The coronavirus economic crisis demonstrated the failure of large banks to reach small and minority-owned businesses, Cathie Mahon, president/CEO of Inclusiv told the Community Development Financial Advisory Board Thursday.
Community Development Financial Institutions stepped up to fill that void as much as they could, Mahon, whose trade group represents community development credit unions, told the board. She added, however, that Minority Depository Institutions and CDFIs were hampered in that effort because they need the capital, technical support, and platforms to keep up with the evolving financial services world.
Mahon said that CDFI credit unions originated one to five times their annual volume of business loans in less than two months. She added that in some cases they deployed up to 20% of their total assets in a four-month period.
“Despite the many challenges small lenders encountered first accessing and then using the Paycheck Protection Program, CDCUs originated over $1.048 billion in PPP loans to 20,000 small businesses with an average loan of under $60,000,” she said, in a report to the board.
At the same time the nation faces the pandemic, it is facing a racial crisis, she said, adding that CDFIs can play a vital role in addressing racial imbalances.
“The CDFI Fund is the federal program best positioned to address the racial wealth divide, which can be achieved through encouraging greater participation among MDIs as well as placing greater value on financial inclusion and empowerment activities,” she told the board.
“By designing programs that specifically address the needs of communities of color, incorporating new technologies, and reducing the burden of participation for small and MDI credit unions, the CDFI Fund will make great progress in closing the racial wealth gap and ensuring the resiliency of our communities,” she continued
But she added that only 10% of the MDI-Black credit unions and less than 20% of MDI-Hispanic credit unions are certified as CDFIs.
Mahon said that while there are 300 CDFI credit unions, 103 credit unions have let their certifications lapse. She said that the resources necessary to meet certification and to maintain it discourages small and MDI credit unions from applying.
She said that federal officials must consider the cost of data collection for small financial institutions as they design certification requirements.