An investment fund focused on minority and community development financial institution banks has closed its fund-raising activities after raising $200 million — well short of its initial goal, but still more than previous efforts to boost the sector had collected.
Organizers of the Mission Driven Bank Fund say their job now is to drive strong returns to demonstrate that the sector can be an attractive target for institutional investors.
"The goal for our fund is to turn more eyes to this sector, then hopefully more capital will follow," Paul Welch, head of private equity at Elizabeth Park Capital Management, told American Banker.
Elizabeth Park, in Beechwood Park, Ohio, co-manages the Mission Driven Bank Fund, along with the Bethesda, Maryland-based Calvert Impact. The fund seeks to invest in community development financial institutions and minority depository institutions.
The fund "should lead to greater investment into these banks that are serving underserved communities," said Eric Heisner, Calvert Impact's director of strategy. "As much as we hope we make a huge impact, I don't think a 10-year fund is going to solve everything."
Elizabeth Park and Calvert launched the Mission Driven Bank Fund in September 2021, with
The overall fundraising goal was set at $500 million, but collecting capital has proved difficult in an economy buffeted by inflation, high interest rates and uncertainty. At the same time, the upsurge in attention and support for mission-driven banks that followed George Floyd's murder, with big corporations and banks pledging billions to fight racism, largely subsided.
"We're not as much in the spotlight," Jeannine Jacokes, CEO of the Community Development Bankers Association, told American Banker. Though the sector continues to draw strong, bipartisan support in Congress, enthusiasm for new initiatives appears to be muted.
"Support isn't dipping," Jacokes said. "People aren't saying, `We're going to withdraw our support for the CDFI sector,' but certainly it's been slower in cultivating new supporters."
The idea of supporting CDFIs and minority-owned banks resonated powerfully in the wake of Floyd's death, as investors and policymakers identified the sector as a readily available tool for assisting underserved communities, Welch said. Since then, "we've seen corporations retrench," he said. "I can't put my finger on exactly why that is, but it's a function of the market, and we're trying to raise capital in the market."
Still, like Welch and Heisner, Jacokes believes a successful financial performance by the Mission Driven Bank Fund could play a critical bellwether role, highlighting the returns that the sector can generate. "It creates a track record [showing] that these institutions perform," Jacokes said.
The fund is about 20 months into its five-year investment phase. The five years following the investment phase are devoted to collecting returns and, ultimately, liquidation. Jacokes said it is the largest CDFI-focused investment fund she had seen in her 30-year career. To date, it's made 10 investments, with two more on the verge of finalization, Welch said.
The portfolio includes the $2.6 billion-asset American Bank in Dallas, Texas; the $504 million-asset Anchor Bank in Palm Beach Gardens, Florida; and the $289 million-asset Grand.bank in Hattiesburg, Mississippi.
"Ten in the first 18 to 20 months is a good pace," Welch said. "We are looking to talk to as many banks as we can, so that we can support what is an underserved, underinvested market."
In addition to capital, the Mission Driven Bank Fund is providing technical assistance, especially in the technology realm. It's introducing banks to consultants, conducting webinars and other training sessions, and arranging peer-to-peer mentoring.
The fund's technical services program "really helps drive forward [institutions'] own strategic mission and strategic plans," Heisner said.
The fund is also providing tools to the banks it invests in to help them measure their impact.
"We don't want to tell you what you need to do, but we want to document and measure what you do accomplish," Welch said.
The Mission Driven Bank Fund's final fundraising close, which was announced Aug. 15, came less than two weeks after a deposit program launched in 2024 to channel funding to minority and CDFI banks announced that it had
