Yesterday Treasury Secretary Janet Yellen and Vice President Kamala Harris announced more than $8.7 billion in capital investments in community development financial institutions and minority-owned banking firms to boost lending in disadvantaged areas.
The Emergency Capital Investment Program (ECIP) is intended to increase lending to low- and moderate-income consumers in underserved communities, including rural areas. The program enables direct investments to banks, credit unions and holding companies designated as Community Development Financial Institutions (CFDI) or Minority Depository Institutions (MDI).
The announcement follows a recent Federal Reserve Small Business Credit Survey, which found that only 21% of Hispanic-owned firms and 13% of black-owned firms received all the non-emergency funding they sought last year, compared to 40% of white-owned firms.
“These CDFIs and MDIs serve communities that the financial sector historically hasn’t served well — and most of the time, those are communities of color. If you’re a Black or Hispanic or Asian or Native entrepreneur, we know it’s harder to get your hands on funding to open to shop, or to keep the lights on, or meet customer demand,” Yellen stated at the 2021 Freedman’s Bank Forum Tuesday.
CFDIs and MDIs are known to make smaller loans, and work with those that face barriers, require more time-intensive and need personalized technical support. $3.1 billion total ECIP investments are being offered to 57 MDIs.
ECIP is intended to multiply assistance to those that disproportionately suffer from the impacts of the COVID-19 pandemic, and is part of a suite of programs that address the economic impact of the pandemic. The CFDI Rapid Response Program previously announced by VP Harris and Treasury Secretary Yellen in June made $1.25 billion in grants available to CFDIs.
The institutions recommended for ECIP investment consist of approximately 54% banks and 46% credit unions, ranging in size from over $200 million to less than $100,000. States with the most ECIP investments include Mississippi, Louisiana, North Carolina, California and Texas.
A full list of institutions receiving ECIP awards can be found here.
Providing access for the underbanked and underserved
This announcement follows a recent roundtable held by the U.S. House Select Committee on Economic Disparity & Fairness in Growth, “America’s Unbanked and Underbanked“; it featured discussions with industry leaders about the ways Congress can assist financial institutions and private sector stakeholders to expand access to banking services for underserved communities.
During that meeting, Communities Limited CEO Ines Polonius urged Congress to provide flexible institution-level equity capital to community development firms that touch unbanked individuals and entrepreneurs.
In other recent fintech news, mobile bill payment app Papaya raised a $50 million Series B that is expected to accelerate product development and engineering hiring. RentPath also terminated its acquisition agreement with CoStar, following an FTC decision to block the proposed $588 million transaction.