community development credit unionsmicroloan funds and credit unions). organizations interested in...
TRANSCRIPT
![Page 1: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/1.jpg)
COMMUNITY DEVELOPMENT
CREDIT UNIONS
Community Economic Development Manual
![Page 2: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/2.jpg)
Disclaimer
This fact sheet was produced by the California Community Economic Development Association, in
partnership with the Community Action Partnership National Office, as part of the U.S. Department of Health
and Human Services, Office of Community Services. The “Community Economic Development” publication
series is designed to increase the knowledge of processes for community economic development projects
nationwide. The contents of this manual are presented as a matter of information only. Nothing herein should
be construed as providing legal, tax, or financial advice. The materials referenced and the opinions expressed
in this product do not necessarily reflect the position of the U.S. Department of Health and Human Services,
Office of Community Services, and no official endorsements by that agency should be inferred.
Support for the Community Economic Development project and this toolkit is provided by the
Department of Health and Human Services Administration for Children and Families,
Office of Community Services (OCS), grant award number: 90ET0426/01.
Entire contents copyright © 2011 Community Action Partnership. All rights reserved.
![Page 3: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/3.jpg)
CommunityDevelopmentCreditUnions 1
COMMUNITYDEVELOPMENTCREDITUNIONSUseofthisGuideTheCommunityDevelopmentCreditUnionGuideisintendedforusebycommunitydevelopmentorganizationsforthefollowingpurposes:
1. OrganizationswantingtolearnaboutCreditUnions2. Organizationscreatingalternativelendingandinvestmentprograms3. Organizationsseekingservicesandcapitalfromloanfunds
NOTE:Forpurposesofthisguide,focuswillbeonbusinesslending(tostart,expandorinvestinbusinessdevelopment)andtoalesserdegreeonpersonalloans(home,autooreducationalloans).Thisguideisoneoffiveguidesdiscussingthefollowingcategoriesoflendingandinvestmentactivities:
1. CommunityDevelopmentLoanFunds(CDLFs):ThisbroadcategoryincludesallloanfundsthatarenotCreditUnionsorEquityInvestmentfunds.Theinformationinthissectionincludesthestepsandconsiderationsforstartingaloanfund.
2. MicroloanFunds:Thisisasubcategorytypeofloanthatfundfocusesonsmallerloans,primarilyforstartupfinancing.
3. CreditUnions:Thisisafederal/statedesignationforalendinginstitutionthatmeetscertaincapitalrequirements,operatingguidelinesandmanagementsystems.
4. EquityInvestmentFunds:Fundsthatprovideequityinvestment(versusloans)intocommunitydevelopmentactivities.
5. CommunityDevelopmentFinancialInstitutions(CDFIs):ThisisaFederalUSTreasurydesignationbasedonorganizationalandlendingstandardsthatallowsloanfundsaccesstoUSTreasurygrantsthroughtheCDFIFund(includesmostCDLFs,MicroloanfundsandCreditUnions).
Organizationsinterestedinexpandingaccesstocapitalforunderservedcommunitieshavefocusedonvariousformsofloanandinvestmentfunds.ThisguidewillfocusonCreditUnions.CreditUnionsprovidespecializedformsofcredit,butcanalsocapturelocalsavingsfromindividualsandbusinessentities.Theabilitytokeepcommunityassets(throughdeposits)withinthecommunitymakescreditunionsaveryimportanttoolforcommunitydevelopment.Creditunionsareregulatedandmustmaintaincertaincapitallevelsbittheydohavelowerrequirementthresholdsascomparedtothriftandloansandbanks.Creditunionsofferanexpandedmenuofcreditandbankingservicesforcommunitiesandresidents.
CreditunionsareeligibletobecomecertifiedCommunityDevelopmentFinancialInstitutions.Thisfederalcertificationallowsloanandinvestmentaccessawidermenuofgrantsandprogramsdesignedtobringcapitaltolowincomeandunderservedcommunities.
CommunityDevelopmentFinancialInstitutions(CDFIs)isbecomingthestandardnomenclaturecategorizingallcommunitydevelopmentlendingandinvestmententities(albeitnotallsuchentitieshaveobtainedtheofficialUSTreasurydesignation,mosthaveandwillapplyfortheCDFIdesignationbecauseitrepresentsarecognizableindustrystandard).TheOpportunityFinanceNetworkistheassociationrepresentingalltypesoflendinginstitutionsandhasbroadly
![Page 4: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/4.jpg)
CommunityDevelopmentCreditUnions 2
categorizedalllendinginstitutionsasCDFIsandsubcategorizedlendingandinvestmentinstitutionsasfollows:1
“Aswithmainstreamlenders,avarietyofinstitutionshasemergedtoservethebroadrangeofneedsinemergingdomesticmarkets.Althoughtheyshareacommonvisionofexpandingeconomicopportunityandimprovingthequalityoflifeforlowincomepeopleandcommunities,thefourCDFIsectors—banks,creditunions,loanfunds,andventurecapital(VC)funds—arecharacterizedbydifferentbusinessmodelsandlegalstructures”:
1. CommunityDevelopmentBanks:Communitydevelopmentbanksprovidecapitaltorebuild
economicallydistressedcommunitiesthroughtargetedlendingandinvesting.Theyareforprofitcorporationswithcommunityrepresentationontheirboardsofdirectors.Dependingontheirindividualcharter,suchbanksareregulatedbysomecombinationoftheFederalDepositInsuranceCorporation(FDIC),theFederalReserve,theOfficeoftheComptrolleroftheCurrency,theOfficeofThriftSupervision,andstatebankingagencies.TheirdepositsareinsuredbyFDIC.
2. CommunityDevelopmentCreditUnions:Communitydevelopmentcreditunions(CDCUs)promoteownershipofassetsandsavingsandprovideaffordablecreditandretailfinancialservicestolowincomepeople,oftenwithspecialoutreachtominoritycommunities.Theyarenonprofitfinancialcooperativesownedbytheirmembers.CreditunionsareregulatedbytheNationalCreditUnionAdministration(NCUA),anindependentfederalagency,bystateagencies,orboth.Inmostinstitutions,depositsarealsoinsuredbyNCUA.
3. CommunityDevelopmentLoanFunds:Communitydevelopmentloanfunds(CDLFs)providefinancinganddevelopmentservicestobusinesses,organizations,andindividualsinlowincomecommunities.Therearefourmaintypesofloanfunds:microenterprise,smallbusiness,housing,andcommunityserviceorganizations.Eachisdefinedbytheclientserved,thoughmanyloanfundsservemorethanonetypeofclientinasingleinstitution.CDLFstendtobenonprofitandgovernedbyboardsofdirectorswithcommunityrepresentation.
4. CommunityDevelopmentVentureCapitalFunds:Communitydevelopmentventurecapital(CDVC)fundsprovideequityanddebtwithequityfeaturesforsmallandmediumsizedbusinessesindistressedcommunities.Theycanbeeitherforprofitornonprofitandincludecommunityrepresentation.
