Out of $3.5 billion given for community development, not one black bank was awarded

Banks owned by minorities are claiming that the federal government has blocked them out of tax credits that were intended to support economic development in neglected and underserved communities.

Reported by Liku Zelleke

They are raising their protests in the face of the distribution of funds by the Community Development Financial Institutions (CDFI) – an arm of the Treasury Department – which took place last month.

CDFI issued a $3.5 billion New Markets Tax Credit (NMTC) allocation to over 75 financial bodies across the United States. But despite their claims of the longest track records in deploying capital in the country’s most under-served areas, not a single minority owned bank was allocated with the award.

The NMTC program was created to help economic development in communities that needed aid – wherever in the US they may be. It involves giving tax credits to institutions that invest in the communities by implementing projects or creating small business opportunities. The program funnels the investments thought the recipients of tax credit allocation.

The CDFI’s Award Book showed that just 6 awards, or less than 8%, were given to minority-controlled entities of any sorts. These awardees were given only $165 million, less than 5% of the total amount allocated for the program.

“The absence of a single minority bank raises much concern. In 2009, the General Accounting Office issued a report detailing the disparity in NMTC awards to minority entities. The numbers have actually gotten worse, not better,” said Michael Grant, President of the National Bankers Association.

A Government Accountability Office study done in 2009 showed that only 9% of minority businesses succeeded when applying for NMTC awards as opposed to non-minorities succeeding 27% of the time. The success rate decreased even more when it came to minority banks.

Doyle Mitchell, CEO of Industrial Bank of Washington, D.C., estimates that less than 2% of the $450 billion issued under the NMTC program over the past 12 years had gone to minority banks.

“Some of our banks have been deploying capital in the poorest neighborhoods in America for over 100 years, and we think the CDFI Fund should review the program to ensure that applications by minority and other small CDFI banks are evaluated on criteria that reflects their position as regulated institutions operating in distressed areas, which is significantly different from non-regulated or larger institution applicants,” Mitchell said.

Meanwhile, Bob James, President of Carver State Bank in Savannah, Ga., said that his bank’s application had been rejected 6 times, despite the fact that “some of our banks have been deploying capital in the poorest neighborhoods in America for over 100 years, and we think the CDFI Fund should review the program to ensure that applications by minority and other small CDFI banks are evaluated on criteria that reflects their position as regulated institutions operating in distressed areas, which is significantly different from non-regulated or larger institution applicants.”

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