Describing the Allocation of COVID-19 Relief Funds to Financial Institutions
What was the challenge?
The Consolidated Appropriations Act of 2021 (Pub. L. 116-260) established emergency funding programs for financial institutions that serve low- and moderate-income communities. The Rapid Response Program (RRP) was established to award $1.25 billion to Community Development Financial Institutions (CDFIs), and the Emergency Capital Investment Program (ECIP) was established to award $9 billion to CDFIs and Minority Deposit Institutions (MDIs). This descriptive evaluation seeks to understand whether the RRP and ECIP met their intended goal of providing credit to low- and moderate-income and minority populations that have disproportionately suffered from the impacts of the COVID-19 pandemic.
What did we do?
We ask two primary research questions: 1) Did financial institutions that were awarded funds have a greater expected ability to serve Act-priority communities than the average award-eligible institution? 2) Did mortgage-lending institutions that were eligible to receive awards have a greater expected ability to serve Act-priority communities than the average mortgage-lending institution?
To answer these questions, we describe institutions’ expected ability to serve low- and moderate-income and minority populations that have disproportionately suffered from the health and economic impacts of the COVID-19 pandemic (referred to as Act-priority communities).
What did we learn?
Institutions that have been approved for awards are similar to other eligible institutions in terms of how they serve Act-priority communities. Results suggest that a summary index measure of institutions’ expected ability to serve Act-priority communities is similar for awarded and all eligible institutions.
Program eligibility rules resulted in a pool of eligible institutions with greater expected ability to serve priority communities than other similar institutions. Results suggest that eligibility based on existing certification and community investment programs may be an effective way to target institutions with a demonstrated record of serving Act-priority communities.
Read the full report here.