Thecompanion“CommunityDevelopmentFinancialInstitutions(CDFI)Guide”alsotouchesonmanyaspectsofloanfundsandshouldalsobereviewed.TheCDFIGuidehoweverisusuallythe“nextstep”forestablishedloanfunds.Wewouldalsorecommendreviewingthe“BusinessTechnicalAssistanceGuide”sincethetwocommunitydevelopmentactivitiesworkhandinhand.Duetorecenteconomicandfinancialturmoil,commerciallendersandinvestorshavetightenedlendingrequirements,resultingina“creditcrunch”wherecreditneedsaregreaterthanresources.Thiseconomiclandscapehasresultedincommercialfinancialinstitutionsrelyingmoreoncommunityloanfundsasthemechanismtobetterservenichemarketneeds.Financialinstitutionsnowinvestandlendmoreaggressivelytofinanciallysoundandstableloanfunds.Loanfundsandcreditunionshavebuiltastrongreputationbyunderstandinglocalcreditnuancesandneedsresultinginsoundlendingandstrongloanportfolios
1 Opportunity Finance Network, website: www.opportunityfinance.net
![Page 5: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/5.jpg)
CommunityDevelopmentCreditUnions 3
Forsuccessfullendinginstitutions,theCDFIdesignationisveryimportantandallowslendingprogramstogrowdramatically.MostfoundationandcorporategrantsandinvestmentsfromfinancialinstitutionslookfortheCDFIdesignationbeforegrantorinvestmentdiscussionsbegin.Overthelastthreeyears,financialinstitutionshavebeenactivelyseekingsoundCDFIstoinvestin.CDFIshavebeenaverysuccessfulmechanismforfinancialinstitutionstomeetlendingandinvestmentmeasuresrequiredbytheCommunityReinvestmentAct(CRA)andenforcedbybankingregulators.AhighCRAratingisneededifthefinancialinstitutionhasplanstoexpandinthefuture.TheCDFIdesignationisdeterminedthroughacertificationprocessconferredbytheCDFIFundoftheDepartmentofTreasury.Thedesignationisforfinancialinstitutions(andlendingprogramsincludingcommunityloanfunds)andallowsaccesstoTreasuryprogramsandinvestments.NOTE:BecausetheCDFIdesignationissoimportant,itwillbereferredtothroughoutthisguideandwillbesummarizedattheend.The“CommunityDevelopmentFinancialInstitutionsGuide”shouldbereferredtofordetailsontheCDFIFundanditsprograms.Creditunionsplayanintegralroleinsupportofacommunity’seconomicdevelopmentstrategy.Thesefinancialinstitutionscanimportandretaincapitalthroughdepositsandcanre‐circulatecapitalinunderservedmarkets.Thesefundscanbeusedforbusinessfinance(startup,micro,non‐profit,smallandbusinessexpansion),realestatedevelopmentfinance(affordablehousing,commercialandoffice,communityfacilitiesandindustrial)andpersonalfinance(auto,homeorpersonal).Capitalenhanceseconomicstabilitywhilecreatingjobsandopportunitiesforcommunityresidents.Creationofpersonalandcommunityassetsisakeystoneinbuildingandstrengtheningcommunities.Creditunionsalsobringcommunitiesahigherleveloftechnicalexpertiseinbusinessandfinance,increasingthepotentialforsustainedcommunitystabilityandgrowth.Financialinstitutionshavebecomemoreeffectiveinmeetingcustomerdemandsinlowincomeanddisadvantagedcommunitiesthroughchannelscreatedbyloanfunds.Financiallysuccessfulfundsgenerateincometocoverorganizationaloperatingandoverheadexpensesandcanbringadditionalincometosupportothercommunitycreditneeds,suchasbusinesstechnicalassistanceprogramsandexpansionoflendingservices(suchasautoloans,microloans,homeorbusinessloans).Astrongerandfinanciallyviablelendingbusinessenhancestheoverallsuccessandlongevityofyourcommunitydevelopmentorganizationwhilesupportingcommunitycreditneeds.Loanfundsplayaveryimportantroleincommunitydevelopment(revitalizationandstabilization).Theeffectsaresubstantialandinclude:FortheOrganization:
1. Generatesadditionalincomefortheprogram2. Supportsandallowsforthecreationofcomplementaryprograms,servicesandprojects3. Expandsstaffcapacityandcapabilitiesbyattractingandretainingexperienced
professionalsinbusinessfinanceanddevelopmentForthecommunity:
1. Increasesaccesstocapital2. Increasedaccess‐relatedresourcessuchastrainingandtechnicalassistanceintheareasof
financeandbusinessdevelopment3. Createspersonalandcommunityassets
![Page 6: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/6.jpg)
CommunityDevelopmentCreditUnions 4
4. Enhancesthelocaleconomybysupportingimportantsegmentsoftheeconomicinfrastructureincludingbusiness,residentialandindustrialsectors
5. Cancollectdepositsthatwillkeepcapitalre‐circulatingthroughthelocaleconomy.6. Providesneededbankingservicesatgenerallylowercostsascomparedtootherfinancial
institutions(includingbanksandespeciallycheckcashingoutlets).Successfullendingefforts(andancillaryfinancialprograms)resultsineconomicallystrongercommunities,strongerworkforces,moreinformedandcapablebusinessesandtenants,andultimatelyastrongerandmoreinclusiveeconomy.Theaddedabilitytocollectdepositsfromthecommunityhelpstokeepcapitalre‐circulatingwithinthecommunity.
![Page 7: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/7.jpg)
CommunityDevelopmentCreditUnions 5
LendingandInvestmentProgramFeasibilityConcepts:Operatingacreditunionisabusinessandcangenerateincomefororganizationsiftheyareoperatedproperlyandhavetherightlevelofactivity.Keymanagementtermsandconceptsinclude:
1. CostofFunds:Yourloanpoolmayincludevarioussourcesofgrantsandinvestmentfunds.Somewillcomeinatdifferentinterestrates.Theblendedrateistheaveragerateforyourloanpool.Ifyoureceivedallgrantstheratewouldbe“0”butifyoureceivedaninvestmentorloan,theratemightbe2‐5%.
2. InterestRateSpread:Thespreadisthedifferentialbetweencostoffundsandwhattherateofreturnisforyourfunds(averageinterestrateyouarecharging).
3. Breakeven:Thisistheminimumrate(abovethecostoffunds)youneedtochargetocoveryourexpenses.
4. FundExpensesandOverhead:Expensesincludebusinessoperations(loanandportfoliomanagement),businessmanagementandmarketing,officeandstaffcosts.Theseareexpensesthatshouldbepaidfromtheincomederivedfromthe“interestratespread”.Ifyourincomedoesnotcoverexpenses,youwillneedtosecureongoingfundingforoperations.
5. LoanLoss:Thisistheexpectedrateoflossesinbadloans.Allfundshaveprovisionsforloanlossesandthemoreaggressivethefundis(willingtotakemorelendingrisks),thegreaterthelossescouldbe.Successfulfundsestimateloanlosseswellbelow5%(whichatonetimewasastandardcommerciallendinglossexpectation).
6. LoanLossReserve:Loanlossreservesarefundssetasidethatmaybeneededtorepayanyloansorinvestmentsmadetoyourfund.Ifyourfundconsistsofamixofloansinvestmentsandgrants,andaportion(ormajority)ofthebadloanneededtoberepaidtoalenderorinvestor,youwoulddrawthefundsfromaloanlossreserve.Ifoneloanwentbadandyourfundlost$25,000.,youwouldneedtotapintothereservetorepaythelenderorinvestor.Theriskieryourlendingisorifyouhavehadhistoricallyhighloanlosses,youwouldneedahigherloanlossreserve.Highloanlossreservesdonotbenefityourfundsincetheyaredollarsthataresetasideandarenot“working”asoutstandingloansorgeneratinginterestincome.
Infinancialinstitutionsandinlargerfunds,loansinportfolioarerated.Thosewithgreaterriskorinvariousstagesofdistress(latepayments)willhaveahigherpercentagesetasideforpotentialloanlosses.
7. Feasibility:Incomeneedstoexceedexpenses.Thelargerthelendingpool(andleveloffundingyouhaveouttoborrowers)thegreateryourpotentialreturnsare.Similarly,smallersizedfundshaveamoredifficulttimegeneratingincometocoverexpenses.Smallerloanshavegreaterrelativeoperatingcostsbecausehandlingandprocessingcostsforeachtransactionisaboutthesamewhethertheloanisfor$500or$5,000,000.
StartuporExpansionThefollowingsectionwilldiscussvariousstrategiesandstepsthatshouldbeconsideredifyouareastartuploanfundorifyouareexpandingtogainCDFIdesignation.Wewilllookatthefollowing:
1. Start‐upCreditUnion:A. AsanewfundB. Throughapartnership
2. Existing,slightlyexperiencedloanfund3. Existing,experiencedloanfund
![Page 8: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/8.jpg)
CommunityDevelopmentCreditUnions 6
StartupCreditUnion:Startingacredituionisverydifficultduetocosts.Fundingisneededforbusinessoperationsandfortheloanfund.Capitalrequirementsmustbemettobecomeacreditunionandthedetailedapplicationprocessusuallyrequiresassistancefromaconsultant.Thefollowingisasuggestedgeneralguidefororganizationsthathaveclearlyidentifiedneedsandstrongsupporttocreateafund.Supportfromyourorganizationandboardiscritical.Thefundshouldbetargetedtoaspecificmarketsegment:microbusinesses,smallbusinesses,affordablehousingorconsumerfinancing.Therearetwopotentialwaysofbecomingacreditunion,onestartingfromscratchandonethroughpartnerships.Strategy1:NewEntity(Ifyourplanscallforthecreationofanewentity).Asignificantamountoffundingandpredevelopmentworkisneededfordevelopingthebusinessplan,marketingandmanagementplansandtoworkthroughtheapprovalprocess
1. FundInitiation:Secureseedfundstoallowforstafforconsultantassistanceforthefollowing:(fundingcouldbelowerifyourstaffhasthetimetoconductthepreliminaryresearch)
A. ConceptPaper:Creationofaonetotwopagesummarythatincludesasummarydescriptionofyourorganization,needs,size,management,andpotentialresourcesavailableforthebusinessandfund.
B. CommunitySupport:Obtainsupportfromentitiesthatrepresentyourtargetmarket
C. PublicandPrivateSectorSupport:Identifysupportfromentitiesthatrepresentsyourtargetmarket
D. Identifypotentialinvestors(otherbanks,foundations,corporationsandindividuals)E. toassistinmeetingcapitalrequirements. F. IdentifypotentialsourcesforpredevelopmentfundsG. Seekgrants(orplantoself‐finance)
2. GO/NOGO:Theinformationresearchedabovewillallowyoutodeveloptheconceptpaper.Thiswillallowyourorganizationtodecideifthecreationofaloanfundmakessenseandisfeasible.Securingpredevelopmentfundswillbeessentialespeciallyifyouaretryingtocreatealargefund.Theconceptpaperwillbethebasisofthebusinessandmarketingplan.
