From Vision to Reality: How CDFIs and MDIs Fund Their Important Efforts by Independent Banker

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From Vision to Reality: How CDFIs and MDIs Fund Their Important Efforts by Independent Banker

Minority-owned banks are a lifeline to their communities—but their needs often outstrip deposits. From partnering with other banks, receiving ECIP funds and even working with the NFL, these MDIs are securing the capital and resources to LIFT UP their communities.

Proud to be included in this article about CDFIs and MDIs in Independent Banker.

It can be a vicious circle: Minority depository institutions (MDIs) need capital to lend to their communities, but those communities sometimes can’t make the deposits necessary to build up the bank’s capital and then expand its capacity.  

“Eighty percent of our branches are in low- and moderate-income neighborhoods,” says Carlos P. Naudon, president and CEO of Ponce Bank in the Bronx, N.Y. “Those communities cannot fund enough deposits to make the branches profitable and give us funds to lend out. We have to have alternative sources of funding.”

Ponce Bank, founded 63 years ago by Puerto Rican immigrants, is a Community Development Financial Institution (CDFI). Naudon is proud of the role the $2.8 billion-asset bank, its branches and five loan production offices play in its communities but is keenly aware of how capital constraints sometimes impede the bank’s vision.  

This is not a new problem for MDIs and may also reflect systemic factors. “There’s been a real historical issue of the inability of MDIs to gain access to Tier 1 capital,” says John Lewis, CEO and president of $372 million-asset The Harbor Bank in Baltimore.

Read the article by Judith Sears in full here.

Source: Federal Reserve Bank of Dallas, February 2022

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