WILMINGTON — Delaware regulators are finalizing the rules for a community investment fund (CIF) to incentivize banks and federal credit unions to become more creative in new products for customers in disadvantaged areas.
Established by Senate Bill 83, the community investment fund is one of the first of its kind in Delaware focused on investing in or underwriting new financial products with $2.5 million in state funds the first year. Traditionally, CIFs are professionally-managed investment funds sourced from people in the community to invest in the community through people, projects and businesses. It’s also typically deployed by institutions in those communities.
For the past three months, the Delaware Council on Banking has worked to develop the community investment fund application for proposals from financial institutions in Delaware – though that includes banking giants like JPMorgan Chase & Co. and Bank of America as well as smaller institutions like WSFS and local federal credit unions. The bill, signed into law by Gov. John Carney in 2023, outlined that this community investment fund is designated for low to moderate income tracts in the First State.
The Office of the State Bank Commissioner is also allowed to transfer $500,000 to the CIF each year through Fiscal Year 2028 to give administrators time to market the fund out in the community.
Sen. Darius Brown (D-Edgemoor/Wilmington), who sponsored the legislation that created the fund, told the Delaware Business Times that his work with the Northeast Revitalization Fund has opened his eyes that such funds can work and need to be expanded to reach the state.
The Northeast Revitalization Fund was established by Community Development Financial Institutions like True Access Capital to offer loans and technical assistance to the community in Northeast Wilmington, where 38% of its population live in poverty.
“That invested thousands in the community and created more than 100 jobs,” Brown told DBT. “That opened the door for business owners, not just in my district but around the state to call me and ask if I could make an introduction or what bank they can call. I thought it was important to open access from banking institutions just beyond the investment and really focus on how we can get to these entrepreneurs in incubation periods, and how to build more of a successful ecosystem.”
With banks tightening their lending standards for small firms and interest rates just now seeing cuts after a year, that could mean there’s less opportunity for securing funding. More than 80% of businesses that opened in 2020 were started by a person of color – and they are 20% less likely to fund themselves through an institutional lender, according to research from the
While the CIF is focused on locally based institutions, Brown also noted that it could serve as a way to get the financial giants here to think outside the box to reach those entrepreneurs facing barriers to bank. Citing population projections, Brown said that by 2050, Delaware is likely to become a majority-minority state, with many residents working at small businesses.
“We need more players in the game – more regional and more national players,” Brown said. “Not only are we looking to work with local banks, but it’s a way to speak to a larger system of businesses that they should do business here to start to form those relationships with banking institutions, as well as diversifying the state’s portfolio of small and mid-sized firms.”
The Delaware Council on Banking is still drafting the code that will spell out who will be qualified for funds from the CIF and what products would be suitable. Brionna Denby, the Senior Vice President-General Counsel at WSFS Bank who serves as the Council’s president, said that products could range from personal and business loans, financial education programs and home equity line of credit or more.
“We’re really focused on putting the materials together first and then having a launch date to market it to financial institutions, CDFIs and credit unions to make sure they’re aware of it,” Denby said. “There’s been a couple of folks in the CDFI world that have asked about this fund already, so there’s already interest in this.”
The goal is to have the CIF requirements in place by early 2025, though Denby was cautious about a certain date at this time.
“We want to manage the time frame of the request so we have applicants, but with enough lead time to roll out the materials. If a CDFI doesn’t know about this and have a client that they do business, this is another tool in the toolbox,” she said.