Determinationofthescope,size,anddirectionofyourloanfundshouldprovideagoodindicationoffeasibility.Sourcesofinitialcapitalaresecuredthroughfoundationandcorporategrantsand,insomeinstances,fromlocalgovernmentprograms,especiallyifthereisatargetedmarketwithtremendousneeds.
Financialinstitutionsoftenprovidecorporategrantstopenetratemarketsbyeffectivelypartneringwithcommunityorganizationsthatrepresentandservethesecommunities.Youmustmakethecase,presentneed,andindicatehowyourorganization’srolewillenhancetheeffort.(SeeDevelopmentTipsattheendoftheGuide)
YourorganizationmustassesshowtheproposedprogramcostswillbenefittheoveralleconomicdevelopmentstrategyofthecommunityandorganizationwhileassessingimpactstoindividualCEDprojectsandprograms.Thecreationofacreditunionofferssubstantialbenefitstothecommunityanditseconomicwellbeing.
3. Pre‐developmentActivities:A. BusinessPlan/MarketAnalysis:Conductamarketanalysisanddevelopabusiness
planforthefund.B. ManagementPlan:
![Page 9: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/9.jpg)
CommunityDevelopmentCreditUnions 7
1.) FundManagement:Includedarethedocumentsthatdefinelendingparameters,lendingguidelines,requirementstheapplicationprocess.
2.) LoanManagement:Includedaretheloanmanagementfunctions(loanapprovalprocess,closing,documentation,andloanmanagement(billing/collections)process).
3.) PortfolioManagement:Guidelinesandstandardsonriskmanagement(loanlosstolerance,reservesandriskratingofloans).
4. Board:CreationoftheBoardofDirectorsisaveryimportantstepthatbuildsthefoundationforasuccessfulcreditunion.
A. Properbalancebetweenmission(helpingimprovedistressedcommunities)andrisk(lendingguidelinesandrequirements)ismaintainedbyboardrepresentation.
B. Fundraising:Fundraisingisacriticalneedforloanfundsandhavingrepresentativesfromentitiesthateitherfunds/investsinloanfundsorareinpeerindustriesthatcansupportcreditunionactivitiesiscritical.
C. Management:Expertiseinlending,businessorlawprovidesthenecessaryinputandoversightoflendingactivitiesandoverallsuccess.
5. LoanCommittee:Theloancommitteeshouldinmanywaysmirrorthebalanceoftheboardofdirectorsbuthavefocusonmanagementissues.Thecommitteemusthavemembersversedinunderstandingofthelendingguidelinesandpoliciesofthecreditunionfund.Experiencedlenderscantypicallyberecruitedfromfinancialinstitutionsthatinvestorlendintothefund.
6. StartUpLendingActivities7. Applicationforcreditunioncertification.
Strategy2:Partnership:Ifthereareothercreditunionsoperatinginyourarea(ornearby),youmaywanttoconsiderpartnershipsthatwillleveragetheirexpertisewithyourunderstandingoflocalneeds.Thisstrategyallowsyoutobuildcapacityandexpertiseandmaintainagoalofcreatingyourownoroperateabranch.Someofthestrategiesinclude:
1. ExpansionofServiceArea:Ifitispossible,ancreditunioncouldexpanditscoverageareatoincludeyourgeography.Youcouldbecomeamarketingarmfortheirproductsandservicesandpossiblyprovidespace,coordinatemeetingsorprovidelanguageservices.Ifthelevelofactivityiswarranted,youmayconsideropening(andoperating)abranch.
2. CreationofaDedicatedFund:Ifthereissignificantinterestandresourcesforcreatingafund,youmaywanttoconsidercreatingoneandhavingtheneighboringcreditunionmanageit.Therearesignificantongoingexpensesforoperationsandall“back‐room”operations(loanservicingandmanagement).Yourorganizationcouldparticipateindevelopingthelendingguidelinesandstandards,orpossiblybeontheloancommitteeforthefund.Thisintermediarystepallowsyoutogainexperiencethatyouwillneedifyoucreateyourownfund.
Thepartnershipstructureisimportantifyouareconsideringoperatingasmallloanfundorprovidesmallerloans.Remember,themanagementandhandlingcostsforasmallloanarethesameasforlargerloans.Inaddition,thelargertheloanpool(andthegreatertheamountoffundedloans)generatesmoreinterestincomeusedforoperationsandmanagement.Forthesesmallerpools,itmayfinanciallywisetohaveanotherinstitutionserviceandmanageyourloanfund.Anotherstrategytoloweringoperatingcostsistopartnerwithotherorganizationsthatcouldhandlemarketing,trainingandtechnicalassistance.
![Page 10: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/10.jpg)
CommunityDevelopmentCreditUnions 8
Existingslightlyexperiencedcreditunion:Ifyourcreditunionhassomeexperienceinlendingorwantstobuildalendingtrackrecord,youcanimmediatelyapplytobecomeaCertifiedDevelopmentEntity(CDE)throughtheUSTreasury’sCDFIFund.AlthoughthedefinitionfocusesonNewMarketsTaxCredits,aCDE’sactivitiesmeetCDFIstandardsandprovideanestablishedcertifiedlendingtrackrecordfororganizations.AsaCDEyouwillbeabletoapplyforCDFIcertificationandaTechnicalAssistanceAward.TheprocesstobecomeaCDEisstraightforwardandrelativelysimple.
AsdefinedontheCDFIwebsite,“aCDEisadomesticcorporationorpartnershipthatisanintermediaryvehiclefortheprovisionofloans,investments,orfinancialcounselinginLow‐IncomeCommunities(LICs).BenefitsofbeingcertifiedasaCDEincludebeingabletoapplytotheCDFIFundtoreceiveaNewMarketsTaxCredit(NMTC)allocationtoofferitsinvestorsinexchangeforequityinvestmentsintheCDEand/oritssubsidiaries;ortoreceiveloansorinvestmentsfromotherCDEsthathavereceivedNMTCallocations.”2
Existingorexperiencedcreditunion:Ifyouarecurrentlyoperatingaloanfund,youshouldconsiderapplyingtotheCDFIFundforcertification.Thecertificationprocessisstraightforward(checkatwww.CDFIfund.gov).Onceyoureceivecertification,youareeligibletoapplyforaTechnicalAssistanceAward(toallowyoutocreatethebusiness,marketingandmanagementplans)foryourCDFI.YoucanalsoapplyforaFinancialAssistanceAwardthatprovidescapitalforyourneworexpandedloanfund.DevelopmentTip:ManageExpenses:Managingyourincomeandexpensesisessentialforyourlongtermsurvival.
1. Partnershipswithotherrelatedlendingentitiesallowyoutoexpandyourmarketandcutdownonyourownexpensesintheareasofmarketing,loanprocessingandloanmanagement.
2. Loanlossesdecreasethesizeofyourloanpoolandloweryourpotentialincome3. Reservesimpactyourbusinesssuccess.Thesearefundssetasidethatdonotgenerate
income.4. Yourlendingguidelinesandapprovalsalsoimpactyoursuccess.Thegreaterrisksyour
fundincurs;thegreaterthepotentiallosses.5. Theexpensesformarketing,processingandmanagingasmallloanarethesameas
expensesforalargerloan.6. Partneringandsharingofloanmanagementandportfoliomanagementfunctionsarean
excellentmeansofmanagingandreducingexpenses.7. Ifyoualreadyhaveloanprocessingandmanagementexperience,youmaywanttomarket
thiscapacityandgenerateadditionalincomebymanagingfundsforpartnerorganizations.
