The Federal Reserve will conduct a national survey of Community Development Financial Institutions (CDFIs) from March 22-April 23. CDFIs are specialized financial institutions operating in markets that are underserved by traditional financial institutions, and they have been at the forefront of the economic response to the COVID-19 pandemic. Participating CDFIs will be asked questions about their capitalization, capacity and the impact of COVID-19 on their organizations, clients and communities. The Federal Reserve Board of Governors, Federal Reserve Banks and the CDFI Fund intend to use the survey data to inform research and policymaking. The survey data will also provide important benchmark information on how CDFIs are faring in the COVID-19 crisis and how they are serving low-income and minority populations. Finally, responses will be used to update a national CDFI directory for business, government, community leaders, investors and policymakers.
The data analysis firm 60 Decibels released last month the results of a survey conducted with the Paycheck Protection Program (PPP) borrowers of six Community Development Financial Institutions (CDFIs), including CDBA members Southern Bancorp and Optus Bank. 60 Decibels interviewed 1,073 PPP borrowers for this survey, one third of whom originally sought assistance from a non-CDFI lender. Of the borrowers who initially sought assistance from another lender, 84% indicated that their experience with a CDFI bank was better than their experience with the other lender.
Can community development financial institutions be anti-racist? As financial institutions, CDFIs inherit the very tools of capitalism that have wreaked havoc on communities of color for decades in repeated cycles of cynical wealth extraction. Can any organization overcome that history? CDFIs believe that they can use the tools of capitalism for good. But without deep analysis and interrogation, each tool should remain suspect.
Banks have been permanently shuttering branches for years, but the number of closures hit a record in 2020 as the pandemic accelerated the move by many customers to online banking. Banks closed 3,324 branches last year, according to a tally by S&P Global Market Intelligence. "In the last 60 days, I've had two mayors reach out to me saying, 'Would you bring a bank branch here?' " says Darrin Williams, CEO of Southern Bancorp, which specializes in underserved communities. "In a lot of the rural communities we serve, the bank branch is part of the social fabric," Williams said. "If you go to Truman, Ark., on a payday Friday, there are going to be 10 people deep in the line. People want to come to that bank branch because it's social."
Several banks have announced initiatives totaling billions of dollars that are aimed at addressing racial inequalities, but observers say the programs need to be carefully tailored. City First Bank, a lender in Washington, closely cultivates relationships with its borrowers, finding ways to direct capital to promising but fledgling businesses. The bank is seeing an uptick in interest from larger financial institutions, said its chief lending officer, Sonja Wells, “but it’s all still at a smaller scale than it could be.”