Federation: CUs Face ‘Historic Opportunity’

Working people have been disappointed or disenfranchised by large banks.

October 01, 2013
/ PRINT / ShareShare / Text Size +
The need for safe and affordable savings, credit, and transaction services among low- and moderate-income communities is tremendous: More than 68 million American adults are unbanked or underbanked. 
Many of these working people have been disappointed or disenfranchised by large banks and seek alternatives to high-cost and complex banking instruments. 
This presents a “historic opportunity” for credit unions, says Cathie Mahon, president/CEO of the National Federation of Community Development Credit Unions. 
How the movement takes advantage of this moment affects the visibility of credit unions and ultimately their market share in the financial services industry. 
Many credit unions have already stepped up to fill the nation’s underserved markets. And many are using NCUA’s low-income designation to do it. 
This designation entitles credit unions that meet certain lowincome membership criteria to a number of legislated benefits, including eligibility to: 
  • Accept nonmember deposits from any source; 
  • Offer secondary capital accounts; 
  • Receive exemption from the aggregated loan limit for member business loans; and 
  • Apply for grants and low-interest loans from NCUA. 
As of August 2013, 1,961 credit unions with over $157 billion in assets are designated low-income. 
“The opportunity to empower underserved communities through credit unions is possible on a scale that didn’t exist before,” Mahon says about the NCUA designation. 
While some credit unions might worry about the risks associated with serving consumers with little or no exposure to formal financial services, Mahon says it can be good business. 
“Tapping into an underserved marketplace is the perfect example of ‘doing well by being good,’ a win for credit unions and a win for the underserved,” Mahon says. 
In fact, she says credit unions that embrace a community development mission tend to find a wealth of resources, partners, and good will that can “catapult their business” forward. 
The Federation has been supporting these “win-win” efforts for years. 
During the past year, the Federation has further broadened its focus to provide the information, tools, and partnerships to help credit unions of all shapes and sizes serve underserved markets. 
“We’re the bridge to connect the credit union industry to local economic development, safe and affordable home ownership, service delivery systems, and the vast network of nonprofit civic institutions that make communities strong,” says Mahon. 
Three-pronged platform supports development 
The Federation supports its 250 member community development credit unions (CDCUs) with a three-pronged platform: 
1. Capital. The Federation invests in CDCUs to boost net worth and to promote liquidity through its Community Development Investment Program. 
CDCUs have received more than $90 million in investments since the fund’s inception in 1982. 
These funds provide member credit unions with a cushion to test innovative products and services while mitigating the risk to their institutions, Mahon says. 
2. Knowledge. The Federation was instrumental in establishing the Community Development Financial Institutions (CDFI) Fund in 1994. 
This fund promotes economic revitalization in distressed communities by providing financial assistance and information to CDFIs. 
The Federation is a permanent member of the national CDFI Coalition. 
“From this perch, we represent the credit union sector to the CDFI Fund, influencing major adaptations to their selection process” says Mahon. 
Additionally, the Federation offers credit unions a wealth of experience in the certification and recertification process for the funds via its consulting firm CU Breakthrough. 
3. Impact: The Federation assists credit unions by developing new resources. 
The Federation recently developed an Emerging Market Review tool that’s proving especially useful for credit unions as they try to align their cultures, products, and services to the needs of low-income members. 
“We’ve always been good at working with strategic partners to develop products for vulnerable populations,” Mahon says. “Now we’re focused on translating pilots into scalable programs that will succeed because they’ve been tested in the real world.” 
Two additional tool kits will come out this fall: 
1. “Borrow & Save,” a small-dollar loan that builds savings; and 
2. “Better Directions,” a tool that helps seniors achieve and maintain financial security. 

Post a comment to this story


What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive