Reductions to Minority Business Development Agency Staffing and $436B CDFI Capital at Risk
- Charlene Crowell
- 1 day ago
- 4 min read
Under the guise of reducing government fraud and waste, a series of executive orders (EOs) from the White House aggressively reduced budgets and staff in federal agencies that directly deliver public services. But when agencies spark job creation and leverage public investments to attract even larger private ones, there’s no logical reason to nix what is working well.
Yet that is exactly what occurred with a March 16 EO that “eliminates non-statutory functions and reduces statutory functions of unnecessary governmental entities to what is required by law.’
Two offices affected were the Minority Business Development Agency (MBDA), designed to foster the growth of minority businesses, and the Community Development Financial Institutions (CDFI) Fund that provides affordable capital for pivotal urban revitalization, mortgage, small business expansion, and entrepreneurial seed capital investments.
As a division of the Department of Commerce, MBDA is now left with only three employees, according to a recent New York Times article. This is the same office that helped Minority Business Enterprises create jobs, build capacity, increase revenues, and expand regionally, nationally, and internationally. In 2021 as part of the Bipartisan Infrastructure Investment and Jobs Act, MBDA was made more accessible with the creation of regional offices and rural business centers. This same legislation also provided for:
MBDA to coordinate federal government programs and operations that affect the establishment, preservation, and strengthening of socially or economically disadvantaged businesses;
The establishment of grants for certain nonprofit organizations that provide services to MBEs as one of their primary activities; and
A three-pronged approach to promote economic resiliency for minority businesses: an annual forum to review problems and programs relating to MBE capital formation, a study and report on alternative financing solutions for MBEs, and entrepreneurship education grants for certain institutions of higher education to develop and implement entrepreneurship curricula.
As a result, in 2024, MBDA helped businesses secure over $3.2 billion in contracts and $1.6 billion in capital and helped create and retain over 23,000 jobs.
Little wonder then, why Congresswoman Maxine Waters, Ranking Member of the House Financial Services Committee spoke in clear and quick opposition to the cutbacks.
“As history shows, generations of segregation and subjugation faced by communities of color have contributed to a lack of wealth building opportunities and a horribly unequal playing field,” noted Waters. “The MBDA was established in 1969 within the first 100 days of President Nixon’s presidency as the only federal agency solely dedicated to the growth of minority business enterprises. Not even Nixon could turn a blind eye to how rigged the system was against communities of color.”
It is equally true that access to capital is key to any business development.
Unlike traditional banks, the nation’s more than 1,400 CDFIs, with combined assets of over $436 billion, help finance the home, community and business dreams in underserved communities that other financial institutions do not. The CDFI Fund, a division of the Department of Treasury, provides financing to CDFIs that in turn use these monies to offer technical assistance and finance loans.
“CDFIs are on the front lines helping people and places adversely affected by high prices, not enough housing, offshoring, and deindustrialization,” wrote Brett Theodos and Noah McDaniel for the Urban Institute. “The federal government’s CDFI Fund provides foundational funding for these institutions, and other federal agencies have key roles as well. Currently, CDFIs are one of the most cost-effective tools available to federal policymakers, with every $1 in federal investment able to unlock $5 to $10 in additional private funding.”
“Over the past decade, the states with the most CDFI investment were Florida and Mississippi, both with $30 billion total (adjusting for inflation). California, Louisiana, New York, Texas, North Carolina, Wisconsin, Michigan, and Iowa round out the top 10 recipients,” Theodos and McDaniel continued.
A significant number of U.S. Senators agree with the Urban Institute’s assessment. In a March 19 letter to Treasury Secretary Scott Bessent, 23 bipartisan Senators representing 19 states wrote:
“The CDFI Fund’s public-private partnership model aligns with this Administration’s emphasis on ensuring that taxpayer dollars are spent efficiently and with measurable impact,” wrote the Senators. “Every federal dollar injected into a CDFI generates at least eight more dollars from private-sector investment. Due in large part to the investments the Trump Administration made in the CDFI Fund in 2020, industry assets have tripled, and the number of CDFI-certified entities has risen by 40 percent.”
“In sum, more distressed communities are being served by CDFIs than ever before, more first-time buyers are receiving the financing they need to purchase a home, more community facilities are being built, and more commercial loans are reaching entrepreneurs. A reduction in the functions and operations of the CDFI Fund will have a corresponding impact on CDFI-certified entities and local communities and we urge you to avoid this unfortunate outcome,” added the Senators.
Congresswoman Waters was more direct in expressing her support for the CDFI Fund:
“We saw just how crucial a role CDFIs played during the pandemic when our nation’s biggest banks refused to deliver badly needed relief to small businesses who were hit hard by the pandemic – instead prioritizing their wealthy concierge clients.”
“Small businesses are also the heart of our communities, and when given the chance, they create millions of jobs and drive economic growth in communities that need it most. Instead of gutting these crucial programs, this Administration should be supporting small businesses, strengthening CDFIs, expanding MBDA, and confronting the unjust financial system that persists today,” Rep. Waters concluded.
~ Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.
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