2 CDFI Fund Website, Op Cit
![Page 11: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/11.jpg)
CommunityDevelopmentCreditUnions 9
COMMUNITYDEVELOPMENTCREDITUNIONS
TheOpportunityFinanceNetworkdefinesCommunitydevelopmentcreditunions(CDCUs):
“CDCUspromoteownershipofassetsandsavingsandprovideaffordablecreditandretailfinancialservicestolowincomepeople,oftenwithspecialoutreachtominoritycommunities.Theyarenonprofitfinancialcooperativesownedbytheirmembers.CreditunionsareregulatedbytheNationalCreditUnionAdministration(NCUA),anindependentfederalagency,bystateagencies,orboth.Inmostinstitutions,depositsarealsoinsuredbyNCUA.”3
In1995therewereover8,200creditunions,ofwhichover5,000arefederallycharteredandabout3.000arestate‐chartered(federallyinsured).Theremaininginstitutionsarestatecharteredandprivatelyinsured.Todaythereare7,292,withthedecreaseduetothedecliningeconomy.4Theseentitieshaveatotalmembershipofover85millionpeople.84%ofthecreditunionshaveunder$100millioninassetswith12%havingassetsof$100‐$500million.4%haveassetsover$500million.5Sinceitspeakin1969(whentherewerealmost24,000creditunions),thenumberhasdeclinedandannualmergersremainedsteadyat2.5%to3.5%.6Creditunionsoriginallywerelimitedtoadefinedcommunityorgeographicarea;employmentwithinagivencompanyorinstitution;ormembershipinaprofessional,ethnic,religiousorsocialaffiliation.Intheearly1980’s,itbecameevidentthatmembershipincreditunionsdwindledascompaniesmerged,industrieschangedanddemographicsshifted.Asaresult,thedefinitionofmembershipexpandedsignificantlytothechagrinofthrifts,savingandloansandbanks.Thisisespeciallytruesincecreditunionstakedepositsbutaretax‐exemptandexemptfromtheCommunityReinvestmentAct(CRA).Communitydevelopmentcreditunions(CDCUs)aredistinguishedfromallothercreditunionsbyfocusingprimarilyonlow‐incomepeoplewhoworkinlow‐incomeurbanandruralcommunities.ThegoalsofCDCUsaretobringcapitaltocommunitiesinneedbyprovidingaffordableservices(financialcounselingandcheckcashingservices)andbuildingtheassetbaseoflowincomeindividuals,familiesandultimatelythecommunity.NCUAdesignatesalowincomeCDCUifthemajorityofitsmembersearnlessthan80%ofthenationalmedianhouseholdincome.Theterm“communitydevelopment”isaselfdefiningtermthatdescribesitsmission(andactivities)focusingoncommunityimprovement.CharteredbytheNCUAorbystateagenciesthatareresponsibleforcreditunions,thedepositsareinsuredupto$100,000bytheNationalCreditUnionShareInsuranceFund.Mostcreditunionsfocusedlendingonsmallerhomeimprovement,autoandpersonalloans.Thisconservativeapproachenabledmosttoavoidthesub‐primeandcreditcrisis.However,theirfocusonlow
3 Opportunity Finance Network, Op. Cit. 4 Tom, “Credit Unions are Increasing Membership and Deposits” , The MRI Blog, June, 2011, website www.marketratesinsight.com 5 Kolakowshi, Mark, “Credit Unions, Financial Careers” about.com website: www.about.com 6 Wilcox, James and Dopico Louis, “Credit Union Mergers: Efficiencies and Benefits” Federal Reserve Bank SF Economic Letter, September 12, 2011
![Page 12: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/12.jpg)
CommunityDevelopmentCreditUnions 10
incomecommunitieshasmademanysusceptibletonegativeeconomictrends.Mosthaveverymodestoperatingbudgets.CharacteristicsofLowIncomeCreditUnions,CommunityDevelopmentCreditUnionsandtheMembersTheyServe:LICUsand,generally,CDCUstypicallyserveamembershipprimarilycomposedoflow‐incomemembers.Thesecreditunionsfaceuniquechallengesservingmembers.Thechallengesareevenmoreprevalentinsmallcreditunions.Theirmembersmayfaceoneormoreofthefollowingcircumstancesandcharacteristics:7
• Unsteadyemployment(oftentemporaryjobswithlonghours);• Part‐timeemploymentwithmultiplejobsorsidebusinesses;• Unstableresidency(oftenrentorliveinpublicorsubsidizedhousing);• Nohealthinsurance;• Lackofaffordablechildcare;• Receivesupplementalsecurityincomeorsocialsecuritydisabilitybenefits;• Englishasasecondlanguage;• Lowshareaccountbalances;• Needforsmalldollarloans;• Limitedfinancialresources;• Limited,negative,ornocredithistory;and,• Aneedforlabor‐intensiveservices(e.g.moneyorders,financialeducationand/or
counseling,checkcashing).Keyelementsforstartingacreditunioninclude:1. CommonBase:Determinationofthemembership.Canbebasedon:
a. Occupation/Industryb. Associationc. Communityd. Income
2. 3,000members:NCUArequirescreditunionswithfewerthan3,000membersshowevidenceofsupport.Institutionswithfewerthan3,000membersmaynotbeeconomicallyjustified.
3. Capitalization:Determinationofcapitalizationrequiresassessmentofthreebasiccategories:8a. Capital(equity)requirementsCapital(equity)requirements:Creditunionscannot
issuestockandmustraisecapitalthroughretainedearningsandreceiptofgrantsb. Anticipatedoperatingexpenses:Operatingexpensesforanewcreditunioninclude:
i. Members:Howmanywilljoin,howsoonandwhatwilltheiraveragedepositsbeii. Howmuchinterestwillbepaidtodepositorsiii. Whatproductsandserviceswillbeofferedandwhatistheircostinrelationto
incomeiv. Whatoperatingsystemswillbenecessarytoservethemembershipv. Employeepositions,numberandsalariesvi. Location(rent,utilitiesandofficeexpenses)
c. Costsassociatedwithpreparingthecharterapplication,craftinganappropriatebusinessplan,andrelatedprojectionsandexhibits.DocumentationandApplicationexpensesinclude:
7 NCUA, “Low Income Credit Unions” website: www.mycreditunion.gov 8 Hall Associates Consulting, LLC, “How Much Does it Cost to Start a New Credit Union” website: www.hallassociatesllc.com
![Page 13: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/13.jpg)
CommunityDevelopmentCreditUnions 11
i. Businessplanii. Proformafinancialprojectionsiii. OrganizationalBylawsiv. Proposedoperationandgovernancepoliciesandproceduresv. Evidenceofduediligenceinselectingoperatingsystems
4. ApplicationProcess:Iftheinitialapplicationisapproved,NCUAissuesacreditunioncharterandbusinessoperationsshouldbeginwithin60days
CreditUnionStart‐upConsiderations:1. Membership:Theaveragecreditunionhasabout12,475memberswithanaveragedepositof
over$8,900.9Theaveragedepositforlowincomeandcommunitydevelopmentcreditunionsisapproximately33%ofthisaverage.
2. BoardofDirectors:Electedfromthemembership,theboard’sprimaryresponsibilityismanagementandsettingpolicy.Theboardalsodeterminesproductsandservices.
3. Staffusuallyconsistsofonepaidemployee(creditunionmanager).Themanagermustplayseveralroles(thatmayevolveintofulltimepositionsasthecreditunionbecomesmoresuccessful).Theserolesincludefinancialmanager,organizer,teller,loanofficerandmarketingrepresentative.Itisimportantthatthispersonhavesignificantpreviousexperience.Creditunionswithassetsupto$500,000willhave0.6FTEandthosewithassetsgreaterthan$500,000average3.2FTE.
4. BasicServices:Servicesincludebasicbankingservicesandcredittomembers.Membersmakedepositsintosharedraftaccounts(creditunionequivalentofcheckingaccounts)andshareaccounts(savingsaccounts).Loanproductsvaryandarebasedoncommunityneedsandthegoalsandobjectivesofthecreditunion.10
5. Projectsincludeconsumerloans(home/auto),debtconsolidationloansandhomeimprovementloans.Somemayprovidesmallbusinessloans(usuallyunder$50,000).
6. AssetSize:Theaverageassetsizeofacreditunionwas$93millionin2007.Bankassetaveragewas$1.53billion.11Atthesametime,low‐incomecreditunion’saverageassetsizewasjustunder$4.5millionandmostrangedfrom$400,000to$5million.
7. NCUA’sregulationsspecifythatacreditunioncannotreceivemorethan20%ofitsdepositsfromnon‐members,howeverlowincomecreditunionsarenotsubjecttothisregulation.The20%thresholdcanbewaivedforinstitutionsbyaNCUARegionalDirector.
8. ThroughtheirCommunityDevelopmentRevolvingLoanFund,NCUAprovidestechnicalassistancegrants($6,500)tohelplow‐incomecreditunionsprovidefinancialservicestotheirmembersandtomaketheoperationsmoreefficient,.SeeNCUAwebsiteat:www.ncua.gov
9. NCUAprovidesseveralgrantprogramsthatmaychangeyeartoyeardependingonfunding.2011grantprogramsinclude
a. FinancialEducationandFinancialLiteracyInitiativeb. BuildingInternalCapacityInitiativec. PartnershipandOutreachInitiatived. StudentInternshipandJobCreationInitiativese. Staff,OfficialandBoardMemberTrainingInitiative
9 Tom, MRI Blog, Op. Cit 10 Shorebank Advisory Services, “Bank of America CDFI Program, Community Development Credit Unions”, May 1996, pages 6-4 through 6-6 11 “Comparing Credit Unions and Banks” website www.becu.org
![Page 14: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/14.jpg)
CommunityDevelopmentCreditUnions 12
f. VolunteerIncomeTaxAssistanceg. UrgentNeedsGrant
COMMUNITYDEVELOPMENTFINANCIALINSTITUTIONS(CDFIs)
Microlendingprograms,mostCDLFsandcreditunionsareeligibleentitiesundertheCDFIprogram.NOTE:(PleaserefertotheCommunityDevelopmentFinancialInstitution(CDFIs)Guideforspecificdetails).
