Small minority-owned businesses and people in poorer communities with limited access to banking got a boost Tuesday when Vice President Kamala Harris and Treasury Secretary Janet Yellen announced the release of $8.7 billion in an effort to spur lending to those groups, the Associated Press reported.
"The wealth gap persists today, the homeownership gap persists," Harris said of the need for the investments. "Black entrepreneurs are three times more likely to report that a lack of access to capital negatively affects their profit margins."
The funds come from the Emergency Capital Investment Program, which was created earlier this year to direct funds to Community Development Financial Institutions and minority depository institutions.
The money will go to 186 institutions headquartered across 36 states, with 54 percent of the funds sent to banks and 46 percent sent to credit unions.
During the announcement, Yellen recalled a local business owner she met in Atlanta who did not have enough financial credit to keep all of her stores open over the course of the pandemic. The treasury secretary said that is an example of how the money could go directly to help local businesses.
"Here, it's very easy to connect the policy with the personal," Yellen said. "What this will do is prevent small business owners of color from closing two of their locations. And better yet, it will help people open two more."
The funds will be distributed in packages of over $200 million for the largest banks, and under $100,000 for smaller institutions.
The funding announcement is part of $12 billion for CDFIs and minority banks set aside in legislation that Harris helped write when she was a U.S. senator for California, which passed in late 2020. That follows an investment of $1.25 billion in COVID relief funds to over 800 similar lenders in June, per Reuters.
Harris and Yellen discussed the investments in remarks at the Freedman's Bank Forum, which was hosted by the Treasury Department.
Black Americans represent 13.4 percent of the U.S. population, yet Federal Reserve figures show they control just 4.3 percent of household wealth. More than half of Black household wealth is in the form of pension entitlements, which cannot be passed along to future generations.
The Associated Press contributed to this report.
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