On Tuesday, U.S. Secretary of the Treasury Janet L. Yellen and Vice President Kamala Harris announced the release of $8.7 billion in investments through the Emergency Capital Investment Program (ECIP) to help increase lending to small and minority-owned businesses and people living in underserved communities with limited access to banking, The Associated Press reported.
The funds from the ECIP will go to 186 community-based financial institutions. ECIP enables the Treasury to make direct investments in banks, credit unions and holding companies that are designated as a Community Development Financial Institution (CDFI) or a Minority Depository Institution (MDI).
Institutions headquartered in 36 states, as well as Guam and Washington, D.C. will be recipients of the deployed $8.7 billion. States with the largest number of institutions being offered ECIP investments include Mississippi, Louisiana, North Carolina, California, and Texas. Among the institutions recommended for an ECIP investment, approximately 54% are banks and 46% are credit unions. The ECIP investments will range, depending on the size of the institution, from over $200 million to less than $100,000. Of the funds, a total of $3.1 billion is being offered to 57 minority depository institutions.
“We know that the communities hurt most by COVID-19 have often been communities of color, and Treasury has implemented relief legislation with equity in mind,” said Secretary Janet L. Yellen in a press release Tuesday. “Today, we’re seeing one result of that effort: Treasury, through the Emergency Capital Investment Program, is injecting nearly $9 billion into Community Development Financial Institutions and Minority Depository Institutions.”
According to the Associated Press, “Black Americans represent 13.4% of the U.S. population, yet Federal Reserve figures show they control just 4.3% of household wealth and more than half of Black household wealth is in the form of pension entitlements, which cannot be passed along to future generations.”
The racial divide and these inequities in wealth have contributed to many of the hardships people of color face when applying for loans, mortgages, and other financial assistance. ECIP investments will help in bridging this gap by supporting mission-motivated institutions to increase responsible investments in low- and moderate-income and minority communities that have disproportionately suffered from the impacts of the COVID-19 pandemic.
In a moderated conversation at the Freedman’s Bank Forum, Vice President Kamala Harris addressed these inequities stating, “Here’s what I know to be true: America is a nation that is driven by the ambition and the aspirations of her people. But I also know that, in America today, deep racial disparities continue to hold people back from achieving all they can.
“Today, the wealth gap persists. Today, the homeownership gap persists. Today, access to capital is unequal. As one example, Black entrepreneurs are three times more likely to report that a lack of access to capital negatively affects their profit margins.
“I believe that the actions we are taking and must take to address these disparities will define our nation’s strength and economic strength in the 21st century.”