COVID-19 and the economic shutdown are affecting communities across the country. How might the Cleveland Fed’s Investment Connection program help address the difficulties people now face?
As appeared in the Cleveland Fed Digest's Ask the Expert
Our Community Development Department is currently doing extensive outreach to better understand how COVID-19 is impacting low- and moderate-income people and communities, and we are finding that they are being disproportionately impacted. These are the most distressed people and communities, and it doesn’t do anyone any good—economically or otherwise—to leave people who are already behind further behind, which is what I’m afraid the COVID-19 situation will do. A lot of small businesses are at risk of failing, too.
Investment Connection is a Federal Reserve program that Banks like ours across the country use to connect funders such as financial institutions, government agencies, and foundations, with community-based organizations such as food banks, affordable housing agencies, and neighborhood health facilities that serve low- and moderate-income people and communities. Through Investment Connection, organizations can pitch projects and programs that need funding, and funders can consider supporting those projects knowing that doing so may get them “credit,” if you will, toward their compliance with the Community Reinvestment Act (CRA).
The CRA encourages institutions to meet the credit needs of the communities where they do business, and banks care about compliance: If they’re found to be in noncompliance, banks cannot grow with new branches or mergers and acquisitions.
Banks are being encouraged to lean in and support activities that help lessen the effects of the pandemic and the shutdowns that followed. In fact, in light of the pandemic, three federal regulatory agencies formally announced that banks taking action to meet the COVID-19-related needs of their low- and moderate-income customers and communities will receive positive consideration toward their compliance with the CRA.
It’s sometimes very difficult for banks, especially smaller community banks, to find CRA-eligible projects and for small nonprofits overtaxed by workload to take the time to develop the banking relationships they need. Investment Connection is meant to create a relationship where it wouldn’t happen otherwise. This year’s events, in light of COVID-19, will most likely be virtual. This is the case for the Erie, Pennsylvania, and Cleveland–Akron, Ohio, events in June. Organizations will pitch selected proposals to funders during virtual events, but all proposals that we find to be potentially CRA-eligible will be available to view in the Investment Connection online portal. So we are hopeful nonprofits will submit their projects and funders will find projects to support.
Through Investment Connection, our aim is to enable organizations to get the funding they need—a loan, investment, or grant—to support healthcare, digital access, activities that sustain small business operations, or food supplies and services. The online funder portal is always live, but we hope it will especially help during this time of COVID-19—and specifically for the low- and moderate-income people hurt by it.
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