The U.S. Department of the Treasury has announced that a new program intending to help out with access to capital in communities that have traditionally been underserved and that have suffered more than usual in the pandemic, a press release says.
Called the Emergency Capital Investment Program (ECIP), the program will invest $9 billion into Community Development Financial Institutions (CDFIs) and minority depository institutions (MDIs) which are working to help provide financial products for small and minority-owned businesses and customers in the low-income and underserved communities.
The money will be provided directly to the CDFIs and MDIs to help the provision of loans, grants and forbearance for businesses.
The program also sets aside $2 billion for participants with under $500 million in assets, while another $2 billion will go towards participants with less than $2 billion in assets.
“America has always had financial services deserts, places where it’s very difficult for people to get their hands on capital so they can, for example, start a business. But the pandemic has made these deserts even more inhospitable,” said Secretary Janet L. Yellen. “The Emergency Capital Investment Program will help these places that the financial sector hasn’t typically served well. It will allow people to access capital, especially in communities of color and rural areas.”
The release says the program’s highlights include incentivizing interest rates via capped low-cost dividends on investments. It will ensure capital capital treatment that maximizes program effectiveness, which will come through agreements with federal banking regulators, and it will help people in general plan more for the long term, the release says.
Short-term lending could be a big help for many Americans living paycheck to paycheck, and in particular modern solutions like a mobile peer-to-peer network to help build creditworthiness, which is what SoLo offers. Travis Holoway, co-founder and CEO of SoLo Funds, told PYMNTS that the best indicator of creditworthiness was often cash flow, such as people working on side hustles or other things outside of a traditional paycheck.