CHICAGO — BMO Harris is launching a $5 billion initiative to support minority-owned businesses and communities, with a significant investment earmarked for Chicago.
The five-year program, announced Tuesday, will increase commercial lending opportunities for Black and Latino businesses, which have been hard-hit during the pandemic. It also will include direct investment in underserved communities through affordable housing and neighborhood revitalization.
“We’ve seen the disparate impact that it (COVID-19) has had on communities of color during the economic downturn,” said Eric Smith, a Chicago-based vice chairman at BMO who is heading up the program. “We wanted to make sure that we could provide targeted assistance to not only small businesses, but to minority businesses as well.”
Nearly a quarter of small businesses in the U.S. have closed since the start of the year, according to September data from Harvard University’s Opportunity Insights. Smith said the closure rate among minority-owned businesses is likely twice that.
The program includes commitments of $3 billion for community reinvestment, $500 million for mortgage loans in low- and moderate- income communities and $500 million for commercial lending.
“We are going to set up a special loan program for Black and Latinx small businesses,” Smith said. “As part of that, we will train our branch bankers to work with small business owners as they come in seeking access to loans.”
Bank of Montreal, now known as BMO Financial Group, acquired Chicago-based Harris Bank in 1984. Chicago is the largest U.S. market for the Canadian banking giant. About 40% of its U.S. branches are in Chicago and the suburbs.
BMO declined to specify how much of the investment will stay in Chicago, but Smith said it represents a “significant portion of the commitment.”
In October, JPMorgan Chase announced a $30 billion, five-year initiative to provide economic opportunities to underserved communities across the U.S. The bank has not specified how much of the money will be allocated to Chicago beyond a $600 million commitment for mortgage loans to Black and Latino families, with a focus on the city’s South and West sides. In 2018, JPMorgan Chase added $10 million to a previous $40 million commitment to fund development in underserved Chicago neighborhoods.
In 2018, after acquiring MB Financial, Fifth Third increased a five-year commitment to invest in underserved Chicago communities to more than $5 billion as part of a $32 billion nationwide initiative.
Under the Community Reinvestment Act, financial institutions are “encouraged” to meet the banking needs of low- and moderate-income neighborhoods in the markets where they do business.
Smith said the economic disruption wrought by the pandemic and the heightened concerns around systemic racism have made efforts to provide equitable access to banking resources even more important.
“It’s important to make sure you go beyond just what’s required,” Smith said. “It’s about making sure that you can really invest in the future and promote economic recovery.”
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