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Banks have made more than $1 trillion in community development lending from 1996 to 2017, benefiting low- and moderate-income communities, as a result of Community Reinvestment Act (CRA) requirements. While this level of financing is impressive, we do not know enough about where it is going in order to determine whether it is targeted effectively to the most underserved and distressed communities. In other words, we need better data. In a recent speech at the 2019 Just Economy Conference, Federal Reserve Governor Lael Brainard suggested that data on community development financing is crucial to assess whether banks are properly responding to neighborhood needs with their CRA financing.
As a senior vice president at Silicon Valley Community Foundation (SVCF), one of Bert Feuss' primary jobs is to decide where to invest the money that comes from donors. But when he went looking for a bank to deposit with, he specifically wanted one that would sign on to the Anti-Displacement Code of Conduct. This pledge would ensure that the financial institution would avoid making loans to developers who rely on the eviction of existing residents. While other banks hesitated, The Community Bank of the Bay was more than happy to agree. CDBA members Amalgamated Bank and Beneficial State Bank are also mentioned in this article.
This week's CDBA Storybank video highlights The Bank of Cherokee County in Tahlequah, Oklahoma, one of the first Native Community Development Financial Institutions in the country. Its featured clients are small business owners who have developed the Bright Start child care center and the Go Ye Village retirement home, both of which serve the community of Tahlequah. The Bank of Cherokee County "is not just a bank," says Go Ye Village's Steve Thomas. "They're more of a partner in the process."
Historically Black-owned banks have been a foundational pillar for the community by providing African Americans access to financial services and capital for businesses. Now, with movements such as #BankBlack, social media has brought awareness to the importance of banking Black and using our money to back these institutions. For those interested in making the shift over, Rolling Out recommends five high-performing black banks, including CDBA's Industrial Bank, OneUnited Bank, and The Harbor Bank of Maryland.
This week, The Clearinghouse CDFI announced a $195,000 investment in Native American Bank, the only Native American-owned, nationwide financial institution. With this investment, Clearinghouse CDFI becomes Native American Bank's first CDFI investor out of thirty-four different shareholders. "We are pleased to make this investment," said Clearinghouse CDFI President and CEO Douglas Bystry. "We are excited to partner with them in providing affordable and flexible financial services to Native American and Alaskan Native individuals, enterprises, and governments."
The number of community banks in our nation is at the lowest point in recent history. From a high of 18,033 in 1985, we've come to just 5,477 as of the third quarter of 2018. Additionally, many community banks have sold to larger institutions as heavy consolidation takes over the banking sector. Local banks are especially important because they support the nation's small businesses, which employ the majority of Americans. In fact, according to the Small Business Administration, small businesses make up 49.2 percent of private-sector employment.
The Omidyar Network, a venture capital fund started by Pierre Omidyar, the founder of eBay, recently spun off the portion of its portfolio devoted to financial-inclusion businesses. This new venture firm, called Flourish, will focus solely on backing fintech entrepreneurs whose innovations are helping people take advantage of economic opportunity and achieve financial health. Tilman Ehrbeck, managing partner of the new venture capital firm, shared the logic behind the spinoff and how he finds fintech startups that have a social mission, yet are also moneymakers. Read the full interview with Ehrbeck.
Rural America has a robust cultural history that has enriched the nation and its people. However, rural areas are also beset with social and economic challenges. Population migration and persistent poverty are contributing to a widening urban-rural divide in many states. But by utilizing the creative sector, specifically arts and culture, governors have a viable approach for changing the status quo. This new Rural Action Guide shares in depth research, processes, and lessons for just how to lead strategies for success.
Governor Lael Brainard of the Federal Reserve Board recently detailed possible steps forward on reforming the Community Reinvestment Act. These possible provisions include an updated approach to CRA assessment boundaries, revising how banks are tested for community development activities, and tailoring certain CRA requirements based on bank size. The aim is to recognize activities beyond a bank's branch network, the traditional CRA assessment boundary, while still prioritizing activities within that network. "By creating separate assessment areas for retail and community development activities, we believe that banks would continue to place their community at the center of their retail lending and service activities while participating in meaningful community development opportunities," said Brainard in a speech to the National Community Reinvestment Coalition.
The StoryBank Project is a CDBA initiative to capture success stories of various impactful loans from our member banks through the eyes of their customers. These important stories show how underserved communities benefit directly from mission-based banking and financial services. This month's video highlights M&F Bank in Durham, North Carolina -- the second-oldest minority-owned bank in the United States. Its featured client, UDI Community Development Corporation, is a nonprofit that reinvests in low-wealth communities.