ThekeyprogramsincludeCDFICertification,TechnicalAssistance(TA)AwardsandtheFinancialAssistance(FA)Awards.TheseprogramsaredesignedtoenableCDFIstoleverageprivatecapitaltomeetthedemandforaffordablefinancialproductsandservicesineconomicallydistressedcommunities.
ThemissionoftheCommunityDevelopmentFinancialInstitutionsFundisto“expandthecapacityoffinancialinstitutionstoprovidecredit,capitalandfinancialservicestounderservedpopulationsandcommunitiesintheUnitedStates”12TheCDFIFundhasseveralprogramsthatenhancesaccesstocapital.Uponreceivingcertification,CDFI’sareeligibletocompetefortechnicalassistancegrants,capitalgrants,NewMarketsTaxCreditsaswellasothertargetedincentiveprograms.TheCDFIdesignationallowslendingprogramsaccesstocompeteforCDFIresources,buttheseresourcesareinveryhighdemand.Sincethestartoftheprogramin1994,thecompetitivebarhasrisendramaticallyandorganizationsreceivinggrantshavesignificantexperienceinoperatingasuccessfulloanfundorconductinglendingactivities.Therefore,wehighlyrecommendthatorganizationscloselystudytheapplicationguidelinesfoundatwww.cdfifund.gov.
CDFIPROGRAMBENEFITS
TheCDFIcertificationisarequirementthatwillallowyoutoaccessCDFIprogramfunds.Theseprogramsinclude:Note:SourcematerialforthissectionisfromtheCDFIwebsiteat:www.cdfifund.gov.Thewebsiteincludesannualchangesintheprogramorspecialprograms,forexamplethe2011applicationprocessincludedtheHealthyFoodFinancingInitiativethatmade12awardsfor$25million.ThegoalofthisprogramistouseCDFIcapacitytomakeinvestmentsinarangeofhealthfoodprojectsservingfooddesertsincludinggrocerystores,mobilefoodretailers.Farmersmarkets,cooperatives,cornerstores,bodegasorotherfoodrelateditems(includinghealthfoods).
CDFIFinancialAssistanceandTechnicalAssistance:TobeeligibleforanFAaward,aCDFImustbecertifiedbytheCDFIFundbeforeitappliesfortheaward.ProspectiveapplicantsthatarenotyetcertifiedmustsubmitaseparatecertificationapplicationtobeconsideredforFAduringafundinground.
Bothcertifiedandnon‐certifiedCDFIsareeligibletoapplyforTAawards.However,non‐certifiedorganizationsmustbeabletobecomecertifiedwithintwoyearsafterreceivingaTAaward.TheTA
12 Community Development Financial Institutions Fund “CDFI Certification Application”, Department of Treasury, June 2007, pg 4
![Page 15: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/15.jpg)
CommunityDevelopmentCreditUnions 13
awardswillcoverexpensesneededtobuildthecapacityoforganizationstobecomeeligibleforCDFIdesignation.
2011CDFIAwardCategories:1. FinancialAssistance:CertifiedCDFIsmayreceiveawardsintheformofgrants,loans,equity
investments,depositsandinsuredcreditunionshares2. TechnicalAssistance:Non‐certifiedCDFI’smayapplyforTA(notboth)tobuild
organizationalcapacity.Ifyouhavenotbeencertified,TAcouldhelpyougetcertified.Thesefundsdonotrequirematchingfunds.
3. HealthyFoodsFinancingInitiative:AwardstoCDFIstoaddresstheneedforhealthyfoodsintheirmarkets(USDAandHHSsupport)
CDFIApplicationforTechnicalAssistanceAwards:ThisawardsupportsyourorganizationtowardsbuildingsystemsandcapacitytoapplyfortheFinancialAssistanceAwards.CDFIApplicationforFinancialAssistanceAwards:Thisawardisagrantthatcanbeusedtoimproveorganizationalsystemsandasseedcapital(orexpansioncapital)foryourloanfund.Thisisagrantandcanbeusedforyourloanfundat0%interest.SummaryStepstoBecomingaCDFI:TogainCDFIdesignationthestepsarerelativelysimple.Theworkisintheplanningandapplicationprocess.Process:
1. TechnicalAssistancetodevelopingtheorganizationandprogramstructure2. ObtainCommunityDevelopmentEntity(CDE)designation3. Financingparticipation/partnership(strategytogainexperience)4. ApplicationforTechnicalAssistanceAwards5. DevelopingtheCDFIorganizationalandprogramstructure6. ApplyforCDFIstatus7. RequestforCDFIfunding8. Otherinvestmentsandmatches9. Makeloans10. Manageloans
OTHERNOTES:ServiceGaps:OnecriticismofCDFIlendingprogramshasbeenthe“unevenlandscape”thatresultsingapsinservice.MosteffectiveCDFIsoperateinsmallgeographies(communities,citiesandcounties)whilelargerentitiesmightservestatesormulti‐stateareas.Someofthelargerlendinginstitutionsmaybenationalbuttheymaynotserveallcommunitieswiththesamelendingproducts.CommunitiesmightbeservedbyCDFIswithlendingproductsthatdonotmeetlocalneeds.ManyCDFIsserveonlyonesegmentoflendingactivitysuchasbusinesses,realestateorpersonal,whichmaynotmatchwithneededcreditserviceinagivenarea.ThisissuepresentsanopportunityforaCDFItoexpandorforanewCDFItoemerge,especiallyifthereisneedandinterestamongsttheresidentsandconstituencyaffectedbythelackofcapital.
![Page 16: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/16.jpg)
CommunityDevelopmentCreditUnions 14
SOURCESOFFUNDS:
1. Federal,StateandLocal
a. SmallBusinessAdministrationi. MicroloanProgram:Fundstononprofitcommunity‐basedMDOswithloans
cappedat$35,000recentlyincreasedto$50,000pursuanttotheJobsAct.Theaverageloanis$13,000.ForFY2010,$25millionwasallocatedtotheprogram.
ii. ProgramforInvestmentinMicro‐entrepreneurs(PRIME):In2010therewere92grantsmadefroma$8milliondollarpool.Grantsupto$250,000canbeawardedtoMDOstofunddirectassistancetocustomersoffundsortobuildtheMDOsownresourcesorcapabilities.
iii. CommunityAdvantageProgram:TheCommunityAdvantageProgramisathree‐yearpilotprogramthatwillallowMDOsandotherlendersthattargetunderservedpopulationstoaccesstheSBA7(a)program(withloansupto$250,000).
iv. The7(a)LoanProgramincludesfinancialhelpforbusinesses.Thesespecialrequirementsare:loanproceedsmaybeusedtoestablishanewbusinessortoassistintheacquisition,operation,orexpansionofanexistingbusiness.
Forexample,fundsareavailableforloanstobusinessesthathandleexportstoforeigncountries,businessesthatoperateinruralareas,andforotherveryspecificpurposes:
1. SpecialPurposeLoans:BusinessesimpactedbyNorthAmericanFreeTradeAgreement,supportforEmployeeStockOwnershipPlansandpollutioncontrol.
2. ExportLoanPrograms3. RuralBusinessLoans4. AdvantageLoanInitiative:Focusonunderservedcommunities.5. CommunityAdvantageApprovedLenders:Pre‐approvedorganizations.6. Express&PilotPrograms:Streamlinedexpeditedloanproceduresfor
specifictargetborrowers.v. The504LoanProgramprovidesapprovedsmallbusinesseswithlong‐term,
fixed‐ratefinancingusedtoacquirefixedassetsforexpansionormodernization.504loansaremadeavailablethroughCertifiedDevelopmentCompanies(CDCs)whichareSBA'scommunitybasedpartnersforproviding504Loans.504LoansaretypicallystructuredwithSBAproviding40%ofthetotalprojectcosts,aparticipatinglendercoveringupto50%ofthetotalprojectcosts,andtheborrowercontributing10%oftheprojectcosts.Inspecialcircumstances,aborrowermayberequiredtocontributeupto20%ofthetotalprojectcosts
b. DepartmentofTreasury:CDFIFundi. CDFICertification:CertificationProgramforloanfundstobecomeeligibleto
applyforCDFIprogramsii. TechnicalAssistance:GrantsallowcertifiedCDFIsandestablishedentities
seekingtobecomecertifiedtobuildtheircapacitytoprovideaffordablefinancialproductsandservicestolow‐incomecommunitiesandfamilies.Grantsmaybeusedforawiderangeofpurposesincludingequipment,materials,orsupplies;forconsultingorcontractingservices;topaythesalariesandbenefits
![Page 17: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/17.jpg)
CommunityDevelopmentCreditUnions 15
ofcertainpersonnel;and/ortotrainstafforboardmembers.TheCDFIFundmakesawardsofupto$100,000
iii. FinancialAssistance:Awardsofupto$2millionaremadetocertifiedCDFIsundertheFAcomponentoftheCDFIProgram.ACDFImayusetheawardforfinancingcapital,loanlossreserves,capitalreserves,oroperations.FAawardsaremadeintheformofequityinvestments,loans,deposits,orgrants,andtheCDFIisrequiredtomatchitsFAawarddollar‐for‐dollarwithnon‐federalfundsofthesametypeastheawarditself.
iv. OtherPrograms:OtherCDFIFundprogramsinclude:1. BankEnterpriseAward(BEA):Thisprogramprovidesfinancial
incentivestoinstitutionstoexpandinvestmentsinCDFIsandtoincreaselending,investment,andserviceactivitieswithineconomicallydistressedcommunitiesoveraspecifictimeperiod.
