDFI investments must clear a critical mass threshold, which they do not appear to have been able to achieve to date.

Keywords: Community; Development; Finance (search for similar items in EconPapers)
Date: 2026
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