Despite their impressive support for struggling small businesses throughout the COVID-19 crisis, community development financial institutions (CDFIs) still face several capacity limitations, including the adoption of effective and appropriate technology tools. This brief explores the ways CDFIs can best leverage technology to scale their operations and increase their capacity to better serve small businesses. Drawing from our interviews with various stakeholders—including technology providers, philanthropic representatives, and CDFIs lending to small businesses—we also offer key lessons learned on investing in technology systems:

• To more effectively improve CDFIs’ capacity, technology systems should seamlessly connect systems and processes across the entire loan lifecycle.
• In most cases, investing in technology will allow CDFIs to process and approve more loans in less time and with less effort, increasing not only their social impact but also their fee revenue.
• Upfront investments in CDFI technology will likely require philanthropic support, but those opportunities are rare.
• CDFIs will see different returns on investment depending on their scale, so not every CDFI should pursue million-dollar investments in technology.
• CDFIs and funders should also consider the often overlooked human capital requirements of adopting and maintaining new systems.