On September 23 2024, we mark the 30th anniversary of the passage of the Riegle Community Development Regulatory Improvement Act of 1994. This legislation established and financed the Community Development Financial Institutions Fund.
We’ve come a long way since then-Senator Bill Bradley of New Jersey said, “Life loses its meaning where there is no community. … Where there are ten check-cashing shops for every bank or credit union that lets people borrow and save for tomorrow, there is no community.”
But there is still much work to be done.
The NYS CDFI Coalition urges the State of New York to honor its commitment to support the mission-driven banks, credit unions, and loan funds that serve all New Yorkers.
In 2007, New York enacted a law establishing a NYS Community Development Financial Institutions (CDFI) Fund modeled after the one launched by the U.S. Treasury in 1994 – the first state-based fund in the country.
Thirteen years later, in 2020, the first round of funding was appropriated, and after 14 years, money began to flow to CDFIs across New York State.
With a commitment of $25 million over 5 years, the NYS CDFI Fund promised to provide resources for the growth of New York State CDFIs to “support the delivery of affordable financial products and services and financial literacy programming to low- and moderate-income New Yorkers.”
New York’s CDFIs are uniquely positioned to leverage these funds for community economic development, small business expansion, and job creation. These grants were envisioned to build capacity and enhance the financial stability of CDFIs of all types and sizes. New York’s CDFIs would be afforded the flexibility to determine the best use of limited resources in their community.
In 2023, a second round of funding was made available, but with limitations that leave fewer NYS CDFIs eligible to deliver meaningful assistance in their communities.
CDFIs in New York State have significant experience and a lengthy track record of meeting the needs of their communities. Unfortunately, the latest round of funding, as it is structured, will be available to only a subset of CDFIs, primarily depository institutions.
New York State’s CDFIs meet New Yorkers’ needs in a wide variety of ways, not just by providing banking services. As structured, the second round of CDFI funding was not directly available to CDFIs that focus on housing, community facilities, affordable car loans, and other services that people need.
Further, the definition of Microbusiness as having $250,000 annual revenue and fewer than 10 employees, as well as the target of household income under $75,000, greatly limits the fund’s ability to support outreach to the broader constituency of NYS small businesses that is underbanked and that faces financial exclusion and limited access to capital. As a result, this grant may only provide partial if not offset support for the work that many CDFIs do.
Financial inclusion efforts would benefit surprisingly varied businesses and individuals. In certain markets, these thresholds will make it more likely that families and entrepreneurs with modestly sized businesses and incomes will continue to fall through the cracks.
No one disputes that all New Yorkers deserve access to transparent and affordable depository products. However, the majority of New York’s CDFIs are dedicated to, as mandated by their CDFI Certification, providing capital in low- to moderate-income communities. That includes loans to micro-business, small business, consumers, and for the development of affordable or supportive housing and community facilities. The focus of this RFP has diverged from the original intent of the fund, and in doing so, limited its efficacy.
The NYS CDFI Coalition has an established framework to share ideas for advancing community development finance throughout the state. The Coalition is the largest and most active coalition of CDFIs in the nation and is a recognized partner of state agencies with longstanding support from the state legislature and successive governors.
The NYS CDFI Coalition and our member Community Development Financial Institutions across New York State stand ready to work with elected and Agency leadership to ensure the greatest impact from the remainder of the $25 million NYS CDFI Fund.
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