How JPMorgan Chase is partnering with CDFIs to advance racial equity in the United States – Trade Observer

As part of the company’s $30 billion racial equity commitment, including $14 billion for the creation and preservation of affordable housing, JPMorgan Chase works closely with community development financial institutions ( CDFI) that ensure that this aid has the maximum possible impact in the communities it serves. Partner Insights spoke with Jessel Amin, Executive Director, Community Development Banking at JPMorgan Chase, to discuss how CDFIs support the company’s critical racial equity work.

Trade Observer: How much does JPMorgan Chase cost to invest in CDFIs?

jessel amine

Jessel Amin: JPMorgan Chase has worked with CDFIs for more than two decades and we have invested more than $2 billion in them to date. CDFIs help extend our reach into underserved communities and influence change by supporting the development of housing, community facilities and small businesses that help neighborhoods thrive, such as grocery stores, daycares, schools and health clinics. This funding also incentivizes and stimulates funding, helping to create jobs and address significant economic and social inequalities in underfunded areas. As part of the company’s $30 billion racial equity pledge, Community Development Banking has increased its commitment to lend to CDFIs by more than 30% annually for the next five years.

Please share some examples of how these CDFI investments are helping to support minority developers.

To truly address historic divestment in communities of color, we must begin by intentionally focusing on investing with Black, Hispanic, and Latino development partners so they are better equipped to compete, serve, and benefit residents and neighborhoods in their communities. In 2020, Enterprise Community Partners launched Equitable Path Forward (EPF), a $3.5 billion initiative to address entrenched racial inequalities in housing. Through EPF, Enterprise is investing $350 million, including a $55 million loan fund that provides flexible capital in the form of working capital and unsecured pre-development financing to developers of historically marginalized color. The $55 million fund is capitalized with $5 million in Enterprise equity and $50 million in debt. We were proud to provide the fund with a base investment of $40 million in debt financing. The fund is expected to reach around 25 color developers and leverage more than $500 million in total development costs. And in a transaction that recently closed, Century Housing, a mission-driven CDFI that supports the development of quality affordable housing throughout California, announced the launch of the Century Emerging Developers Program, a special purpose lending program. specifically targeting affordable housing owned by minorities and women. developers. This program is funded by our dedicated facility for $15 million.

What are some of the challenges faced by minority developers making JPMorgan Chase investments so critical?

We lend to CDFIs that meet our highly selective credit profile: high-capacity CDFIs with strong leadership and a track record of strong asset performance through multiple economic cycles. Beyond that, we are looking for CDFIs that focus on promoting systemic change and investing in the infrastructure of the CDFI space – in particular, CDFIs that focus explicitly on capacity building, such as the supporting the infrastructure of small CDFIs or reaching out to minority developers. We seek partnerships with CDFIs that have national reach and local depth in their work. They are engaged in the communities, working where they have boots on the ground. We are also very enthusiastic about the idea of ​​working with CDFIs who bring an innovative vision to their work. They can be pioneers in how we think about structuring credit, their business model, technology and data, for example.

How inflation and rising interest rates have affected the functioning of CDFIs, and how JPMorgan Chase is helping them deal with these factors?

We know that economic downturns disproportionately affect low-income communities, so the work of CDFIs is more important than ever. Historically, CDFIs have delivered strong asset performance throughout economic cycles, and we continue to anticipate strong performance in the current environment. In a rising interest rate environment, it is difficult for CDFIs to absorb the higher cost of capital. This is because profit margins in underinvested communities are tight and it is difficult to pass on higher borrowing costs while meeting community needs. As a result, CDFI spreads and operating margins are compressed, and they are becoming increasingly dependent on mission-driven capital versus market-rate capital. We offer a wide range of products and services to meet the diverse and evolving needs of our CDFI customers – these products and services range from capital and credit solutions to cash management solutions. To meet today’s challenge, we are working with our CDFI partners to design products that creatively solve challenges related to drawdown schedules, amortization schedules, prepayment penalties and fees.

Are there government policies in place to support these efforts? Are there any policies that JPMorgan Chase would like to see put in place to further support these efforts?

The CDFI Fund, which is administered by the United States Department of the Treasury, provides grants and equity, and awards technical assistance grants to CDFIs. Some of these programs include the Financial Assistance Program, New Markets Tax Credit, Capital Magnet Fund, and Bond Guarantee Program. The goal of this program is really to invest federal dollars alongside private capital to help more mission-driven organizations create market-based approaches to working on community development issues. Historically, the CDFI Fund has enjoyed very strong bipartisan support, and we have seen an increase in support for CDFIs since the start of the pandemic. Over the past two years, the Treasury Department has directed more than $15 billion in investments and tax credits to community lenders. The pandemic has really shone a light on the importance of CDFIs in our financial system. Vice President Kamala Harris and Treasury Secretary Janet Yellen announced that the Treasury Department had invested more than $8 billion in 162 CDFIs under the Emergency Investment Program. These funds help support the efforts of financial institutions to provide loans, grants and other forms of assistance to small and minority-owned businesses that have grappled with the impact of the COVID-19 pandemic. 19. Additionally, the Treasury Department announced a bond guarantee of $355 million – the largest round we have ever seen for this program. This source of capital provides the most flexible and long term capital to CDFIs. This year also saw the launch of the Economic Opportunity Coalition, which brings together private sector partners in community development to provide advisory services and financial commitments to CDFIs. We also saw the launch of the Treasury Department’s first-ever Racial Equity Committee. Many CDFI leaders participate in these committees, and I suspect this trend is here to stay.

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