Microsoft and Truist answered a call from the US government’s Federal Deposit Insurance Corporation four years ago to create a pooled investment fund to finance mission-driven banks in underbanked US communities.
The corporations helped launch the Mission Driven Bank Fund with an initial $120 million, which also included an anchor commitment from Warner Brothers Discovery.
The private investment fund sought to raise $500 million to offer flexible, below-market-rate capital and technical assistance to FDIC-insured, mission-driven banks as well as federally designated minority depository institutions and community development financial institutions. It has raised just over $70 million in additional funds.
The Mission Driven Bank Fund (unaffiliated with Mission Driven Finance) has secured commitments from banks including Enterprise Bank and Trust, Hancock Whitney Bank, Banner Bank and Lake City Bank.
Community Finance
The fund has backed 10 mission-driven banks to date, including Grand Bank for Savings, or Grand.bank, a minority depository institution and federal savings bank in Hattiesburg, Mississippi.
Grand.bank has a goal to improve the financial wellbeing of more than a million people in the state’s underserved communities by 2030. The community bank hopes to do so through “affordable homeownership” products like down-payment assistant loans and seller-financed mortgages for first-time home buyers.
“The financial and technical services support of the Mission Driven Bank Fund will help us reach that goal,” said Grand.bank’s Chris Sawyer. Mission Driven Bank declined to disclose the investment amount.
Other banks in Mission Driven Bank’s portfolio include American Bank, an MDI in Texas, and FNBC Bank, a CDFI that operates in Arkansas and Missouri’s underserved communities.
Bridging wealth gaps
Mission Driven Bank, co-managed by Black-led asset management firm Elizabeth Park Capital Management and impact investor Calvert Impact, has a pipeline of 300 mission-driven MDI and CDFI banks the managers believe could make a dent in the racial wealth gap by expanding the financial capacity of local banks to finance homeowners and small businesses.
Misperception of risk and other racial biases in lending from national lenders have also played a key role.
Just 142 of the approximately 4,500 banks and savings institutions the FDIC insures qualify as minority depository institutions with 51% or more of the voting stock owned by minority individuals.
