Wells Fargo Commits Up to $50 Million Investment To Help Support Black Banks
by Jeffrey McKinney
The San Francisco-based banking and financial services company announced Tuesday that these investments are part of Wells Fargo’s commitment to supporting economic growth in African American communities. That is where MDIs, often community-based banks, provide mortgage credit, small business lending, and other banking services.
Many black-owned banks in America are now facing difficult circumstances and need big-time support to help them stay open.
“Our industry is stronger when we work together, shepherding resources for underserved individuals and small businesses to create economic opportunities that will strengthen the long-term success of communities,” Jonathan Weiss, CEO of corporate & investment banking and interim CEO of wealth & investment management at Wells Fargo, said in a news release.
“MDIs are a key part of the lending ecosystem for underserved communities, playing an important role in neighborhood revitalization, and we look forward to helping African American MDIs grow, serve their communities, and expand their sphere of influence by providing capital, connections and expertise.”
MDIs have for decades provided banking services to minority residents, including African Americans, who live in low and moderate-income areas. Yet raising capital is the biggest challenge for MDIs, potentially threatening their ability to keep serving underserved residents who often don’t rely on traditional banks for financial services.
The bank maintains the fresh investment complements of its Wells Fargo’s Diverse Community Capital (DCC) program, a five-year, $175 million initiative to empower diverse small business owners with greater access to capital and technical help so they can grow and sustain local jobs. The DCC program is a collaboration with Opportunity Finance Network and CDFIs (Community Development Financial Institutions) across the country.
To date, the CDFIs in the program have made 124,000 loans, delivered 322,000 hours of technical assistance, and benefited 49,000 small business owners who collectively sustain more than 183,000 jobs in rural and urban markets nationwide, Wells Fargo reported.
Additionally, Wells Fargo commended Congresswoman Joyce Beatty (D-OH) and Congressman Gregory Meeks (D-NY) for recently sponsoring legislation to enhance MDIs. These investments in African American MDIs will support the spirit of that legislation.
Commenting on Wells Fargo’s investment, William Michael Cunningham, a Washington, D.C.-based economist and banking expert, says this is good news. “We think other banks may create similar initiatives, as Citigroup did with its $150 million impact fund.”
BLACK ENTERPRISE reported that African American businesses with socially-driven concepts can now possibly attain some new capital from Citi from the new $150 million Citi Impact Fund. It was started to make equity investments in private U.S. companies. The New York-based financial services giant claims it is the largest fund launched by a bank using its own capital.
Cunningham says a key will be measuring and reporting on impacts. He claims getting authentic advice is especially important for the staff and board, given the impact of the bank’s past behavior on the black community.
“For this type of investment, in creating and analyzing the impact investment process, it is critical for the bank to move outside the traditional, expected set of community development advisers,” Cunningham says. He adds that using traditional and social media to reach both consumers and regulators is another needed skill.
Cunningham runs Creative Investment Research, an impact investment research firm. He has been researching and analyzing black banks since 1990.