For a few years of Mayor Fischer’s first term, I ran a new kind of agency that sought to combine Innovation with Economic Development – we called it “Economic Growth and Innovation.” It was a departure from traditional economic development and a departure from the hip new Innovation Offices. Our reason for trying this was simple: we need new ideas for our old tools. I’d like to share one illustration of this philosophy in action. When the Community Reinvestment Act or CRA was passed in 1977, banks were riding high, experiencing steady recovery since the low point of the recession in 1975. The country was excited about the recent release of the innovative Apple II computer with its amazing 4KB of RAM and five-inch floppy disc drive. Banking was only done through a combined process of in-person meetings, telephone calls and networking clubs. Instant messaging, video conferencing and cell phones were concepts seen only in science fiction.
For those of us familiar with CRA, we know that Congress’ intent in passing the legislation was to encourage financial institutions to help meet the credit needs of their local communities and discourage redlining. The Act bridged the gap between regulatory requirements and community building in a new way, ensuring that banks devoted resources to all areas and individuals in their markets, regardless of income.
In 2015, banks are seeing an unprecedented change in the way consumers use their services…
Saying that the landscape of banking has changed over the past forty years is at best an understatement. In 2015, banks are seeing an unprecedented change in the way consumers use their services with nearly a third of millennials rapidly adopting mobile banking and rarely, if ever, visiting their local branch. Banks themselves are spending billions of dollars on technology each year, increasing spending 5% annually.
In the midst of all of the recent innovation sits CRA. Banks are still required to meet the credit needs – and for larger banks, the investment and service needs – of their communities. Performance in meeting those needs is judged every few years by federal regulators that provide a public evaluation that anyone can see. So, given the amazing advances in banking technology, CRA has benefited from the rapid innovation and new ideas, right?
The short answer is not really. The business development process started for CRA in 1977 is much the same today. Further complicating the matter, in many financial institutions internal procedures to track and monitor CRA initiatives have added complexity and obscurity to what should be a simple process. CRA examinations are focused on proving performance in a bank market but that burden of proof lies heavily on transaction volume, especially in lending performance, sometimes at the expense of ultimate social impact. Nonprofits are logical recipients of these kinds of funds but are often confused or reluctant to jump into the process, leaving support and money on the table.
Louisville (and the country) needs a fresh approach to CRA and community building between banks and nonprofit community partners.
Louisville (and the country) needs a fresh approach to CRA and community building between banks and nonprofit community partners - an approach that leverages the rich history of CRA, regulatory guidance, and public evaluations to simplify community collaboration. This approach would have to add transparency to the complicated qualification process, promote education about the CRA requirement and bridge the gap between government regulation and community revitalization. It’s a big challenge.
Sometimes we need to look to social entrepreneurs to solve these tough community problems. Here in Louisville, findCRA (www.findCRA.com) has accepted that challenge. findCRA has created an innovative web platform in pursuit of the goal of simplifying the process of collaboration between banks and community partners. With nearly 20 years of banking experience, the company founders developed the findCRA network with an understanding that while the CRA requirements are complex, the matchmaking process does not have to be. They launched the platform in July 2014 in the Louisville market and in the year since have added over 70 partners to their network. Over the next few months, they’ll continue to expand regionally on the path to serving partners throughout the United States.
findCRA levels the playing the field. They have provided a streamlined project- listing process that gives all types of nonprofits and other community partners, including government agencies, the ability to list their community needs in a single place. No longer do executive directors or grant writers have to spend time figuring out all the rules and nuances of the CRA. They work directly with the findCRA team to identify their best CRA-qualifying projects and findCRA takes on the promotion and business development with banks from there.
On the other side, findCRA is bringing opportunities to its bank partners that have a demonstrated community reinvestment purpose. Each project receives a CRA analysis that highlights the measurable impacts of the project. Through the findCRA network, inclusive collaboration is the key – leading to stronger connections, lasting partnerships and ultimately greater community impact.
findCRA has taken an innovative approach to a longstanding community need to bring capital to part of our community that have inspirational ideas for revitalization. I hope findCRA does well and inspires more companies to take those old tools out and make them work better.