Every year, millions of households with urgent financial needs rely on small-dollar, zero-interest loans from friends, family, or high-cost alternative lenders. 90% of low-to-moderate income people in the U.S. participate in peer-to-peer lending and U.S. households carry as much as $213 billion in peer-to-peer debt, with about half of these loans used for basic expenses such as rent, utilities, or medical bills. At the same time, payday lenders extract $9.1 billion annually.  

Community-based lending demonstrates that trust-based, socially underwritten credit can meet these needs without predatory pricing. However, this system places enormous financial risk on those making unsecured loans. Peer-to-peer and nonprofit lenders often operate without the financial protections available to traditional institutions, meaning a small number of defaults can jeopardize their ability to continue lending. 

Community Finance (CoFi) was created to address this constraint. CoFi’s core hypothesis is that risk-sharing can unlock additional capital for community-based lending. By providing guarantees that absorb a portion of potential losses, CoFi aims to give community lenders the confidence to expand affordable credit to borrowers who are excluded from mainstream financial systems. If successful, this approach could increase the supply of zero-interest credit, helping households meet financial needs while reducing reliance on predatory lenders.