A little government money sometimes goes a long way. And in the rush to evaluate and eliminate government programs, Congress sometimes goes too far.
The House Banking Committee’s Subcommittee on Financial Institutions and Consumer Credit is holding hearings on whether to reauthorize the Community Development Financial Institutions Fund, a program that leverages private investment to improve low- and moderate-income communities across the country.
Though little known, CDFI’s innovative programs are critical to the continued success of community development financial institutions that serve distressed communities nationwide. In Chicago the fund has had a major impact by encouraging private investment in some of our most effective neighborhood improvement organizations.
There are 17 certified CDFIs in Illinois. Four have won awards from the CDFI Fund: the Illinois Facilities Fund, Neighborhood Housing Services of Chicago, Community Investment Corp. and Shorebank, the model for the CDFI Fund. They provide funds for home mortgages, real estate development, small businesses and entrepreneurs.
The CDFI Fund represents a new direction for government programs and community development. It takes an innovative, business approach to improving neighborhoods by providing capital to communities in a new way. It supports communities by making direct investments and loans to CDFIs.
Over the past two years, Bank of America has received about $4 million through the CDFI Fund’s Bank Enterprise Award Program, with about $533,000 of the total awarded to Bank of America in Illinois. BofA used the award to make new grants to its CDFI partners.
The Illinois Facilities Fund is a non-profit community partner of Bank of America and a recipient of CDFI Fund support. IFF provides affordable loans for non-profit real estate projects throughout Illinois. It received a $900,000 grant in the fund’s first round of funding in 1996 and used the money to augment its available loan capital.
With a strong asset base, IFF is able to make loans to projects that may carry more risk than a bank is prepared to bear. One example is IFF’s loan to Matthew House, a homeless services organization on Chicago’s South Side. IFF made a $500,000 loan for a $650,000 project that enabled the organization to renovate an existing structure and double its capacity.
The experience of IFF and Bank of America in Illinois is a vivid snapshot of the CDFI fund’s impact on community investment nationwide. Overall, the fund has awarded more than $70 million to 77 institutions under its program and $30 million to 92 banks, thrifts and CDFIs through its BEA Program. To date, the CDFI industry has loaned and invested more than $3.5 billion and provided critical basic financial services in many of the nation’s poorest communities.
The fund is an inexpensive and innovative program that maximizes return on government investment. It deserves to be reauthorized and to receive its full appropriation.
