Policy Brief: Community Reinvestment Act Serving Communities of Color and Rural CDFIs

As the Federal Reserve works to overhaul the CRA, the Partners for Rural Transformation issues five recommendations to ensure CRA benefits reach historically overlooked rural communities.

Berea, KY: The Partners for Rural Transformation (PRT) published a policy brief with five recommendations aimed at strengthening the Community Reinvestment Act (CRA), in order better reach communities of color and persistent poverty communities in rural America.

The Community Reinvestment Act was passed in 1977 to reverse racial redlining effects and reinvest in low-income communities. The CRA, unfortunately, has not been properly leveraged to sufficiently invest in communities of color and persistent poverty communities, particularly in rural areas. In the past decade, PRT has deployed over $2 billion in funding to people residing in persistent poverty communities, yet community development financial institutions (CDFIs) with strong track-records in serving these communities continue to be underserved by CRA-motivated investments.

PRT makes the following recommendations to strengthen the CRA’s ability to reach the country’s most economically distressed rural communities:

  1. Assessment areas beyond bank branches should be based on a mix of lending and deposit activity.
  2. Investments in designated areas of need must be meaningful and targeted to communities with low levels of lending activity.
  3. Investments in CDFIs serving persistent poverty areas, communities of color, and designated areas of need should be meaningful and prioritized.
  4. Ensure greater accountability for small banks, particularly those serving rural areas.
  5. Maintain the current small business threshold for loan size and revenue.

To date, over 98% of U.S. banks have a passing CRA grade; however, rural counties facing persistent poverty struggle from continuous disinvestment and lack of access to enriching financial services. CDFIs in rural, persistent poverty counties have been stepping in to fulfill public needs in the interim. From 2015-2019, come dream | come build (cdcb) deployed over $84 million of capital directly to persistent poverty counties, as the only CDFI in the southernmost U.S./Mexico region. HOPE is currently the only depository institution in three small towns in the Mississippi Delta; residents are just now opening their first checking accounts, as the lack of banking access has been rampant for generations.

The CRA is a critical tool to facilitate bank investments into persistent poverty communities and the CDFIs that serve them.  Until the CRA is strengthened in the ways outlined here, the economic mobility for communities of color and persistent poverty communities will be severely constrained

Partners for Rural Transformation’s recommendations in the brief are rooted in decades of experience of work to economic prosperity in communities of color and persistent poverty communities in rural America.

Click here to read more about PRT’s call to action and recommendations and download our policy brief in full.

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