FACT SHEET: Vice President Harris Announces New Public and Private-Sector Efforts to Advance Racial Equity at Freedman’s Bank Forum
Today, Vice President Harris will announce a slate of new actions taken by the Biden-Harris Administration and private sector stakeholders to deliver capital and resources to underserved small businesses and the community lenders who serve them. Small businesses are the engines of our economy and the path to economic prosperity for countless Americans in underserved communities. Community lenders—including Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), and others—are vital to unlocking the full economic potential of these communities, turning previously sidelined talent into a source of economic growth and shared prosperity for all.
Unfortunately, for too long, the small business ecosystem in underserved communities has struggled to keep up with better funded businesses and entrepreneurs in more prosperous communities. Entrepreneurs of color regularly report being turned away by traditional financial institutions for loans at higher rates than their white counterparts. And the community lenders committed to filling that gap similarly report that shortfalls in capital and technical capacity limit their ability to invest in the communities that need them the most.
Under President Biden and Vice President Harris’s leadership, this Administration has taken significant steps to address these disparities. Over the past two years, the Treasury Department (Treasury) has directed more than $15 billion in investments and tax credits to community lenders and other mission capital providers, allowing them to expand their efforts to drive inclusive entrepreneurship and create high-opportunity communities. This past summer, the Vice President announced a first-of-its-kind private sector initiative—the Economic Opportunity Coalition (EOC)—committed to investing billions of dollars in underserved communities and small businesses emerging from the pandemic.
Today’s announcements build on that work. With new commitments from agencies across the federal government, the Administration is taking the next step towards ensuring that underserved small businesses and community lenders can reliably access the resources necessary for success. For underserved communities, small businesses, and community lenders, these new policies mean increased investments, greater regulatory clarity, and improvements in infrastructure and capacity.
New Federal Investments in Underserved Small Businesses
- Government Contracts for Small, Disadvantaged Businesses (SDBs). Today, the Office of Management and Budget (OMB) is issuing a memorandum to federal agencies to set individualized goals for an unprecedented 12 percent of FY 2023 governmentwide procurement dollarsto go to SDBs, up from a FY 2022 goal of 11 percent and a statutory goal of 5 percent.Today’s action will put agencies on a path to meet the President’s goal of increasing annual SDB spending from an average of 9.8 percent over 5 years prior to the start of the Biden-Harris Administration to 15 percent by FY 2025.
- New Lenders for Underserved Small Businesses. This Fall, the Small Business Administration (SBA) will propose a rule to expand its lender base by lifting the moratorium on new Small Business Lending Companies (SBLCs), which would allow new lenders to apply for a license to offer SBA-backed 7(a) small business loans. The SBA’s objective for this policy change is to grow the number of lenders that receive its loan guarantee, thus increasing small business lending, particularly in smaller-dollar and underserved markets, where borrowers are most acutely shut out of current lending.
- Technical Assistance for Underserved Entrepreneurs. Using funds made available through the ARP, the Minority Business Development Agency (MDBA) will issue a $100 million notice of funding opportunity to provide technical assistance grants for entrepreneurship technical assistance providers to help businesses owned by socially and economically disadvantaged individuals (SEDIs) launch, scale and connect with growth capital.
- Opportunities for Smaller Asset Management Firms. The Pension Benefit Guaranty Corporation (PBGC) is releasing a review of its Smaller Asset Manager Pilot Program, a first-of-its-kind program to reduce barriers to competition and create opportunities for smaller investment management firms to manage some of the agency’s fixed-income assets. The review finds that each of the participating smaller managers generated net-of-fee returns exceeding the benchmark. Earlier this year, the PBGC Board established the pilot as an ongoing program, and is exploring opportunities for expansion.
Improving Federal Support for Community Lenders and other Community Financial Institutions
- CDFI Fund Increasing Accountability and Clarifying Impact for Financially Underserved Communities. Through the CDFI Fund, Treasury is soliciting public comment regarding the CDFI certification requirements as well as the designation of a Minority Lending Institution (MLI). The CDFI Fund is in the process of updating the requirements and standards for CDFI certification and has released for public review policies that define clearer guardrails for the activity of CDFIs and provide greater transparency into their impact. The CDFI Fund also published for public comment criteria for designating a certified CDFI as an MLI. These policy steps will clarify the value of investing through community financial institutions, which is important for private investors that seek to align with recent historic federal investment in this sector.
