BofA pledges $40 million to help CDFIs fund health clinics
Bank of America has committed $40 million in low-interest, long-term loans to fund primary healthcare needs in regions lacking medical resources, including communities of color and rural areas.
This “builds on recent developments by the company 25 million dollars Working with leading health organizations” to improve health outcomes in such places, the company said in an announcement of the project in June.
The bank becomes a partner Financial institutions for community development, non-profit lenders that distribute the money to verified local healthcare providers across the country. The bank lends the $40 million to the CDFIs at a 1% interest rate, said Dan Letendre, managing director of ESG Capital investment at Bank of America. The CDFIs then lend the money at higher rates, which are still below market rates for banks in the region, he said.
“It is not easy or extremely profitable to start and operate [a] Health clinic – otherwise there would be many more of them in these areas we are talking about,” Letendre said. “They are often more risky to fund in less populated or poor areas.”
However, CDFIs have proven to be secure sources of income for the bank. “We will repay every dollar, I have no doubt about that. The overall performance of the CDFIs we lend is outstanding,” said Letendre. He added that while smaller banks are less familiar with the strategy, “I would encourage all banks to think about it.”
BofA will also provide $100,000 in grants to CDFI partners to pay for their staff and operations. The grants come from a pool provided by the Bank of America Charitable Foundation, the bank’s philanthropic extension, for projects that increase racial justice and economic opportunity. When the fund was set up in 2020, it was budgeted at $1 billion over four years, but last year the commitment grew to $1.25 billion over five years, of which $450 million is for others Initiatives have been issued, the bank said.
The fund “reflects the work that we’ve been doing in our market for quite some time,” said Eboni Thomas, chief executive of the Bank of America Charitable Foundation.
Following the outbreak of the COVID-19 pandemic and the 2020 killing of George Floyd by a police officer, the bank has increased its focus on those areas, she said, with a strategy of targeted aid for health, jobs and small business projects to afford and housing.
This month’s rollout is a “Phase 1” of several more that Letendre and Thomas plan for their joint offering of loans and foundation grants, Letendre said.
A “catalytic” opportunity for CFDIs
“This money is really catalytic for us because it’s so cheap in a rising interest rate environment,” said Louise Cohen, chief executive of Primary Care Development Corp., one of the largest intended recipients of the money. PCDC plans to get the funds to its customers quickly, starting with a low-income housing project in Florida.
“We think [of] Bank of America as a leader as many banks lend to CDFIs under their Community Reinvestment Act Commitments, but they don’t necessarily do so at such low rates and for such a long time,” Cohen said. The CRA was a law passed in 1977 that required banks to offer loans and capital to people of color to help communities disenfranchised by redlining.
“Many small businesses show up on a CDFI’s doorstep after being denied a bank loan,” said Jennifer Vasiloff, chief external affairs officer at CDFI trade group Opportunity Finance Network. CDFIs offer a tailored approach to lending, often coupled with support services such as business advice tailored to each client.
Vasiloff said Bank of America has been “an extremely powerful partner” for the entire CDFI industry, being its largest bank lender and the primary sponsor for its annual industry-wide conference.
But she also sees a growing interest in CDFI partnerships from banks in general. “Clearly the pandemic and the racist reckoning that the whole country is grappling with is part of it,” she said.
“It’s not just about having loan capital”
For bankers of color, initiatives like these from old big banks are welcome but warrant continued scrutiny.
“I wouldn’t say they’re industry leaders,” said Nicole Elam, president and chief executive officer of the National Bankers Association, of Bank of America’s racial justice plans. The Association is a leading trading group for minority deposit institutions. “However, I would say that Bank of America was the first to commit. And from that standpoint, that’s good,” she said, referring to the bank’s early promise to address systemic racism.
Elam is a former vice president of government relations at JPMorgan Chase, where she guided public engagement for his promise in 2020 Spend $30 billion over five years for racial justice.
“They took more time to develop their strategy. It was a little more holistic,” Elam said of JPMorgan’s racial justice programs. “Now you see Bank of America adding new things that they didn’t have before, like this particular initiative.”
She also commended Bank of America for offering grant money on top of the loans in the plan. “So often people make these soft loans,” she said of other banks. “But what most MDIs and CDFIs also need is a grant component. So it’s not just about having loan capital, there are some other things that they need to do to put the capital to work.”
For Elam, the key to these pledges is how well they are implemented through policy, business strategy and philanthropy, and how far into the future they reach. “Most of these banks make commitments for five years. What will it look like in ten years?”