Historically, minority and women owned businesses have been denied access to capital, and that lack of capital is a key barrier to the development of minority and women owned businesses. In response, the legislature passed the 1993 Minority and Women Owned Business Assistance Act, which created the Linked Deposit Program.
The program links the deposit of state funds to loans made by participating financial institutions to qualified veteran, minority and women-owned businesses. The deposit of state funds is made at below market rates. The savings are then passed on by the bank to the Linked Deposit borrowers in the form of an interest rate reduction.
The Linked Deposit Program has provided access to more than $340 million in bank loans for hundreds of small businesses. But the program became untenable for participating banks because of historically low interest rates.
Rep. Bob Hasegawa and State Treasure James McIntire led an effort to restart the program.
Current statute requires banks to pay at least 2 percent interest on the state’s certificates of deposits while also requiring them to issue loans at lower-than market rates. The low-interest rate environment has forced many banks to drop out of the program because they were required to pay the state an above-market rate on the deposits.
Hasegawa's bill removes the 2 percent minimum-interest requirement and adds flexibility for the treasurer so the linked deposit program overall can work in the current market environment.
Photo: Gov. Gregoire signs HB 1167 on May 7, 2009. Front: Gov. Chris Gregoire, Rep. Bob Hasegawa. Back: Philip Brady, Senate Staff; Marissa Chavez, Legislative Assistant to Rep. Hasegawa; Diane Smith, Senate Staff Coordinator and Counsel.
