Community development financial institutions, including CDFI-certified credit unions, could get a lifeline for when emergencies strike if legislation introduced Tuesday becomes law.
A bill from Sen. Brian Schatz, D-Hawaii, would create an additional $2 billion fund for CDFIs to provide capital during natural disasters and other crises. The fund would complement the U.S. Treasury’s existing CDFI Fund and be replenished each year as needed.
“This pandemic has shown us that when a crisis or a disaster strikes, families and communities need immediate support,” Schatz said in a press release. “By creating a crisis fund for CDFIs with automatic triggers, we can quickly provide aid to the people and small businesses that need it most.”
Thirty percent of the monies would be allocated to CDFIs that double as minority depository institutions, while another 10% will be reserved for institutions serving Native American populations. Individual grant amounts for each institution would be determined by the Treasury, with no grant exceeding 10% of the total amount available in the crisis fund.
Along with being activated in the event of natural disasters, the legislation is designed to include automatic triggers for increases in unemployment at the state or federal level.
The bill already has the support of the Credit Union National Association and Inclusiv, a trade group for CDFI-certified credit unions.
“This automatic, trigger-based crisis fund will ensure that community-based financial institutions, including credit unions, remain in a position to support small businesses and low-income communities,” CUNA President and CEO Jim Nussle
There were 331 CDFI-certified credit unions nationwide on July 13. Over $2 billion in aid has been awarded to CDFIs in need since the Treasury's CDFI Fund was created in 1994.
Along with Schatz, the bill was cosponsored by nine other Democratic senators, as well as Bernie Sanders, an independent who caucuses with the Democrats. No Republicans have signed on to the bill.