2. CapitalMagnetFund(CMF):providecompetitivelyawardedgrantstoCDFIsandqualifiednonprofithousingorganizations.CMFawardscanbeusedtofinanceaffordablehousingactivitiesaswellasrelatedeconomicdevelopmentactivitiesandcommunityservicefacilities.Awardeeswillbeabletoutilizefinancingtoolssuchasloanlossreserves,loanfunds,risk‐sharingloans,andloanguaranteestoproduceeligibleactivitieswhoseaggregatecostsareatleasttentimesthesizeoftheawardamount.
3. FinancialEducationandCounseling(FEC):ThroughtheFECPilotProgram,theCDFIFundprovidesgrantstoeligibleorganizationstoenablethemtoprovidearangeoffinancialeducationandcounselingservicestoprospectivehomebuyers
4. NewMarketsTaxCredits:TheNMTCProgramattractsinvestmentcapitaltolow‐incomecommunitiesbypermittingindividualandcorporateinvestorstoreceiveataxcreditagainsttheirFederalincometaxreturn.Thisisinexchangeformakingequityinvestmentsinbusinessesandcommercialprojectsthatcreatesjobsinlowincomecommunities.NOTE:TheNMTCprogramhasbecomeaveryimportanttoolforCommunityEconomicDevelopment.PleasereviewtheseparateGuideonNewMarketsTaxCreditsformoredetails.
5. NativeAmericanCDFIAssistanceProgram(NACA):FocusedprogramsupportingactivitiesforNativeAmericancommunities
6. CertificationforCommunityDevelopmentEntities(CDE):BenefitsofbeingcertifiedasaCDEincludebeingabletoapplytotheCDFIFundtoreceiveaNewMarketsTaxCredit(NMTC)allocation.
c. UnitedStatesDepartmentofAgriculture:i. RuralMicroenterepreneurAssistanceProgram(RMAP):Maximumloan:
$500,000.Lowinterest,20yearloanswith2‐yeardeferralofpayments,tocapitalizearevolvingmicroloanfund.Themicrolendermustestablish&maintaina5%lossreservefromtheirownfunds.Loanproceedsaretobeusedforrelendingasfixedratemicroloans(≤$50,000)toruralmicroentrepreneurs.
ii. RMAPTechnicalAssistanceGrants:($100,000maximumsize)toallowamicrolendertoprovidetechnicalassistancetotheirmicroloanborrowers.Theycanpayadministrativeexpensesofthemicrolender,butnotmorethan10%ofthegrant.MaximumTAgrantawardis≤25%ofmicrolender’sRMAPloanportfolio.
![Page 18: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/18.jpg)
CommunityDevelopmentCreditUnions 16
iii. RMAPEnhancementGrants($25,000maximumsize)toallowamicrolendertoincreaseitscapacitytoserveruralmicroenterprises.EnhancementgrantawardsarenottiedtotheoperationofanestablishedRMAPloanfund.RMAPgrantscannotprovidemorethan75%ofthecostoftheproject.
d. HealthandHumanServices,OfficeofCommunityServices,CommunityEconomicDevelopment:CommunityEconomicDevelopmentGrants:discretionarygrantfundstoCommunityDevelopmentCorporations(CDC)forwell‐planned,financiallyviable,andinnovativeprojectstoenhancejobcreationandbusinessdevelopmentforlow‐incomeindividuals.Upto$800,000isavailableforprojectsthatincluderevolvingloanfunds,realestatedevelopmentandbusinessstartupandexpansion.
e. DepartmentofHousingandUrbanDevelopment:i. CommunityDevelopmentBlockGrants(CDBG):Microloanfundingisaneligible
activityundertheCDBGprogam.UseoffundsisdeterminedbycitizensinputintotheCDBGprocessbytheparticipatingjurisdiction(localorstategovernment).ManyjurisdictionshaveallocatedfundsforMDOsupportandalltypesofsmallbusinessactivities.
ii. CommunityServiceBlockGrants(CSBG):LoanfundsarealsosupportedthoughCSBGfundingthrougheligiblestateandlocaljurisdictions.MostofthelocaljurisdictionsarecommunityactionagenciesoralocalgovernmentaffiliatethatdeterminesuseofCSBGfunds.
2. FoundationsandPrivateSector:a. Grants:Foundationshavebeenastrongsupporterofmicroenterpriselendingand
development.Mostofthesupportisconductedonarelationshipbasis.b. Investments:Toagreatdegree,banksandfinancialinstitutionshavemadeequitytype
investmentsintoloanfunds,primarilyCDFIs.Theyhavealsoactivelyprovideddepositsincreditunions.ProgramRelatedInvestmentshavebeenmadebylargernationalfoundationsinthepastandfocusedonspecificindustrysupport.TheCaliforniaEndowmenthasrecentlymadeasubstantialinvestmentintoafundtosupportthedevelopmentofmarketsin“fooddeserts”aspartofnational“healthyfood”initiatives.ThefundisinpartnershipwiththeNCBBank(previouslyknownastheNationalCoopBank).
![Page 19: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/19.jpg)
CommunityDevelopmentCreditUnions 17
DEVELOPMENTTIPS:
Considerwhatcommunityneedsareanddesignthelendingorinvestmentactivityappropriately.Considerwhatresourcesyouhaveorcanaccesstohelpdeterminesizeandscopeofyourprogram.Somekeydevelopmenttipstorememberinclude:1. Ifyouarestartinganewcreditunion,dotheinitialinvestigativeresearchandconceptpaperto
determineiftheprojectisfeasible.Theconceptpaperwillalsobeyourbasetooltopresenttopotentialfundingandresourcepartnersandbecomesthebasisforyourbusinessplan.Asyougatherdata,yourconceptpapershouldbecontinuallyupdated.Thisinformationwillbecomethebasisofyourbusinessplan.
2. Insteadofstartingyourcreditunion,considerpartnershipstobringtheresourcetoyourcommunityortocreateaspecializedfundthatcanbemanagedbyanexistingcreditunionorloanfund.Thismaybeanintermediarystepforyoutogainexperienceifyoulaterwanttocreateandmanageyourownfund.
3. BecomeaCommunityDevelopmentEntity(CDE)andgetCDFICertification.Thisisespeciallytrueifyourorganizationhasalendingprogram.
4. TheCDFIdesignationonlyallowsyoutoapplyforCDFIFundresources.Theyareverycompetitive.Itisimportanttobuildyourcapacityandtrackrecord.
5. OnceyougetaCDFIdesignationmakesureconventionallendinginstitutionsarepartofyourplanning/developmentprocess.Enlistthemassupporters(onyourboard,advisoryboardorprojectcommittee).Remember,conventionalfinancialmarketshaverealizedtheimportanceandsuccessesofCDFIsandseekCDFIstoplaceinvestments.
6. Yourboardofdirectorsandloancommitteeareveryimportanttothegrowthandsuccessofyourloanfund.
a. Board:CreationoftheBoardofDirectorsisaveryimportantstepthatbuildsthefoundationforasuccessfulloanfund.
i. Properbalancebetweenmission(helpingimprovedistressedcommunities)andrisk(lendingguidelinesandrequirements)ismaintainedbyboardrepresentation.
ii. Fundraising:Fundraisingisacriticalneedforloanfundsandhavingrepresentativesfromentitiesthateitherfunds/investsinloanfundsorareinpeerindustriesthatcansupportloanfundactivitiesiscritical.
iii. Management:Expertiseinlending,businessorlawprovidesthenecessaryinputandoversightoflendingactivitiesandoverallsuccess.
b. LoanCommittee:Theloancommitteeshouldinmanywaysmirrorthebalanceoftheboardofdirectorsbuthavefocusonmanagementissues.Thecommitteemusthavemembersversedinunderstandingofthelendingguidelinesandpoliciesofthefund.Experiencedlenderscantypicallyberecruitedfromfinancialinstitutionsthatinvestorlendintothefund.
