BofA pledges $40 million to help CDFIs fund health clinics
Bank of America pledged $40 million for long-term, low-interest loans to fund primary health care in areas that lack medical resources, including communities of color and rural areas.
This “builds on recent developments in the company $25 million collaboration with leading health organizations” to improve health outcomes in these places, the company said in a project announcement in June.
The bank will partner with community development financial institutions, non-profit lenders who will distribute the money to licensed local healthcare providers across the country. The bank lends the $40 million at a 1% interest rate to CDFIs, said Dan Letendre, managing director of ESG. capital deployment at Bank of America. The CDFIs then lend the money out at higher rates, which are still below the market rate for banks in the region, he said.
“It is neither easy nor extremely profitable to start and operate [a] health care clinic – otherwise there would be a lot more in these areas that we are talking about,” Letendre said. “They are often more risky to finance in less populated areas or poor areas.
However, CDFIs have proven to be secure sources of income for the bank. “We’re going to get paid back every dollar, I’m sure. All of the performance of the CDFIs we lend to is stellar,” Letendre said. He added that while smaller banks may be less familiar with the strategy, “I encourage all banks to think about it.”
BofA will also provide CDFI partners with $100,000 in grants to help pay for their staff and operations. The grants come from a pool that the Bank of America Charitable Foundation, the bank’s philanthropic extension, has set aside for projects aimed at increasing racial equity and economic opportunity. When the fund was established in 2020, it was expected to be $1 billion over four years, but last year the commitment grew to $1.25 billion over five years, of which $450 million was spent on other initiatives, the bank said.
The fund reflects “the work we’ve been doing in our market for some time,” said Eboni Thomas, chief executive of the Bank of America Charitable Foundation.
After the onset of the COVID-19 pandemic and the 2020 police killing of George Floyd, the bank increased its focus on these areas, it said, with a targeted aid strategy for projects in areas of health, employment and small businesses. and housing.
This month’s rollout is a “phase 1” of several that Letendre and Thomas are planning for their collaborative offering of foundation loans and grants, Letendre said.
For CFDIs, a “catalytic” opportunity
“This money is really catalytic for us because it’s so inexpensive in a rising interest rate environment,” said Louise Cohen, chief executive of Primary Care Development Corp., one of the main intended recipients of the silver. PCDC plans to get the funds to its clients quickly, starting with a low-income housing project in Florida.
“We think [of] Bank of America as a market leader, as many banks lend to CDFIs under their Community Reinvestment Act bonds, but they don’t necessarily do it at such low rates and for such a long time,” Cohen said. The ARC was a law passed in 1977 that requires banks to offer loans and capital to people of color, to help communities that have been disenfranchised by redlining.
“Many small businesses show up at the door of a CDFI after being turned down for a bank loan,” said Jennifer Vasiloff, director of external affairs for the CDFI Opportunity Finance Network business group. CDFIs offer a personalized approach to lending money, often combined with support services such as business advice tailored to each client.
Vasiloff said Bank of America “has been an extremely strong partner” to the entire CDFI industry, is their largest financial backer among banks, and is the primary sponsor of their annual industry-wide conference. industry.
But she also sees interest in CDFI partnerships growing among banks as a whole. “Clearly the pandemic and the racial reckoning that the whole country is grappling with is part of that,” she said.
“It’s not just about having loan capital”
For bankers of color, moves like this from big traditional banks are welcome, but worth continued consideration.
“I wouldn’t say they’re industry-leading,” said Nicole Elam, president and CEO of the National Bankers Association of Bank of America’s racial equity plans. The association is one of the leading trade groups of minority deposit-taking institutions. “I would say, though, that Bank of America was the first to get involved. And so from that perspective, it’s good,” she said, referring to the bank’s early engagement. to fight against systemic racism.
Elam is a former vice president of government relations at JPMorgan Chase, where she led public engagement for its commitment in 2020 to spend $30 billion over five years for racial equity.
“They took longer to develop their strategy. It was a bit more holistic,” Elam said of JPMorgan’s racial equity programs. “Now you’re starting to see Bank of America adding new things that they didn’t have before, like this particular initiative.”
She also praised Bank of America for offering grants in addition to loans in the plan. “Too often people make these low-interest loans,” she said of other banks. “But what most MDIs and CDFIs also need is a grant component on top of that. So it’s not just about having loan capital, but there’s ‘other things they need to deploy the capital.’
For Elam, the key to these commitments is how well they are implemented through policy, business strategy and philanthropy, and how far they go in the future. “Most of these banks commit for five years. What will it look like in 10 years?”