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ECIP magnifies impact by helping CDFIs and MDIs reach people who would benefit from loans but would not otherwise have access to them.
The COVID-19 pandemic threw into stark relief America’s two-tiered economic system. During the pandemic, 41% of Black-owned businesses, 32% of Latino-owned businesses and 26% of Asian-owned businesses shut down, compared to 17% of white-owned businesses. And unemployment soared, especially among Black, Latino and Asian workers.
In response, Congress created the Emergency Capital Investment Program, which drove unprecedented resources to community development financial institutions and minority depository institutions. CDFIs and MDIs specialize in serving low-income communities and people and communities of color who are often excluded from the mainstream financial system. ECIP invested more than $8 billion in CDFI and MDI banks and credit unions with the goal of supporting access to affordable credit for small businesses and households as well as bolstering affordable housing efforts.
The U.S. Department of Treasury administers ECIP and is focused on ensuring the program supports deep impact lending. That’s lending that reaches people who would benefit from and can afford loans but would not otherwise have access to them because of redlining, lack of or damaged credit, lack of language access or other structural barriers.
ECIP is well-structured to support this goal. Credit unions received ECIP in the form of $2.1 billion of low-cost 15- or 30-year secondary capital investments, bolstering their balance sheets to support them in raising additional deposits and expanding their affordable loan offerings. Inclusiv, the national network of CDFIs and a CDFI intermediary, supported many of these credit unions in developing their vision and plan to achieve their impact goals with ECIP.
Now that most of the CDFI and MDI credit unions that received ECIP investments have had a chance to put that money to work, communities across the country are reaping the benefits. In just the first year of ECIP, recipient credit unions expanded access to safe and affordable capital and financial services for 4.8 million members and increased their lending by 12%, making more than $20 billion in loans. And, as illustrated below, credit unions that received ECIP investments are making strategic investments to increase their impact and serve their communities more effectively. Just two, of more than 80 examples, include:
River City Federal Credit Union
$150 million River City Federal Credit Union, a CDFI and MDI credit union based in San Antonio, Texas, is putting its $14 million ECIP investment to work to support its financial inclusion and asset-building initiatives for under-resourced members of the San Antonio community, with a focus on recent immigrants who are often targeted by predatory lenders. With ECIP capital, River City FCU has already more than quadrupled its small business lending and deepened its community partnerships using a microbranching model.
“The ECIP capital has intensified our community outreach efforts, allowing us to get deeper into the communities we serve,” says CUES member Jeff Ivey, president/CEO of River City FCU. “We opened our first community center-based branch in the Family Services Neighborhood Place location and are about to open our second one in the Avenida Guadalupe Association. These microbranches, located within underserved areas in San Antonio, fill the need for financial services and offer a safe, affordable option as opposed to the predatory outlets that are prevalent in these neighborhoods. Additionally, these areas of our market have historically suffered from a lack of access to loan and deposit products. We’re filling that need and providing financial stability for our members, and the capital we received from ECIP has allowed us to meet these needs.”
(Also read “Get Actively Involved in LGBTQ Allyship” by Ivey.)
Northeast Community Federal Credit Union
$14 million Northeast Community Federal Credit Union is a CDFI and MDI credit union serving San Francisco’s Chinatown, Tenderloin and SOMA (South of Market) neighborhoods. More than half of Northeast Community FCU’s members were unbanked or underbanked before joining the credit union, and many residents of the neighborhoods the CU serves have incomes below the federal poverty line. During the COVID-19 pandemic, the credit union was a lifeline for small businesses in its community as business owners in Chinatown experienced 70% losses in revenue because of the pandemic and concomitant rise in anti-Asian hate crimes and racism.
Northeast Community FCU is using its $1.5 million ECIP investment to invest deeply in its mission of financial inclusion by building a trilingual, culturally nuanced mobile app to serve its multi-racial membership in English, Chinese and Spanish. Providing member services in multiple languages will ensure trusted, culturally nuanced financial access to their members and expand services to their community partners who are also serving underbanked, limited English language proficient communities.
Board members Michael Chan and Wilson Chu and CEO/manager Lily Lo had this to say about ECIP: “Because of our stronger capital position, we are able to develop new products and services, such as our trilingual mobile app, that center on communities and financial inclusion. The ECIP capital has strengthened our ability to address short-term concerns and also plan for long-term, strategic ways we can further our mission, build trust and advance community-owned economic revitalization.”
Many other credit unions are developing programs to close the Black-White homeownership gap, bring critically needed financial services to historically redlined communities, provide technical assistance and affordable loans to small business owners and much, much more.
This impressive level of impact in the first year of ECIP suggests that the cumulative impact of the $2.1 billion ECIP investment in credit unions will be extraordinary. And past experience backs this up. In response to the Great Recession, Treasury created the Community Development Capital Initiative, which funded $69.9 million in secondary capital investments in credit unions serving low- and moderate-income communities.
Over just five years, every dollar of that investment was leveraged 60 times over—funding lending to support asset-building in low-income communities and communities of color. That means ECIP could lead to more than $375 billion in high-impact credit union lending over the life of the program, building wealth in under-resourced communities, supporting purpose-driven design of products and innovative technologies and strengthening the community development credit union movement for years to come.
The early results of ECIP show that by putting community and impact first, credit unions can generate meaningful change in the communities they serve and build equitable and resilient communities. Inclusiv has been proud to support our member community development credit unions in this work, and we look forward to seeing the impact of 29 more years of ECIP!
Cathi Kim is director of Inclusiv/Capital, New York.
