How Pro Bono Can Help You Earn Community Reinvestment Act Credit
Think that the Community Reinvestment Act (CRA) has nothing to do with you? Well, if your company delivers pro bono service to the community, you may want to think again.
Here’s the scoop. If you work at a financial services firm that provides pro bono to nonprofits serving low-income communities, you may be missing out on getting CRA credit for the good work you’re doing. The CRA offers a variety of opportunities for both companies and nonprofits to benefit from quality pro bono work through its CRA credit policy.
Still wondering what the Community Reinvestment Act is?
Here’s the cliff-notes version: CRA was passed to ensure that banks invest in low and moderate income (LMI) communities.
Sounds like a good thing. But what does it have to do with pro bono service? Pardon us while we get a bit technical: To enforce the Community Reinvestment Act, regular performance evaluations are conducted to measure whether or not financial institutions are satisfying their CRA requirements. Based on their efforts, institutions receive individual CRA credit ratings. Regulators measure financial institutions against a number of criteria, but the relevant one to note is the extent to which a company makes products and services accessible to LMI individuals. Satisfying this criteria can be achieved by supporting community development services – things like affordable housing, financing for small businesses – and engaging in activities that revitalize and promote economic development in LMI communities.
Why does Taproot care? Well, the Community Reinvestment Act counts qualified pro bono service as a community development service too – and this is exciting for Taproot and our corporate partners in the financial services sector. Read on to figure out if your company can get CRA credit for its work.
Community Reinvestment Act Credit: Would You Qualify?
If you’re wondering whether the pro bono you’re doing at your company qualifies for CRA credits, use the following checklist as a guide:
- Nonprofit Mission: The mission of a nonprofit partner must meet the definition of community development.
- Generally speaking, community development includes practices that help to build stronger communities and empower individuals to affect change where they live.
- Documentation: The financial institution needs to maintain appropriate documentation to show that the organization serves LMI individuals.
- It’s important for organizations to keep consistent sets of metrics and data points to show how they meet the definition of community development and to show that the majority of beneficiaries are LMI individuals.
- Type of Service: The type of service provided must be related to the provision of financial services.
- The CRA describes the provision of financial services as “providing services reflecting financial institutions employees’ areas of expertise at the institution, such as human resources, information technology, and legal services.”
- Right Geography: The geography served must be in the bank’s CRA assessment area.
- These assessment areas are pre-defined by CRA.
- Bank Representation: Volunteers must serve as a representative of the financial institution.
- While partnering with nonprofit organizations, pro bono volunteers must present themselves as representatives of the company they work for.
How did you do? If you’ve checked some or all of the boxes on the list, you’re well on your way to earning CRA credit for your company.
Think of investing in pro bono services for CRA credit as an opportunity to build and grow relationships with nonprofits in the communities where you do business. We’ve found that pro bono service can be a great way for financial institutions to enhance their CRA credit standing while also building capacity at the social sector organizations they partner with.
Engaging in pro bono can help companies attract and retain talent, boost reputation, and foster innovative practices. Our financial institution partners have talented professionals willing to give their time and services to nonprofit organizations because they are interested in making an impact. Doing so creates a strong sense of community and corporate pride, and is a fulfilling way to help nonprofits improve their business practices.
At Taproot, we know it’s important for our corporate partners to understand how Community Reinvestment Act credit works and how an effective CRA strategy can fit into your pro bono service model. Since the Community Reinvestment Act mandates that financial institutions engage in community development and countless nonprofits are committed a shared goal, there’s a natural synergy.