JPMorgan Chase and Google launched a program Tuesday to help banks owned and led by people of color increase their lending capabilities.
The new initiative is dubbed “Empowering Change.” It’s designed to help banks that are majority-owned or directed by people of color provide JPMorgan-backed money market funds to large companies. Most minority depository institutions wouldn’t have the resources to service those companies otherwise.
The program offers the same services to minority-led community development financial institutions, which offer credit to underserved markets typically overlooked by mainstream lenders.
JPMorgan says Empower Change will give minority-owned banks access to corporate clients, providing new revenue streams that can help these banks better serve their communities.
“MDIs and CDFIs are really important components of the financial system that could achieve greater scale with more investment and support,” JPMorgan executive director Ted Archer told CNN Business. “We think, in partnership with them, we can extend their capabilities into communities that desperately need access to banking and financial services.”
JPMorgan will receive an annual management fee for the investment assets being offered through Empowering Change, but the company says it will donate 12.5% of that revenue to local community development nonprofits.
Google plans to invest a total of $500 million in money market share funds for the Empowering Change program. Initially, the search engine company says, those funds will be distributed by four minority-led banks: M&F Bank in North Carolina, Harbor Bank of Maryland, Liberty Bank and Trust in New Orleans, and Unity National Bank in Texas and Atlanta.
“This is another step for us to continue supporting minority and diverse-led institutions in a way that we hope will inspire other participants and have a multiplier effect,” Google treasurer Juan Rajlin told CNN Business.
M&F Bank president and CEO James Sills says Empowering Change gives MDIs like his a way to play a larger role in reducing the wealth gap between White America and most people of color. In 2016, the average White American household’s net worth was $901,000 while the average Black American household had a net worth of just $140,000, according to a Survey of Consumer Finances study cited by the Federal Reserve.
“The new share class will create new, recurring and long-term revenue opportunities for M&F Bank, which in turn will benefit the local communities,” Sills told CNN Business.
Empowering Change is just one of the latest programs stemming from JPMorgan’s $30 billion commitment to advance racial equity. The company made the commitment in October in the aftermath of the George Floyd tragedy, which compelled Corporate America at large to do more to combat institutional racism.
In conjunction with that commitment, JPMorgan said it would invest $50 million in Black and Latinx-led MDIs and community development financial institutions. The bank confirmed Tuesday that it has already invested a total of $40 million in the holding companies for four Black-owned banks: Carver Federal Savings Bank in New York City and Broadway Federal Bank in Los Angeles, in addition to Liberty Bank and Trust and M&F Bank.
JPMorgan has also created a program to use new market tax credits to incentivize community development projects in underserved communities. Through the tax credit program, the company is investing $20 million in the Washington, DC-based non-profit Community of Hope, which provides food relief, after-school programs and other targeted aid for the poor and elderly.
Some of the money being invested will go to help MDIs improve their technological capabilities, which is one of their top priorities this year, according to the National Bankers Association — a trade group that represents 23 of the nation’s minority-owned lenders. The association’s chairman, Robert James, says his organization is looking forward to working with JPMorgan and Google to expand the services they’re offering to all MDIs.
“We all have a collective mission to close the racial wealth gap,” James said. “If we all work together, it’ll be much more powerful than if there’s only a handful of banks participating.”