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Community development financial institutions, which operate in low-income and underserved markets, have gained access to record levels of federal funding over the course of the pandemic.
The Treasury Department said this week that it has awarded $1.25 billion in coronavirus relief funds to 863 financial institutions that provide business loans and investments and other services in lower-income communities and underserved markets.
This funding is part of $3 billion that Congress allocated for "community development financial institutions," or CDFIs, under pandemic relief legislation that was approved in December. The $1.25 billion installment comes under what's known as the CDFI Rapid Response Program, which was designed to quickly get capital to the financial services providers so they could help to blunt the economic hit the pandemic dealt in disadvantaged areas.
CDFIs come in different forms, and can include banks, credit unions and loan and venture capital funds. They operate in both urban and rural areas that tend to lack widespread access to capital and traditional banking services.
Treasury is also overseeing a separate pandemic-era program that will provide up to $9 billion that CDFIs are eligible to tap into. The department opened this program in March, and since then extended the application deadline from May to July 6.
This week's funding release marks yet another infusion of federal money that can help with economic development and recovery efforts coming out of the pandemic and comes on top of billions of dollars in federal aid that is going to states and localities.
Treasury Secretary Janet Yellen in a statement emphasized that the CDFI funding, in particular, fits with equity priorities that the Biden administration has identified.
"In serving places that the financial sector historically hasn’t served well, CDFIs lift our whole economy up," Yellen said in a statement. “The president and the vice president ran on a very ambitious agenda ... unwinding systemic racism, creating an economy that works for everyone. I believe this is what that looks like in practice."
The CDFI Coalition, a group that advocates for the institutions, applauded the release of the funds and noted that, since the pandemic began early last year, Congress has pumped a record amount of funding towards CDFIs. Regular appropriations for the institutions—through an account known as the CDFI Fund—totaled $262 million in fiscal 2020 and $270 million in fiscal 2021. The Biden administration has requested $330 million for fiscal 2022.
Treasury noted that the recipients of the funding awarded this week include CDFIs based in 48 states and Washington, D.C., that operate in urban and rural areas. Of the 863 institutions, 463 are are loan funds, which will receive $571 million. CDFI credit unions will receive $401 million, banks $267 million and venture capital funds $9.4 million.
Bill Lucia is a senior editor for Route Fifty and is based in Olympia, Washington.