Reworking the CRA to Benefit Native American Communities
While the Community Reinvestment Act has been called “one of the nonprofit sector’s biggest advocacy triumphs,” Native Americans have largely been shut out of the CRAs benefits. In this article, NPQ highlights how some Native Americans are seeking changes to CRA regulations to help direct more financial resources to Native lands.
The CRA, which passed in 1977, requires private banks to make financial services and loans available to low- and moderate-income residents, “especially in communities of color, which had previously been denied loans due to redlining.” All told, the CRA has fostered billions of dollars of investment—trillions, by some counts—by private banks in low-income communities. However, the legislation’s limitations and the need to update it have been acknowledged for years.
One such limitation is the requirement that a low-income community have a bank branch to be eligible for CRA investment. Areas with few or no bank branches, referred to as “CRA deserts,” have been effectively shut out of the opportunities CRA investment offers. Indian Country is mostly located in those CRA deserts. As such, organizations such as the Native American Finance Officers Association are calling for the modernization of the CRA to enable investment in Indian Country.
This would be done in part by building on one of the great successes of Indian Country finance, the rise of a network of Native American-focused community development financial institutions (CDFIs). There are 94 CDFIs operating in Indian Country, according to Federal Reserve data, a sizable number considering that there were a total of 1,131 CDFIs operating nationwide as of May 2019. Banks get “CRA credit” for depositing funds in CDFIs within their service area; indeed, at least as of 2015, banks were the largest single source of CDFI finance (29 percent of total funds lent out). But if the investment occurs outside the bank’s service area, then the bank is not credited with making a community-supporting investment.
The proposed changes call for bank regulators to establish designated CRA zones within tribal lands, meaning banks located anywhere in the US would get CRA credit for investing in projects benefiting Native American areas.