CRA as a business strategy: Four key benefits
The CRA was designed to prevent redlining and ensure that banks meet the credit needs of the communities they serve, including low- and moderate-income (LMI) areas. Under the CRA, banks are assessed based on their lending, while the larger institutions are also examined on their investment and service activities as well. At its core, the CRA was enacted to ensure that banks are serving those markets in which they take deposits; however, over time, this mission has expanded to incentivize activities that benefit broader statewide or regional areas that include the bank’s assessment area. This expansion is where we believe that a bank’s business strategy, coupled with its competitive mindset, can accelerate the CRA’s purpose while meeting unmet market needs.
While fulfilling these obligations is essential for regulatory compliance, forward-thinking banks recognize that aligning with CRA goals can also drive meaningful business growth. Benefits of CRA include:
Expanded market reach
The CRA supports business growth by encouraging banks to expand their market reach into LMI areas, which often contain thriving small businesses and emerging entrepreneurs. For instance, a 2018 study1 led by the Federal Reserve Bank of Philadelphia, with assistance from Harvard University, found that the CRA promotes increased small business applications and originations in LMI communities., including increased lending to LMI borrowers.
Such research may also be valuable for banks that consider expanding or retracting their physical branch presence. Banks evaluating the location and hours of having lenders on-site will also see a benefit, as well as those evaluating branch performance from a CRA perspective. The regulators do not evaluate “efforts” to comply with the CRA, only results. Thus, CRA officers are encouraged to regularly monitor performance by region, or even at the branch level, to ensure goals and objectives are met.
Robust community partnerships
The CRA can foster value-generating partnerships between banks and local organizations. Banks collaborating with Community Development Financial Institutions (CDFIs) can expand their ability to provide flexible financial products and services tailored to local needs, including affordable housing and small business development, both of which are CRA-eligible activities2 as stated by the Federal Deposit Insurance Corporation (FDIC). Another example is a bank partnering with a nonprofit focused on homeownership education, which can improve mortgage approvals for LMI families. Such collaborations strengthen a bank’s reputation and bottom line.
Community partnerships can be reciprocal, thus creating a strategic advantage for all participants. For example, banks that lend, invest, or serve not-for-profits can ask for referrals for customers interested in certain banking products. Banks can also fill their pipeline for open positions by participating in local workforce development training programs through community colleges (see below for additional context). And banks can partner with other banks to increase economies of scale on larger projects thus creating synergies and goodwill amongst what otherwise may be just a competitive relationship.
Enhanced innovation in financial products
The CRA can incentivize banks to innovate their financial offerings. These include specialized mortgage products like the HomeFirst3 program, led by Firstrust Savings Bank, which features low down payments, no private mortgage insurance, and fixed rates. According to the National Disability Institute, the CRA has also spurred innovation in microloan programs4 that fund entrepreneurs in target areas. Throughout, the CRA has helped fuel the rise of digital banking solutions, such as mobile and online services, to simplify the lending process for individuals facing traditional banking barriers. In sum, large banks are incentivized and rewarded under the CRA to put forward products, programs, and services that are considered complex, innovative, and responsive; however, any such efforts must be safe and sound and comply with other consumer protection laws and regulations, such as the Equal Credit Opportunity Act (ECOA).
Talent acquisition and retention
The CRA enhances a bank’s ability to attract and retain talent through values-driven initiatives that align with the preferences of millennials, Gen Z workers, and other coveted demographics in the talent pool. Employees also value CRA-focused activities – such as designing financial literacy programs or collaborating with nonprofits to support small businesses – for the hands-on experience in creative problem-solving, customer engagement, and other skills critical for leadership development. These efforts position banks as employers of choice for mission-driven professionals seeking career advancement through roles that align with their values.
These four benefits deliver organizational value above and beyond the obvious business advantages of CRA regulatory adherence in helping organizations avoid reputational damage5 from non-compliance. In addition, superior CRA performance can strengthen messaging internally to boost staff morale, and in the case of publicly traded institutions, the organization’s share price, as applicable.