7. ManageExpenses:Managingyourincomeandexpensesisessentialforyourlongtermsurvival.a. Partnershipswithotherrelatedlendingentitiesallowyoutoexpandyourmarketand
cutdownonyourownexpensesintheareasofmarketing,loanprocessingandloanmanagement.
b. Loanlossesdecreasethesizeofyourloanpoolandloweryourpotentialincomec. Reservesimpactyourbusinesssuccess.Thesearefundssetasidethatdonotgenerate
income.
![Page 20: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/20.jpg)
CommunityDevelopmentCreditUnions 18
d. Yourlendingguidelinesandapprovalsalsoimpactyoursuccess…thegreaterrisksyourfundincurs;thegreaterthepotentialisforlosses.
e. Theexpensesformarketing,processingandmanagingasmallloanarethesameasexpensesforalargerloan.
f. Partneringandsharingofloanmanagementandportfoliomanagementfunctionsareanexcellentmeansofmanagingandreducingexpenses.
g. Ifyoualreadyhaveloanprocessingandmanagementexperience,youmaywanttomarketthiscapacityandgenerateadditionalincomebymanagingfundsforpartnerorganizations.
8. AdditionalCapital:TheCDFIFinancialAssistanceAwardisagrantthatcanstartyourlendingprogram,butyoushouldlookatitasanopportunitytolocateadditionalmatchingfundstoexpandyourloanpool.
Itisimportanttodeterminewhointhemarketplace,hasinterestinsupportingyourlendingactivities.
Yourboard,advisoryboard,orprojectcommitteeshouldhavememberswhorepresentfinancialinstitutions,localbusinessesandcorporations,andlocalgovernmentandcommunityleaders.Theycanbecomeyourspokesperson(s)andcanconvenemeetingswiththeirpeerstomarketinterestinyourfund.
Engagementanddiscussionswiththebankingregulators;FederalDepositInsuranceCorporation(FDIC),OfficeoftheComptrollerofCurrency(OCC)andFederalReserveBank(FRB)regardingyourfundareaveryimportantactivity.Theseinstitutionscanbeanimportantresourceforknowingwhomightbeinterestedinsupportinglendingactivitiesorareinterestedinyourcommunity.Theyarealsogreatresourcesforconveningmeetingswithfinancialleaderstogenerateinterestinyourfund.
9. CreditUnions:TheapplicationprocessforcreditunioncertificationbytheNationalCreditUnionAdministrationorbydesignatedstateauthoritiesisextensiveandrequiresasignificantamountofpre‐developmentexpensesforthebusiness,marketing,managementandoperationplans.Thebusinessesfinancepro‐formawillrequiresignificantdetailsthatincludefundmanagementincomeandexpenseprojections.Additionally,significantstartupcapitalisneededforoperationsandequity.
![Page 21: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/21.jpg)
CommunityDevelopmentCreditUnions 19
FinalNote:
Communitydevelopmentloanfundscanspecializeinitsmarketandservices.Becomingaloanfundisnoteasyandrequiresastrongcommitmentfromtheorganizationandthemembersofthedevelopmentteam.WithexperiencethenaturalprogressionistogainCDFIcertificationandaccessitsmanyresources.Withthisaddedcapacity,organizationscanbecomeequityinvestorsorcanexpandtheirservicestotheentirecommunitybycreatingacreditunion.Thegoalcanbeaccomplishedwiththesupportofthecommunity,localgovernmentandinterestedfinancialinstitutions.Itismostimportanttohavestaffdedicatedtotheprojectandiftheydonothavetheexpertise,locateresourcestosupportandguidetheeffort.Thisdocumentisintendedtobeaguidethatoutlinessomeofthekeyissuesandidentifiespossiblesolutionsandsteps.Itisnotintendedtobeyoursourcesinceeveryprojecthasitsownissues,concernsandpeculiaritiesanditsownuniquesolutions.Thedocumentisnotintendedtoencourageanyorganizationintoprojectdevelopmentbutonlytolayoutsomeofthekeystepsandissuesoncethedecisionismadetoproceed.
![Page 22: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/22.jpg)
CommunityDevelopmentCreditUnions 20
APPENDIXAFORMOREINFORMATION:ResourcesWebsites:
OpportunityFinanceNetwork:(www.ofn.org)“OpportunityFinanceNetwork(OFN)isanationalnetworkofcommunitydevelopmentfinancialinstitutions(CDFIs)investinginopportunitiesthatbenefitlow‐income,low‐wealth,andotherdisadvantagedcommunitiesacrossAmerica.
OFNMembersareperformance‐oriented,responsibleinvestorsthatfinancecommunitybusinesses,sparkingjobgrowthintheareasthatneeditmost,anddeliveringbothsoundfinancialreturnsandrealchangesforpeopleandcommunities.
OurNetworkhasoriginatedmorethan$23.2billioninfinancinginurban,rural,andNativecommunitiesthrough2009.Withcumulativenetcharge‐offratesoflessthan1.4%,wehavedemonstratedourabilitytolendprudentlyandproductivelyinunconventionalmarketsoftenoverlookedbyconventionalfinancialinstitutions.”
CoalitionofCommunityDevelopmentFinancialInstitutions(CDFICoalition):(www.CDFI.org)“Formedin1992asanad‐hocpolicydevelopmentandadvocacyinitiative,theCoalitionofCommunityDevelopmentFinancialInstitutions(CDFICoalition)istheleadnationalorganizationintheUnitedStatespromotingtheworkofcommunitydevelopmentfinancialinstitutions(CDFIs).Throughitsmemberorganizations,theCoalitionrepresentsCDFIsworkinginall50statesandtheDistrictofColumbia.ThisnationalnetworkofCDFIsincludescommunitydevelopmentloanfunds,communitydevelopmentbanks,communitydevelopmentcreditunions,microenterpriselenders,communitydevelopmentcorporationsandcommunitydevelopmentventurecapitalfunds.TheCDFICoalitioncoordinatesindustrywideinitiativestoincreasetheavailabilityofcapital,creditandfinancialservicestolow‐incomecommunitiesacrossthenation.”
CommunityDevelopmentFinancialInstitutionsFund:(www.cdfifund.gov)“Throughmonetaryawardsandtheallocationoftaxcredits,theCDFIFundhelpspromoteaccesstocapitalandlocaleconomicgrowthinurbanandrurallow‐incomecommunitiesacrossthenation.
Throughitsvariousprograms,theCDFIFundenableslocallybasedorganizationstofurthergoalssuchas:economicdevelopment(jobcreation,businessdevelopment,andcommercialrealestatedevelopment);affordablehousing(housingdevelopmentandhomeownership);andcommunitydevelopmentfinancialservices(provisionofbasicbankingservicestounderservedcommunitiesandfinancialliteracytraining).
NationalCommunityReinvestmentFund(CRF,USA):(www.crfusa.com):“CommunityReinvestmentFund,USA(CRF)helpschangethelivesofpeoplelivingineconomicallydistressedcommunitiesacrossthecountry.Wesupplycapitaltolocalcommunitydevelopmentlenderssotheycanmeetgoalslikethese:
• Growsmallbusinesses• Increaseaffordablehousing• Createandpreservejobs• Buildchildcarecenters• Developcommunityfacilities
Atthesametime,weenablefinancialinstitutions,socially‐motivatedinvestors,andaccreditedindividualstoreachtheirsocialinvestmentgoals.
