WASHINGTON, [1.4.22] – Today, U.S. Senators Tina Smith (D-Minnesota) and Mike Rounds (R-South Dakota) introduced legislation to jumpstart economic development in economically distressed areas and address disparities in access to capital for underserved communities.
The bill would strengthen and expand Community Development Financial Institutions (CDFI), which play a critical role in bringing capital and financial services to a wide range of underserved communities – from urban areas to small towns and rural communities to Tribal lands.
“Unequal access to capital and financial services is a key driver of economic disparity in rural areas, communities of color, and Indigenous communities,” said Sen. Smith. “This legislation will jumpstart economic development in these communities by expanding and enhancing a program with a track record of effective capital investment and community development.”
“Our bipartisan legislation creates greater opportunity for development in South Dakota, particularly in tribal communities,” said Rounds. “This bill will make much-needed changes to the CDFI Bond Guarantee Program and will directly address issues we’ve heard in our discussions with stakeholders in South Dakota.”
Their legislation—called the CDFI Bond Guarantee Program Improvement Act, named for Community Development Financial Institutions–will make the CDFI Bond Guarantee Program permanent, while making it more reliable and accessible to smaller CDFIs. This legislation will expand and improve a successful program that operates without a taxpayer subsidy and allows CDFIs to access long-term, stable funding.
The CDFI Bond Guarantee Program was enacted in 2010 to provide long-term, low-cost capital to CDFIs, which use the funding for economic development activities in underserved communities. The program’s authorization lapsed in 2014, but it has been extended on a year-by-year basis in annual appropriations bills. Under current program rules, borrowers must have a loan size of at least $100 million – which means that the program can only be used for relatively large projects.
The CDFI Bond Guarantee Program Improvement Act will permanently authorize the program, to provide certainty to borrowers and lenders. It will also reduce the minimum loan size to $25 million, to allow smaller CDFI to utilize the program and to support more community development projects.
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