Federal agencies could improve the effectiveness of community investment programs by removing barriers to bank participation in federal loan programs, improving public awareness of loan programs, and enhancing the ability of community development financial institutions to provide capital to low- and moderate-income communities and underserved populations, the American Bankers Association said Monday in a letter to the Interagency Community Investment Committee.
The ICIC was created by President Joe Biden earlier this year as part of a larger push by the administration to accelerate economic opportunities in historically underserved communities. The committee issued a request for input in October on ways to improve community investment programs. In its letter, ABA made several recommendations based on input from its members. One recommendation: If federal agencies wanted to encourage bank participation in federal loan programs, they should increase the guarantee that the agencies provide and reduce the fees charged on loans to underserved individuals, businesses and communities, the association said.
ABA also recommended agencies facilitate the layering of public, private and philanthropic capital to increase project success, noting community development initiatives often require multiple sources of financing. It suggested that federal agencies increase awareness of federal programs and support for technical assistance; streamline and declutter processes, procedures and programs; and build on the successes of the CDFI public partnership model. In addition, ABA urged agencies to leverage existing agency data to minimize the burden on nonprofit organizations and avoid chilling community bank participation in federal loan programs.