WASHINGTON–Some 244 credit unions have received$401.8 million in awards from the Treasury Department’s new Rapid Response Program (RRP) as part of $1.25-billion in COVID 19 relief funds that are going to 863 community development financial institutions (CDFIs) overall.
Ten percent of that $1.25 billion went to credit unions that are clients of Tacoma, Wash.-based Credit Union Strategic Planning, which reported 65 successful CDFI RRP grant applications for $115.2 million.
The awards were announced during a press conference that included Vice President Kamala Harris, Treasury Secretary Janet L. Yellen, Rep. Maxine Waters (D-CA) and Sen. Mark Warner (D-VA).
The funds are part of a record $12 billion for CDFIs that were included in the COVID relief legislation. Another $1.75 billion in grants are to be announced later this year. The remaining $9 billion will be injected directly into CDFIs as tier 1 capital.
“That $9 billion can be leveraged 10 to one, which means $90 billion in additional lending to communities that are challenged,” said Warner during a press conference.
Capital ‘Bottleneck’
Treasury’s Yellen said during the same press conference that 70% of all venture funding went to just four metropolitan areas in 2020. “We as a country are missing out on many avenues for growth because capital is bottlenecked,” Yellen said, noting the racial wealth gap in the country has not changed in 50 years.
The grants will be made through Treasury’s CDFI Rapid Response Program (CDFI RRP) and are designed to provide necessary capital for CDFIs to respond to economic challenges created by the COVID-19 pandemic, particularly in underserved communities.
The CDFI RRP was created by the Consolidated Appropriations Act, 2021, which was passed by Congress, with strong backing from then Sen. Harris, along with Warner.
“In serving places that the financial sector historically hasn’t served well, CDFIs lift our whole economy up. We know that for every dollar injected into a CDFI, it catalyzes eight more dollars in private-sector investment, meaning that today’s announcement might lead to an additional $10 billion in investment,” said Yellen.
How Funds Will Be Used
According to Treasury, CDFI RRP grant funds will be used to support eligible activities such as financial products, financial services, development services, and certain operational activities, and to enable CDFIs to build capital reserves and loan-loss reserves.
In addition to the 244 credit unions, the CDFI RRP award recipients include:
- Loan funds: 463 organizations receiving $571.3 million in awards
- Banking entities: 149 organizations receiving $267.1 million in awards
- Venture capital funds: seven organizations receiving $9.4 million in awards
The full list of winners can be found in CUToday.info’s The Gov here.
Ten Percent of Overall Funds
In noting it had helped 65 CU clients to secure $115.2 million in RRP grants, CU Strategic Planning said it has now directly won nearly $250 million dollars for credit unions from the CDFI.
“CU Strategic Planning is proud to be a key facilitator for CDFI credit unions to be a significant part of the solution to provide rapid relief funding to families and distressed communities” said CU Strategic Planning CEO Stacy Augustine. “The rightful attention CDFIs are receiving – particularly the announcement coming from the vice president from the White House – has been spectacular and well deserved.
“Based on our credit union clients’ challenging, yet rewarding, efforts to serve hard-working Americans in underserved and underbanked communities, we’re not surprised at their success in obtaining grant funding through this special, emergency program,” Augustine continued. “Credit unions’ are the solution to eviction prevention, business sustainability and rebuilding and economic recovery for distressed families and communities.”
NAFCU Response
"CDFI credit unions have always worked hard to helpp low-income and underserved communities gain access to financial services," said NAFCU President and CEO Dan Berger. "During the pandemic, credit unions stepped up to the plate to ensure these communities had financial resources needed to weather the pandemic. NAFCU has advocated tirelessly for additional CDFI funding so credit unions can take good financial care of their local communities and to help Americans in need of support. For every dollar the U.S. Treasury has awarded in new grant funding, there is a CDFI that will put each dollar to good use towards the economic recovery."