CDFIs Can Do More With a Few Changes to the Program
Thanks to Addison Peterson, CAMEO’s Policy Specialist
Two CAMEO members, Luz Lopez Urrutia, the CEO of the Accion Opportunity Fund, and Everett K. Sands, the CEO of Lendistry testified on Wednesday February 16, 2022 at a virtual House Committee on Financial Services hearing titled “An Unprecedented Investment for Historic Results: How Federal Support for MDIs and CDFI’s Have Launched a New Era for Disadvantaged Communities.” The meeting, chaired by Congresswoman Maxine Waters (D-CA-43) of Los Angeles, was focused on how Congress and the U.S. The Treasury could improve the CDFI fund.
Witnesses testified on the impact that CDFIs have on communities of color:
- Some local CDFIs gave small businesses loans up to 80% more than the traditional banks in their communities;
- The average loan amount has been around $26,000;
- CDFI loans were given mostly to people of color;
- Most of the small business that these MDI’s work with have less than ten employees; and
- 4 million new businesses were started during the pandemic and the opportunity to get these new businesses start up capital is enormous.
The CEOs provided their insights on how Congress and the U.S. Treasury can improve the CDFI fund:
- Increase the speed of CDFI funds being given to the community. Approve more CDFI institutions in communities of color because there are benefits to geographic diversity; and there would be less space for predatory lenders.
- Lower CDFI fund bond guarantee from $100 million to $25 million. This would increase the number of small community based banks that are eligible to apply to be a CDFI lending institution.
- Develop an accountability reporting system for Treasury capital development programs to ensure that funds are going to the right groups of people, i.e. women and people of color.
- Create a federal office dedicated to supporting the efforts of MDI’s. MDI’s are closing at a rapid pace due to the lack of business support and the federal government can help by offering products such as CDFI funds.
- Provide more capital to MDI’s and grant funds to improve technology to make lending fast and efficient, reducing costs to the financial institution and the customer.
For more information on what the CEO’s of each of the institutions that testified would like to see happen with CDFIs and their impacts on their communities please visit the committee hearing page on the U.S. House of Representatives Committee on Financial Services website. On the committee hearing webpage you can view the written statements each witness submitted.
Minority Deposit Institutions (MDIs) are banking institutions that focus on banking and lending to women and people of color. Community Development Financial Institutions (CDFIs) share a common goal of expanding economic opportunities by providing access to financial products and services for local residents and businesses. CDFI’ are provide capital to minority owned businesses that don’t have relationships with traditional banking institutions.