Biden Admin. Pumps $1.25 billion into Rural LendingBy Sydney Clark, National Press Foundation

Biden Admin. Pumps $1.25 Billion into Rural Lending. Community development financial institution experts say CDFIs can help alleviate rural poverty and racial inequities where previous pandemic relief failed. How journalists can track COVID-19 federal funding in their communities.

5 Takeaways: If you’ve never heard of a community development financial institution, you’re not alone. In June, the Treasury Department awarded $1.25 billion in COVID-19 relief to 863 CDFIs to help counter poverty, racial inequality, and the ravages of COVID-19. This move brought unprecedented attention to the long-underfunded lenders. CDFI experts call themselves “private bankers to the poor” and “financers with a heart.” They are grassroots-level microlenders, credit unions, mortgage lenders, small business lenders, venture capital funds and more – the “Swiss army knife” of financial services to low-income communities, said Lisa Mensah, president and CEO of Opportunity Finance Network, a CDFIs umbrella group. Previous rounds of federal COVID relief funds disproportionately benefitted white borrowers. The Biden administration has targeted CDFIs for the next round of funding because they are trusted institutions that understand the needs of the communities they serve, argued Mensah.

Access to capital is the equivalent of oxygen. “If you’re Black and poor, if you’re rural or Brown, those resources aren’t as readily available,” argued Bill Bynum, CEO of Hope Credit Union. “CDFIs step in where the market has failed and level the playing field for neglected people and places.” HOPE works in Mississippi, Louisiana, Alabama, Arkansas and Tennessee, states that suffer from systemic, persistent poverty. Roughly 370 counties nationwide are categorized as persistent poverty, and a third of them are in Mississippi, Louisiana and Alabama. It’s no coincidence, Bynum said, that these counties are the most heavily Black and the most capital-starved. The black-white wealth gap in the country is 10 to one, and for black families with children, it’s 100 to one, according to Bynum. The federal CARES Act spending included funding to prevent eviction, but Mississippi only distributed 11% of those funds. There was also a COVID relief program for entrepreneurs of color in Tennessee and Arkansas, but “only a fraction of those funds actually were deployed,” Bynum added.

The Rapid Response Program aims to correct inequities in the Paycheck Protection Program. Sole proprietors—many rural business owners—were not eligible for the first round of PPP loans. “As we saw over the past year and a half, particularly through the [PPP], the rural communities, the mom and pop entrepreneurs that are so vital to a local economy were capital-starved,” Bynum said. “And banks, which are the default tool for the federal government…did not prioritize rural communities, communities of color.” In the second and third rounds of PPP loans, CDFIs outperformed banks and put more money into the rural economy. In Louisiana, the CDFIs made more loans than the seven largest banks in the country combined, Bynum said. Ines Polonius, CEO of Communities Unlimited, said that the $1.28 million federal grant her organization received “is the first time in 23 years that we’ve received flexible money. Until this program, we had little pockets of money,” Polonius said. When the loans are repaid – and the default rate is very low – the money will be lent out again. “What’s so amazing about rural entrepreneurs is that if you provide them the resources, and you build that relationship with them, they will pay you.”

Reporters need to go beyond stereotypes of rural America as “hopeless” to document where the federal funds are going and whether the money is making a difference in cash-starved communities. Tim Marema, editor of The Daily Yonder and a dean of rural American journalism, encouraged reporters to first identify the CDFIs in their area that have received federal funding and then keep track of who got how much for what. One resource is ProPublica’s Tracking PPP Loan Database, where you can search for every company approved for federal loans. CDFIs can be “allies in identifying the constituents they work with, helping find the people who can personalize these stories,” Marema said. While he thinks most CDFIs will help reporters tell these stories, he said to be cautious of those that provide limited transparency. Lack of disclosure could signal ethical problems, he said.

Rural America isn’t a monolith and entrepreneurs abound. Marema warned journalists to beware of common stereotypes about rural communities. Only 2% of rural residents earn their primary wages from farming or ranching, and there’s a larger percentage of manufacturing jobs in rural America than in metropolitan areas. Bynum added that the region is also ethnically diverse. “If you look at us collectively, we are the incredible quilt that is America,” Bynum said.