![Page 23: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/23.jpg)
CommunityDevelopmentCreditUnions 21
CRFoperatestheleadingnationalsecondarymarketforcommunityandeconomicdevelopmentloans—amarketCRFpioneered.Wepurchaseeconomicdevelopmentandaffordablehousingloansfromcommunitydevelopmentlenders.Wethenpoolthemintoasset‐backeddebtsecuritiesandNewMarketsTaxCredit(NMTC)investmentfunds,whichweprivatelyplacewithinstitutionalinvestors”NationalCreditUnionAdministration(NCUA):(www.ncua.org)“NCUAistheUnitedStatesindependentfederalagencythatsupervisesandchartersfederalcreditunions.NCUAalsoinsuressavingsinfederalandmoststate‐charteredcreditunionsacrossthecountrythroughtheNationalCreditUnionShareInsuranceFund(NCUSIF),afederalfundbackedbythefullfaithandcreditoftheUnitedStatesgovernment.”NCUAprovidesuptodateinformationoncreditunionsandreportstoassistallcreditunionsinstartupandoperations.FORMOREINFORMATION:OrganizationalExamplesValleyEconomicDevelopmentCorporation/PacoimaDevelopmentFederalCreditUnion(webwww.vedc.organdwww.pacoimadcu.org)"Tocreateandsustainjobsandbusinessesinourcommunitiesbyprovidinghigh‐qualityeconomicdevelopmentservices.VEDChasconsistentlyprovidedservicestosmallandmediumsizedbusinessowners,entrepreneursandmembersofthecommunitiesitserves.VEDChasgrowntobecomethelargestnon‐profitbusinessdevelopmentcorporationinthemetropolitanLosAngelesarea.”Itoperatesandfacilitatesseveralprograms&projectssuchas
• SBAWomen’sBusinessCenter• SanFernandoValleyFinancialDevelopmentCorporation• PacoimaDevelopmentFederalCreditUnion• LosAngelesBusinessSourceCenter
“VEDCknewthatthePacoimamarketwasunderservedinfinancialservices.TherewereonlytwobanksinPacoimatoservice90,000localresidents.Therefore,VEDCbecameinterestedincreatingitsownbank.Inlate2000,VEDCandLosAngelesUrbanFundersconductedafeasibilitystudyforcreatingacommunitydevelopmentbankinPacoima.Thefindingswerepublishedin"AssessingNeedforaCommunityDevelopmentBankinPacoima"inOctoberof2000.ThestudyprovideddetailsaboutthedemographicsofPacoimaresidentsanditsbusinesscommunity,aswellasanoutlineofacommunitydevelopmentbankstrategy.In2001,VEDCretainedShorebankAdvisoryServices(SAS)tocontinuethisfeasibilitystudywork.Afteritssitevisit,SASpresentedseveraldifferentoptionsforVEDCtoconsider:createadenovo(start‐up)communitydevelopmentbank;engageinapartnershipwithalargecommercialbanktobringabankpresenceintoPacoima;createabankconsortiumtoraisecapitalforareabusinesses,
![Page 24: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/24.jpg)
CommunityDevelopmentCreditUnions 22
and/orcharteracreditunion.Basedupontheseoptions,VEDCsupportedtheestablishmentofonlythesecondcommercialbankinPacoimain50years,aWellsFargoBankBranch.VEDC,then,proceededwiththecharteringofaCreditUniononafederallevelthatwouldservetheseunderservedcommunitiesandutilizetheprovisionsoftheFederalCreditUnionActanditsregulationsthatpermitafederalcharteredcredituniontobedesignatedaslowincome.”
B.O.N.D.CommunityDevelopmentFCU(Atlanta,GA):
(See:http://www.bondcu.com/site/bond/AboutBONDCFCU.asp)
Concurrently,theBassOrganizationforNeighborhoodDevelopment(B.O.N.D.)wasorganizedtohelpfivein‐townneighborhoodstakebacktheircommunity.TheseneighborhoodswereLittle5Points,InmanPark(Atlanta’sfirstsuburbbuiltaftertheCivilWar,withsomeofGeorgia’smostbeautifulVictorianandantebellum‐stylemansions),Poncey‐Highlands,CandlerPark,andLakeClaire.Alltheseneighborhoodswereconsideredlow‐incomecommunities,consistingmainlyofmulti‐familyrentaldwellings.
Thecommunitybelievedthatonlythroughpropertyownershipwouldtheaverageindividualwieldanypowerandescapepoverty.Onlythroughbuyinghomes,residinginthem,andfightingforthemcouldthepeoplebeempoweredandtheroadconstructionstopped.Everyoneshouldhavebeengiventheopportunitytoownahome,butdueto“red‐lining,”therewasnosuchopportunityfortheresidentsofthisarea.
Financialinstitutionslocatedinandaroundtheseneighborhoodswouldgladlytakedeposits,butwouldnotreinvestbackintothecommunity.Afinancialinstitutionwasnecessarytofollowthephilosophyofthelocalpeople,toreinvestbackintothecommunity,andtoprovideservicesandfinancialcounselingtoimprove“theplightoftheresidents.”
Afteralongtwo‐yearstrugglewiththeNationalCreditUnionAdministration(NCUA),thiswasreluctanttocharteracreditunionwiththeexpressedintenttoproviderealestatelending.TheMCCthenprovidedtheinitialfundingof$2,500tostart‐upthecredituniononashoestringbudget.
Dividendswerecommencedatafullquarterpercentovertheclosestcompetitor,C&SBank,anddepositsbegantogrow.Butbythefourthquarterofthefirstyearofoperation,therewerenotenoughfundsinreservestopaydividends.Thiswasthepointwherethecreditunionproveditselftothecommunity!Theboarddevisedaplanforincreasingreservesinordertopaythedividendsastheyhadbeendeclared.Theywouldtaketheavailablefundsinreserves,borrowaresident’slargetruck,andpickpeachesonafarmsouthofAtlanta.TheplanwastobringthesepeachesbacktoAtlantaandbysellingthemonthestreet,raisethe$210neededtopaydividends.
B.O.N.D.CommunityFCUrequestedandreceivedlow‐incomestatus.Bytheendof1974,thecredituniondepositsof$101,390andhadbooked162loanstotalingover$165,000,mostofwhichwererealestate.Thecreditunionexperiencedgreatcapitalgrowthandlowloanloss.ThistrendcausedNCUAsomeconcern.Theyfeltthatwewerenotchargingoffenoughloansandourdelinquencyratewastoosmall.ThisisstillatrendtodayatB.O.N.D.CommunityFCUandcontinuestocauseNCUA
![Page 25: COMMUNITY DEVELOPMENT CREDIT UNIONSMicroloan funds and Credit Unions). Organizations interested in expanding access to capital for underserved communities have focused on various forms](https://reader033.vdocuments.net/reader033/viewer/2022050120/5f509a9fd3344b37095f833e/html5/thumbnails/25.jpg)
CommunityDevelopmentCreditUnions 23
concernevenaftersomanyyears.NCUAonceagaintriedtoconvincetheBoardofdirectorstotakegreatercreditrisks.TheBoardonceagainremindedNCUAthatourprimarypurposewasandistoassurehomeownershipasabaseforourcommunity.
Overtheyears,ourfieldofmembershiphasexpanded.Thefirstoftheseexpansionswaswhenmembershipwasopenedtopeopleworkingatthebusinesseslocatedwithinthecommunityboundaries.Thischangesignificantlyexpandedtheneighborhood’suseofthecreditunion.Ouraveragesharedepositgrew55%overthenextthreeyears.
Thecreditunionaddednewneighborhoodstoouroriginalgroup.Currently,B.O.N.D.CommunityFCUservesover5,000members,andasofDecember2008,assetsexceeded$34milliondollars.B.O.N.D.CommunityFCUhasloanedover$143milliondollarstoresidentswhohaverenovatedhundredsofin‐townhomes.
In2010,thecreditunionobtaineditsCDFIcertification,addingsubstantialresourcesandfundingtoincreaseitslendingactivities.
ElPasoCreditUnionAffordableHousing,LLC(ElPaso,TX)
(see:http://epcuah.com/history.htm)
TheElPasoAffordableHousingCreditUnionServiceOrganization(CUSO)wasformedin2001by8ElPasocreditunions;GECU,FirstLightFCU,WestTexasCU,ElPasoAreaTeachersFCU,OneSourceFCU,ElPasoEmployeesFCU,MountainStarFCU,andGoldenKeyFCUasacreditunioninitiativetoimprovetheeconomic,socialwellbeing,andthequalityoflife,ofmembersinthecommunitythroughfinancialliteracy,savingsandprovidingaccesstolowcostcapital.ElPasoAHCUSOservicesinclude:financialeducation,housingcounseling,creditcounseling,foreclosurepreventionassistance,pre‐andpost‐homeownershipeducation,andinformationonpredatorylenderpractices,andthroughitssisterorganization,ElPasoCreditUnionAffordableHousing,LLC,providesaccessiblelow‐costprogrammortgageloans,inpartnershipwiththeHousingAuthority,HUD,ElPasoEmpowermentZone,theCityofElPaso,andothers.AHCUSOworkscloselywithothercreditunionstodeveloplowcostfinancialproductsthatwillprovidelowtomoderateincomefamilieswithoptionstohigh‐costorpredatoryloansandwireremittancesandareaccessibletofinanciallyunderservedmarkets.
TheAHCUSOtargetmarketisapproximately90%LatinoandistheverylowtomoderateincomefamilieswithintheCountyofElPaso,Texas,whichincludestheCityofElPaso,CityofSocorro,HorizonCity,CityofAnthony,Fabens,Tornillo,SanElizarioandoutlyingColonias.Theseareunincorporatedsettlementsthatlackbasicwaterandsewersystems,pavedroads,safeandsanitaryhousing.Texashasthelargestnumberofcoloniasandthegreatestcoloniapopulation,whichispredominantlyHispanic.Oftheproximately1,500coloniasintheU.Ssideoftheborder,97percentareinTexas(Sharp,1998).Ourcommunityishometoapproximately140,000peoplelivingin78colonias(ProfilesofColonias,THDCA1998).Mostfamilieslivinginthecoloniasdonothaveeasyaccesstoanyfinancialinstitutionsortraditionalfinancialservices,oraccesstolowcostcapitalforhomeloansorconsumerloans.