Case studies on the strategic impact of CRA investments
The CRA’s value in driving business strategy is far from hypothetical. Financial institutions continue to demonstrate how the CRA can be leveraged for significant growth and innovation in banking operations. Several recent use cases stand out for their effectiveness in expanding business through innovative programs tied to CRA compliance:
Eastern Bank6 has been recognized for its creativity, impact, and program sustainability. The Massachusetts-based bank’s Equity Alliance for Business initiative offers specialized credit solutions, banking services, and entrepreneurial resources to help business owners. Eastern Bank has also successfully shown how credit scores used in traditional underwriting standards can be adjusted to consider other credit-related metrics, thereby leveling the playing field while generating more loan products.
Citizens National Bank7 of Meridian, Mississippi has generated similar outcomes through consumer education programs that create more business by helping applicants establish credit, improve credit scores, and secure affordable home loans. Over a single 12 month period, Citizens National Bank invested nearly 200 hours in one-on-one credit counseling sessions and financial education workshops; provided small loans to more than 500 individuals looking to build their credit scores; and originated 28 home loans in the target LMI population. When banks can articulate how their efforts led to loans, the impact of these efforts is only further amplified.
Additional examples include banks that have grown their customer base through financial literacy programs, partnerships with chambers of commerce, mentorship programs, and other initiatives that have demonstrated how strategic CRA investments can deliver tangible financial returns while strengthening community relationships.
Conclusion: Best practices for integrating CRA into business strategy
While compliance with the Community Reinvestment Act is a requirement, banks that can approach CRA requirements with a strategic mindset stand to gain significant advantages. To maximize the business benefits of CRA activities, banks should consider the following best practices:
- Embrace Data-Driven Decision–Making – Use data analytics to identify target markets and tailor financial products to meet their needs. By leveraging geographic and demographic data, banks can craft investments that align with community demand while revealing lending patterns and community development opportunities.
- Seek Opportunities to Collaborate with Community Organizations – Partnering with local nonprofit and advocacy groups can provide insights that help align CRA efforts with actual community demands. Additionally, working with nonprofits can lead to innovative solutions, such as financial literacy programs or microloan initiatives, which empower communities while creating new business opportunities for the bank.
- Invest in Employee Training – Educate staff about the CRA's purpose and potential to unlock growth opportunities. Ensure employees engaged in CRA-focused initiatives understand how these activities align with broader business goals, and how they can enhance employee skills and leadership qualities.
- Integrate CRA into Digital Strategy – Modernize CRA-related services by investing in digital platforms that improve financial access for underserved populations, such as mobile banking solutions or online loan applications. These platforms can also simplify compliance reporting and allow staff to allocate time toward maximizing the impact of their efforts rather than on tracking.8
- Measure and Report Impact – Banks should track the impact of CRA investments to demonstrate tangible benefits to the business. Regularly sharing these insights with stakeholders strengthens accountability and showcases the value of CRA initiatives. Furthermore, platforms can help translate complex metrics into actionable insights for leadership.
These best practices are just some ways banks can expand their customer base and drive sustainable business value while ensuring CRA compliance. By promoting strategic investments, partnerships, and innovation, the CRA allows financial institutions to do more than fulfill a regulatory obligation; it offers a framework for building strong, profitable relationships with target communities.
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1 PhiladelphiaFed.org: discussion-paper-effects-of-the-cra-on-small-business-lending.pdf
2 Strategies for Community Banks to Develop Partnerships with Community Development Financial Institutions
3 HomeFirst | Community Reinvestment Act (CRA) | Firstrust Bank
4 banks-community-reinvestment-act-opportunities.pdf
5 12 CFR § 225.84 - What are the consequences of failing to maintain a satisfactory or better rating under the Community Reinvestment Act at all insured depository institution subsidiaries? | Electronic Code of Federal Regulations (e-CFR) | US Law | LII / Legal Information Institute
6 Homepage | Eastern Bank
7 Home | Citizens National Bank
8 CRA Wiz® - automation technologies for your CRA reporting process | Wolters Kluwer
