Memphis and Beyond: Assessing the Market for CRA Investment

June 16, 2017
By  Nidia Logan Robinson Ian Nunley Rachel Knox

On the precipice of the 40-year anniversary of the Community Reinvestment Act (CRA), Innovate Memphis and the Community Development Council of Greater Memphis partnered to research the current market for CRA investment and suggest recommendations for capitalizing on new opportunities in Memphis. The goal of this research was to find strategic opportunities for partnerships and investment tools with local financial institutions that are subject to the requirements of the CRA. For lenders, improved application of CRA funds can both fuel community development and trigger further investment.

The research included interviews with both long-standing and up-and-coming local for-profit and nonprofit developers, government agencies and nonprofit stakeholders. Additionally, the Innovate Memphis team conducted a scan of peer cities, seeking to understand the strength of their local urban development portfolio and prevalent CRA investment and lending tools, and to better understand what factors have led to improved local community development infrastructure.

Our recommendations focus on strategies and tactics for cultivating a more progressive and collaborative community development pipeline in Memphis. The city should invest in infrastructure that fosters cooperation among financial institutions, adds capacity and training to bring new tools to the market, develops the skills to use the tools with precision, and increases the lending viability of borrowers.

Memphis in Context

CRA legislation is intended to spur lending in communities that are traditionally underserved in terms of financial services. Thus, the CRA examination focuses on evaluating a financial institution’s lending, investment and services offered in or impacting low- and moderate-income (LMI) neighborhoods.

Figure 1 displays the median family income levels of census tracts in Memphis and Shelby County, Tenn. Memphis’ LMI tracts are concentrated in the urban core of the city, with most middle- and upper-income tracts on the periphery and more suburban portions of the county.


Shelby County, Tenn., Census Tracts by Income Level

Shelby County, Tenn., Census Tracts by Income Level


SOURCE: Federal Financial Institutions Examination Council, 2016 FFIEC Census Report—Summary Census Income Information

Research Findings

Stakeholders lack understanding of CRA provisions and how best to apply them for community development purposes.

Effective community partnerships must be based on shared goals and mutual understanding. For this reason, we sought to assess the extent to which potential partners understood the CRA.

Two-thirds of interviewees indicated that they had some knowledge or were very knowledgeable about the requirements of the CRA for financial institutions (Figure 2). Those with a limited understanding of the CRA acknowledged that it would be difficult to enter into new partnerships with banks because they were unaware of the possibilities within the CRA. The lack of local subject matter expertise has made it difficult for local financial institutions and community development corporations (CDCs) to build lasting relationships and a more robust toolkit of lending and investment opportunities.


Analysis of Local CRA Subject Matter Expertise

On a scale of 1 to 5, how well do you understand the CRA and its requirements for certain financial institutions, with 1 being “No understanding at all” and 5 being “Extensive understanding”?

Analysis of Local CRA Subject Matter Expertise

Though we are not proposing that community development leaders become experts in federal banking regulations, more effective and mutually beneficial partnerships can result when both parties understand the possibilities and limitations within the CRA. Some interviewees voiced concern that banks themselves were not fully aware of the range of project types that could qualify for CRA consideration. Therefore, existing partnerships continue to focus primarily on limited affordable housing lending and activities that fall into the services area, such as financial education and loan counseling.

Memphis does not have a strong entity that provides sustained coordination between financial institutions, community organizations and local government.

Currently, there is no central point where community development leaders and financial institutions regularly engage with the goal of developing new partnerships, addressing gaps in financing needs and exploring innovative investment strategies. There are periodic efforts to bring these groups together, but these efforts should be more structured and frequent. Though the bank officers responsible for CRA compliance should be engaged in these regular sessions, loan officers and other bank leadership should also actively participate, as new partnerships have implications for multiple business processes. There may also be benefit in having these engagement opportunities facilitated by a third party.

Community development practitioners are interested in working in new ways with financial institutions to increase both local affordable housing stock and economic development opportunities. Locally, BLDG (Build. Live. Develop. Grow.) Memphis (formerly, Community Development Council of Greater Memphis), the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Bank of St. Louis have worked to provide this coordination.

Developing an intentional pipeline of CRA projects and borrowers is not currently a system­wide priority.

There are essentially two pipelines for facilitating new development that require significant investment in Memphis: projects and people.


