October 07, 2021
THE DEPARTMENT OF FINANCIAL SERVICES AND EMPIRE STATE DEVELOPMENT AWARD $5 MILLION IN GRANTS TO EXPAND AFFORDABLE BANKING SERVICES IN UNDERSERVED COMMUNITIES
Awards to Community Banks will Increase Access to Safe, Affordable Bank Accounts, Financial Literacy Programs, and Small Loans to New Yorkers Living in Historically Underserved and Redlined Communities
List of Community Development Financial Institutions Receiving Awards Here
The New York State Department of Financial Services and Empire State Development today announced the first awards from the New York State Community Development Financial Institution (CDFI) Fund to support access to safe and affordable banking services in historically underserved and low-income communities across New York State. With a multi-year $25 million state-commitment, the CDFI Fund will provide resources for the growth of New York State CDFIs to support the delivery of affordable financial products and services and financial literacy programming to low- and moderate-income New Yorkers. The CDFI Fund will also increase access to capital and technical assistance services for New York State small businesses and non-profit organizations. In total, 31 CDFIs were selected to receive financial inclusion grants, totaling $4,907,000.
“The pandemic demonstrated that financial health and resilience must be built from the ground up and New York’s CDFIs continue to be an essential building block to ensuring our recovery benefits those most affected,” said Acting Superintendent of Financial Services Adrienne A. Harris. “The distribution of these grants is a testament to what can be achieved when government works across agencies and community banks to benefit the people they serve.”
Empire State Development Chief Operating Officer and Executive Deputy Commissioner Kevin Younis said, “Creating and expanding banking services in underserved communities across the state will increase economic opportunities for all. New York State’s CDFIs play an important role supporting small and micro-businesses, many that are minority and women owned, with financial resources and skills not always available to them from traditional or big banks. These grants will expand their services to help small businesses continue to recover, grow and realize a brighter future.”
CDFIs and CDFI Credit Unions are private financial institutions dedicated to delivering affordable lending options to low-income, low-wealth, and other disadvantaged people and communities. These mission-driven institutions often serve clients who often struggle to get access to banking services, including due to high costs of entry, credit history, and simply a lack of banking branches in their communities. Approximately 25% of New York State households do not have bank accounts or seldom use one and rely on costly non-bank services for their financial activities, according to the Federal Deposit Insurance Corporation. Additionally, a recent survey conducted by the Federal Reserve Bank concluded that unbanked and underbanked rates are higher among lower-income households, less educated households, African American and Latino households.
In February 2021, New York State Federally Certified CDFIs and CDFI Credit Unions were invited to submit proposals to provide affordable financial products and services that meet the unique needs of economically underserved and underbanked communities. Proposals were evaluated on each organization’s ability to demonstrate institutional capacity, provide technical assistance to bank challenged and otherwise underserved individuals, and the ability to provide broad banking services ranging from savings accounts to capital for lending to individual, small business, non-employer firms, or non-profit borrowers.
CDFI Fund grants will enhance the selected institution’s capacity to meet the needs of underbanked individuals and of small businesses and non-employer firms and entrepreneurs. This includes offering basic banking services where needed, such as opening traditional accounts and providing transaction services like ATM networks and debit cards and providing technical assistance to bank-challenged and otherwise underserved individuals. Other services include providing affordable consumer loans and developing new financial literacy and financial education programming. The selected CDFIs and CDFI Credit Unions will attempt to bridge this gap through providing affordable financial products and services that meet the unique needs of economically underserved communities.
Grants to CDFIs and CDFI Credit Unions increase their capital reserves, allowing them to grow, take in more deposits and make more loans. As demonstrated by the U.S. Treasury CDFI Fund, CDFI Credit Unions leverage grant funds, on average, by 12:1 – meaning they bring in $12 in deposits and make $12 in community development loans for every grant dollar received. By increasing capital reserves, CDFIs and CDFI Credit Unions can quickly expand into more underserved communities to address unmet needs – bringing in new members and deposits; using those deposits to make more loans; and adding branches, mobile banking and other services.
New York State Senate Banks Committee Chair James Sanders said, "We must continue to address the issue of access to banking services in underbanked and underserved communities, which are often areas with a large percentage of people of color and low-income residents. The New York State Community Development Financial Institution (CDFI) Fund is an effort by the State to improve access to banking services for everyone. I give my full support to this worthwhile program to promote equity and consumer rights in the banking sector."
New York State Senate Committee on Commerce, Economic Development, and Small Business Chair Anna M. Kaplan said, “Access to affordable banking services and financial literacy programs are critical to uplifting historically underserved communities and spurring investment in local small businesses and non-profits. By investing state funds in community banks and financial literacy programming, we can help more New Yorkers in marginalized communities to access quality, low-cost financial services that aren’t currently available, and we can help more small businesses access the capital they need to grow, hire, and thrive. I applaud Governor Kathy Hochul for her leadership to ensure that our State is making smart investments like this to improve the lives of everyday New Yorkers.“
New York State Senate Committee on Consumer Protection Chair Kevin Thomas said, “The pandemic and resulting economic crisis continue to have a disproportionate, adverse effect on New York State’s most underserved communities. The CDFI Fund will provide crucial access to safe and affordable banking services in the communities that need them the most. I thank Empire State Development and the New York State Department of Financial Services for their ongoing work to advance economic justice and expand access to essential financial services.”
Assembly Standing Committee on Banks Committee Chair Patricia Fahy said, “Small businesses are the cornerstones of our communities and by expanding funding to New York State’s CDFIs and CDFI credit unions, New York State is ensuring that affordable, fair and safe banking services are being offered to our small businesses and microenterprises across the state and here in the Capital Region that are so often underserved. As Chair of the Assembly Banks Committee, improving access to banking for the 1 in every 4 New York State households that lacks a bank account is a major priority, and I commend Empire State Development and the Department of Financial Services for prioritizing our historically underserved communities in their work across the state.”
Assembly Standing Committee on Small Business Chair Al Stirpe said, "Expanding access to affordable banking services and financial literacy programming are critical components of New York's economic recovery, helping ensure our revival doesn't leave disadvantaged communities behind. With this state funding, we'll be able to make real strides in providing financial services to more New Yorkers, including the nearly 25% of state households that don't have a bank account. I want to thank Governor Hochul for prioritizing this issue and will continue working with the governor and legislative leaders to provide further support for CDFIs and CDFI Credit Unions."