The Aspen Institute and the Microfinance Impact Collaborative today announced the creation of the Entrepreneur Backed Assets (EBA) Fund, which will strengthen the capacity of community-based financial institutions to lend to small businesses in low-income communities and those owned by people of color. The fund, which will create a secondary market for loans originated by community-based microlenders, has been launched with initial grant funding from the Citi Foundation, the Bill & Melinda Gates Foundation, and the Robert Wood Johnson Foundation. Microsoft Corporation and Woodforest National Bank are making the first capital investments in the Fund. A total of $8.75M in founding commitments have been made to this innovative solution.
While small businesses of all kinds have been hurt by the pandemic, business owners of color have been more acutely affected. Between February and June of 2020, the rate of business closures among Latino and Asian business owners was twice that of white owners, and the closure rate of Black-owned firms was almost four times as high.
Community-based microlenders target their lending to businesses that are not served by banks. The six microlenders that comprise the Microfinance Impact Collaborative – Accion Serving Illinois and Indiana, Ascendus, Dreamspring, Justine PETERSEN, LiftFund and Accion Opportunity Fund – make 75% of their loans to business owners of color, and 61% to businesses owned by low- and moderate-income individuals. Recognizing unprecedented circumstances, these lenders have taken action to help by rescheduling and deferring loans and extending additional credit, among other measures. Many community-based lenders now face their own financial challenges as a consequence. EBA Fund will empower these crucial institutions by purchasing existing loans, providing capital for new lending. The Fund has already begun to purchase loans from the CDFIs; with the funding agreements now in place it is on pace to purchase 1,000 small business loans by February of 2021.
Read the full article about the Entrepreneur Backed Assets (EBA) Fund at The Aspen Institute.
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