Financing

The Community Reinvestment Act is a financing tool for community development. It is important to understand which activities and products CRA agreements can support in order to better target an advocacy strategy.

Securing Finance Products that Work

In 1998, many newspapers carried a banner headline: Bank of America pledges $350 billion for community reinvestment. When the bank pledged $12 billion in 1992 and when Wells Fargo Bank pledged $45 billion in 1996, similar headlines appeared. What difference do these pledges really make for local businesses, neighbors and community organizations?

The truth is that the commitments probably have had more and less impact than anticipated. Direct commitments result in short term impact, with increased loans and financial presence. Indirect commitments slowly change the way banks operate, with long-term implications for the community. Both are important. With community residents and their organizations holding banks responsible, there can be scores of community investments and improvements occurring. The types of equitable development financing support to target include:

Lending

• Small business loans (less than $50,000) previously unavailable, or only available at substantially higher interest rates.
• Mortgage loans with low down payments and reasonable interest rates available to moderate and low-income residents.
• Monitoring and correction of discriminatory practices.

• Financing of affordable rental housing built by nonprofit developers.

• Mortgage financing for long-term affordability properties including LEHCs and CLT housing.

Investments

• Corporate grant programs that support community-based organizations.
• Bank investments in nonprofit community development loan pools.

Services

• Bank vendor purchase programs that offer business opportunities for minority-owned businesses.
• Retention of local bank branches.