U.S. Sens. Tina Smith (D-MN) and Mike Rounds (R-SD) introduced a bill that seeks to spur economic development in distressed areas and underserved communities.
Their legislation — CDFI Bond Guarantee Program Improvement Act – would look to strengthen and expand Community Development Financial Institutions (CDFI), which bring capital and financial services to underserved communities.
Specifically, it would make the CDFI Bond Guarantee Program permanent, providing certainty to borrowers and lenders while making it more reliable and accessible to smaller CDFIs.
“Unequal access to capital and financial services is a key driver of economic disparity in rural areas, communities of color, and Indigenous communities,” Smith said. “This legislation will jumpstart economic development in these communities by expanding and enhancing a program with a track record of effective capital investment and community development.”
Further, the CDFI Bond Guarantee Program Improvement Act would reduce the minimum loan size to $25 million to allow smaller CDFIs to use the program. Currently, borrowers must have a loan size of at least $100 million, which means it can only be used for relatively large projects.
“Our bipartisan legislation creates greater opportunity for development in South Dakota, particularly in tribal communities,” Rounds said. “This bill will make much-needed changes to the CDFI Bond Guarantee Program and will directly address issues we’ve heard in our discussions with stakeholders in South Dakota.”
The CDFI Bond Guarantee Program was enacted in 2010 to provide long-term, low-cost capital to CDFIs, which use the funding for economic development activities in underserved communities. The program’s authorization lapsed in 2014, but it has been extended on a year-by-year basis in annual appropriations bills.