WASHINGTON – U.S. Sen. Mark R. Warner (D-VA) led a letter to Mr. Gene L. Dodaro, Comptroller General of the U.S. Government Accountability Office (GAO), asking for a study on supporting the technology modernization needs of Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs). This study – part of a suite of efforts by the Senator to support CDFIs and MDIs – would help lay the groundwork for additional measures related to CDFI and MDI technology modernization. Sen. Warner was joined in sending the letter by House Financial Services Committee Chairwoman Maxine Waters (D-CA).
“In the Federal Reserve’s annual survey of CDFIs, more than 75% of CDFIs indicated they were unable to provide all the products or services they would like to offer on a sustained basis. In addition to further federal capital support, increasing access to technology tools will play a critical role as CDFIs and MDIs begin to leverage the historic funding provided by Congress. Technology resources can further empower community-based lenders with deep expertise and an understanding of their communities’ needs,” wrote the lawmakers. “There have been several private-sector and philanthropic efforts and partnerships to support technology investments in CDFIs and MDIs. In addition, several think tanks and policy organizations have highlighted these investments as a critical need for supporting CDFIs, MDIs, and the communities they serve. We are requesting GAO examine the scope of CDFIs and MDIs’ needs in technology and what else the federal government could do to support those needs.”
Beyond capital and staffing constraints, another significant barrier for CDFIs and MDIs is access to technology, because the cost to implement new systems is expensive and difficult to prioritize against the more immediate challenges of raising capital, staffing, and delivering for their communities. However, CDFIs and MDIs’ experience with the Paycheck Protection Program showed that technology investments can increase efficiency, support more lending, and improve the ability of these institutions to serve their communities.
To combat the hemorrhaging of jobs and economic opportunities during the pandemic, Sen. Warner has been a leader in Congress for CDFIs and MDIs. Most recently, Sen. Warner introduced legislation with Sens. Roger Wicker (R-MS), Cindy Hyde-Smith (R-MS), and Chris Van Hollen (D-MD) to deliver more long-term patient capital for CDFIs.
Sen. Warner also led successful efforts to secure a historic, $12 billion investment in CDFIs and MDIs in the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, which was signed into law on December 27, 2020. Of that $12 billion, $9 billion was used to create the Emergency Capital Investment Program (ECIP) to make tier one capital investments in depository CDFIs and MDIs. The Department of Treasury began to close on ECIP investments earlier this year and is expected to be finished closing its investments in the coming months. The remaining $3 billion in grant funding is also in the process of being fully distributed. On June 15, 2021, Treasury awarded the first tranche of $1.25 billion through the Rapid Response Program to 863 CDFIs. In addition, this week, Treasury opened the Equitable Recovery Program, the remaining $1.75 billion, up for applications.
A copy of the letter is available here.