More than $1 billion has now been disbursed through the Community Development Financial Institutions Fund?s (CDFI Fund's) CDFI Bond Guarantee Program (BG Program) to support community revitalization activities in distressed and underserved communities across the nation.
Established by the Small Business Jobs Act of 2010 (P.L. 111-240), the BG Program provides long-term, low-cost capital to spur economic growth in low-income communities - at no cost to taxpayers. Through the BG Program, the Secretary of the Treasury provides a 100% guarantee of bonds issued by Qualified Issuers. The Qualified Issuers use the bond proceeds to finance loans to Eligible CDFIs, which then use the funds to make loans in underserved areas.
Since the inception of the BG Program, the Treasury Department has guaranteed more than $1.5 billion in bonds. Eligible CDFIs have up to five years to deploy committed funds. Of the $1.5 billion guaranteed to date, participating CDFIs have now invested over $1 billion in a broad array of projects in low-income urban, rural, and Native Communities.
The unique nature of the capital accessed by CDFIs in the BG Program (which is long-term and low-rate debt) means they have flexibility to finance a variety of innovative and impactful community development initiatives, such as the preservation of affordable housing, financing for rural manufacturing facilities, as well as providing access to key community services. The experience gained by CDFIs that have participated in the BG Program has even led some CDFIs to access debt capital through publically-rated issuances.
The CDFI Fund continues building on the milestones that have already been reached in the BG Program. Recently, the types of community revitalization activities that can be supported through the Program were expanded.
New building construction is now an eligible use of the BG Program. Previously, the proceeds of a bond could only be used to support the renovation or expansion of existing structures. This change will allow participating CDFIs to support a much broader scope of construction activities in distressed and underserved areas. In addition, charter school loans that have a U.S. Department of Education credit enhancement are now eligible to be pledged to the BG Program. Additional information and material can be found on the BG Program webpage under Step 5: Compliance Resource and Reporting.
The CDFI Fund anticipates announcing the FY 2019 BG Program guarantees later this fall and looks forward to regularly reporting on how CDFIs are deploying this important source of long-term capital for investment and lending in distressed and underserved communities.
Jodie Harris is the CDFI Fund Director