Our interview findings from local developers and CDCs established that many lack the subject matter expertise to effectively leverage community lending and investment tools that facilitate project development. In some cases, interviewees said that their limited knowledge and lack of technical assistance in acquiring and using tools (e.g., low-income housing tax credits) impedes their ability to plan larger, more complex development projects. In other cases, the source for acquiring tools can present an administrative barrier for smaller organizations with limited capacity. Most small and mid-sized developers reported that their current projects are using only one or two layers of tools, often in the form of subsidy from government grants or philanthropy and tax credits for debt.

To increase the number and frequency of projects ready for investment, Memphis needs to improve the project planning and implementation capacity for local community-based organizations (CBOs). The city recently launched the first local investment fund aimed squarely at improving the development capacity of local CDCs. Though this resource is greatly needed, local stakeholders need to emphasize a system-wide approach that not only improves capacity, but also collaboration and understanding between all parties.


Banks need good customers and borrowers. However, credit is an obstacle to financing opportunities for LMI borrowers. The St. Louis Fed found that 74.4 percent of Memphians living in LMI neighborhoods are credit constrained, meaning they have poor/fair or no credit history.1 This significantly limits access to mortgages, car loans and even apartment leases. Credit from banks has tightened since the 2008-2009 financial crisis, which has made it increasingly difficult to provide economic stabilization to LMI neighborhoods. Many interviewees indicated that the rate of home loan denials for LMI people is a significant barrier to neighborhood revitalization. CBOs need additional resources to expand programming focused on consumer financial education and creditworthiness.

However, good news is on the horizon. Many interviewees expressed a high degree of optimism regarding the possibilities for accelerating community development in Memphis. New leadership in key positions of city government, current long-­term planning efforts and new philanthropic investments were cited as evidence of a changing tide and more progressive landscape for community development.


To build a more robust and diverse portfolio of CRA-eligible investment opportunities, Memphis should invest in developing a more holistic strategy that includes collaboration among both financial institutions and community organizations, exploring new lending and investment tools, and increasing the ability of borrowers to take out loans.

Identify local champion(s) to lead a coordinated, strategic approach.

Memphis needs an intermediary that provides strategic leadership in developing partnerships, finding opportunities and guiding priority investment based on a coordinated neighborhood development strategy. It is crucial to success that those involved in community development collaborate in a new way and come together regularly, in person, to build the system together.

This new intermediary should serve as a galvanizing force to:

  • help focus energies into a set of priorities;
  • guide an assessment of the tools and investment vehicles needed to address priorities;
  • align funding strategies from multiple sectors;
  • coordinate investment strategies and resources;
  • assess the development environment and assist in identifying and removing barriers; and
  • serve as a convener of stakeholders including banks, developers, government, and community development organizations.

Provide professional development and technical assistance opportunities to address stakeholder gaps in capacity.

Local developers and CDCs are in need of education and training that will allow them to engage in larger-scale community development projects. Local entities are working to launch small developer “boot camps” and interviewees expressed interest in real estate clinics to improve their dealmaking abilities. Member-supported stakeholder groups can also facilitate internal professional development opportunities for their constituent groups.

Develop and expand the tools and investment vehicles that are needed to achieve community development goals.

Creating structured funds or the development of a particular institution or collaboration would only represent part of the solution for improving investments to meet strategic goals. Memphis is working with The Kresge Foundation and Harvard’s Initiative for Responsible Investment to achieve a more coherent and effective community investment system, where financial institutions and other private-sector investors can logically deploy capital in LMI areas.

A New Era for Community Development

Memphis is ushering in a new era of opportunity. Growing engagement by local and national philanthropy and a greater willingness of the banking community to engage as strategic partners are creating a more collaborative and impactful climate for improving the quality of life in our neighborhoods. Banks and communities can enter into mutually beneficial partnerships that help improve local economic opportunity for all.

To build a more robust and diverse portfolio of investment opportunities, Memphis should commit to facilitating a stronger pipeline that better connects financiers, developers and CBOs. Growing collaboration among stakeholders through professional development organizations, adding capacity and training to bring new tools to the marketplace and improving the lending viability of local customers will be essential in creating a more dynamic and prosperous environment for local community development.


The goal of this research is to illuminate options for local community investment partnerships. Though there are several opportunities for investment unfolding in Memphis, intentional cultivation of the pipeline of projects and people should be our next major step. As we have seen in other cities, investment in building capacity and collaboration leads to growth in community development investment in the years that follow.

Nidia Logan-Robinson, Ian Nunley and Rachel Knox are project managers at Innovate Memphis.


  1. Eggleston, Michael C.: “All Low- and Moderate-Income Areas Are Not Created Equal,” Bridges, Summer 2016, Federal Reserve Bank of St. Louis. [ back to text ]

Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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