- Coordinating Federal Investments in Underserved Communities. The newly formed Interagency Community Investment Committee (ICIC) issued a request for information (RFI) to gather input from the American people on how to improve the effectiveness and impact of federal community investment programs. The Administration invites feedback from community stakeholders, including local government, civil society, as well as the private sector, to understand the specific challenges of accessing and working with federal community investment programs. This feedback will enable the ICIC to better align numerous federal programs, thereby facilitating the flow of resources into underserved communities.
- Feedback on Small-Balance Mortgages. To facilitate greater availability of small-balance mortgages, HUD is issuing an RFI to solicit specific and actionable feedback on the barriers that prevent the origination of these mortgages and recommendations for increasing the volume of small-mortgage loans in FHA programs. This RFI supplements a report also released today by HUD’s Office of Policy Development and Research that assesses the factors that limit the supply of small mortgages and the impact to affordable homeownership for those interested in lower-priced homes.
These new policy steps follow two recent announcements by the Administration of billions of dollars in investments for CDFIs and MDIs.
- Investments under the Emergency Capital Investment Program (ECIP). Vice President Harris recently joined Secretary Yellen to announce that Treasury has funded over $8.28 billion in 162 community financial institutions across the country through ECIP. The communities served by these ECIP investments are geographically diverse, and many share a common characteristic of having suffered from a lack of investment historically.
- Last week, Treasury, through the CDFI Fund, announced $11.4 million in grant awards under the Small Dollar Loan Program, $27.6 million under the CDFI/NACA Program, and three guarantees totaling $355 million under the Community Development Financial Institution (CDFI) Bond Guarantee Program. The Small Dollar Loan Program helps certified CDFIs expand consumer access to mainstream financial institutions and provide alternatives to high-cost small dollar loans. Of the 66 CDFIs receiving awards, 13 are MDIs, eight are based in Puerto Rico and one in Guam. The CDFI Program/NACA Program provides monetary awards to invest in and build the capacity of CDFIs. There are 218 organizations receiving Technical Assistance awards, the largest number of award recipients in program history. Recipients include 56 MDIs and 38 organizations based in Puerto Rico. The CDFI Bond Guarantee Program provides low-cost capital to spur economic growth and jump start community revitalization.
New Private Sector Investments in Underserved Communities
On July 28, 2022, Vice President Harris announced the formation of the EOC, a historic partnership of more than 20 corporations and foundations to catalyze private investments to address disparities and accelerate inclusive economic opportunity. EOC members include Ariel Investments, Bank of America, BNY Mellon, Capital One, Citi, Discover, Ford Foundation, Goldman Sachs, Google, Intercontinental Exchange, Key Bank, Kresge Foundation, Mastercard, McDonald’s, McKinsey & Company, Micron, Momentus Capital, Moody’s, Netflix, Next Street, PayPal, PNC, Rockefeller Foundation, TIAA, Upstart and Wells Fargo.
As part of today’s announcement, EOC members have committed more than $1 billion in investments that will:
- EOC members have committed to moving $1 billion in deposits to MDIs to increase access to affordable capital in communities of color. As an initial commitment to this initiative, Bank of America, Intercontinental Exchange, KeyBank, Moody’s, PayPal, Next Street, and Wells Fargo have already committed more than $550 million.
- Mastercard is launching Strive USA to help 5 million small businesses access capital, go digital, and grow networks, with an intentional focus on women and entrepreneurs of color. As part of its launch, Strive USA and Next Street are working with New York City to build on Mayor Adams’ initiative to launch its one-stop-shop Business Portal. Together, they are linking business owners to financing options, advisors, educational content, and a community of representative, local business owners.
- Google, BNY Mellon, Citi, KeyBank, Mastercard, Moody’s, and Upstart are establishing a Center of Excellence for the more than 1,000 CDFIs and MDIs that serve over 1 million people in low-to-moderate income (LMI) communities per year. This shared platform will provide CDFIs and MDIs with the access to the technology, data, and professional expertise from EOC members.
- Micron is partnering with Alphabet on a new Semiconductor Career Certificates Program to open up pathways for students, especially students of color, to obtain the tens of thousands of new, highly paid technical and operational American jobs created through their recently announced plans to invest in domestic memory manufacturing. The effort will also include partnerships from key non-profits like YearUp, Co-Op, and Merit America.
Outside of the EOC, philanthropies and the private sector are making complementary investments by leveraging the underwriting and capital channeled to community lenders and capital providers. Fund for Inclusive Entrepreneurship.
Today, Hyphen announced the Fund for Inclusive Entrepreneurship, a $100 million national initiative to expand access to capital for small businesses owned by people of color. With lead support from JPMorgan Chase and the W.K. Kellogg Foundation, the Fund will offer a two-stage approach: (1) building capacity among high-impact community lenders, and (2) raising private capital to invest alongside federal funding.