To boost lending in low-income areas, the Biden administration will provide a $9 billion infusion to underserved financial institutions.
The Treasury Department announced it would open applications for the Emergency Capital Investment Program, which will provide funding for Community Development Financial Institutions and Minority Depository Institutions, the New York Times reported.
The program will invest in local lenders that support struggling communities with low-interest loans.
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Previous federal bailouts placed those institutions in the same category as other, better-connected lending institutions. That left the smaller institutions, many of which have stronger ties to minority-owned businesses, to compete for the limited funds.
Funding for the new effort will be drawn from the $900 billion stimulus passed in December.
The pandemic’s effect was devastating for Black-owned businesses, which in the first part of 2020 experienced the highest rate of closures, the Federal Reserve Bank of New York found.
Treasury Secretary Janet Yellen has long been a staunch advocate of CDFIs, which serve individuals and areas that are often overlooked by traditional lenders.
“America has always had financial services deserts, places where it’s very difficult for people to get their hands on capital so they can, for example, start a business,” Yellen said in a statement. “But the pandemic has made these deserts even more inhospitable.”
[NYT] — Georgia Kromrei