Credit unions can be bigger than their products

While racing to gate A2 at SEA, I was inspired by a sign that proclaimed “Starbucks is Bigger Than Coffee” and went on to explain the good work the company does around the world. Now I’m not a coffee drinker (yes, there are a few of us in Seattle), but this message got me thinking about credit unions.

Today, more credit unions are becoming much larger than their products and services. Sure, we still race to market with new spins on the same old products, and in recent years there have been some cool technology to make things faster and more convenient. This is all well and very good. But my message today is about the rising number of credit unions who are taking bigger steps and reaching for more to meet the rising financial needs in their community.

The bar is being raised

There are scores of best-practice credit unions across the country – small, large, urban and rural – that are powerful and influential leaders within their local communities. Leveraging internal and external resources, these credit unions are addressing specific and significant needs within their communities. Here are a few noteworthy examples:

  • The $35-million Lower East Side Peoples Federal Credit Union reaches out to a large population of foreign born non-citizens through education, short-term loans, citizenship loans and Individual Development Accounts.
  • The $65-million Lower Valley Credit Union and the $390-million Jefferson Financial Credit Union reach out to their underserved Hispanic communities, providing education and affordable access to consumer and small business loans.
  • The $237-million St. Louis Community Credit Union has built a broad-base community coalition focused on economic empowerment in a “financial services wasteland” by providing financial education, financial resources, and support to its low income communities. Community partnerships include social-service agencies, faith-based organizations, and for-profit organizations such as Enterprise Car Sales and local banks (yes, I said banks). Working together, the credit union, its non-profit affiliate and community partnerships have reached 19,000 youth and adults since 2008.
  • The $311-million Freedom First Federal Credit Union provides affordable housing and education programs that leverage partnerships with the Federal Home Loan Bank, HUD, Innovations for Poverty Action and CDFI grants to meet the affordable housing needs of its low-income communities.

Truly, these credit unions are demonstrating that they are bigger than their products.

Moving towards a tipping point

Movement towards greater community impact is gaining momentum with the effects of the Great Recession, intense competition, the NCUA’s action to expand the number of Low Income Designated credit unions, and, last but not least, CUNA’s vision of Uniting for Good. Each of these things has dramatically increased awareness and motivation to do more. Today, nearly 2,000 credit unions have been recognized as Low Income Designated (LID) credit unions, and another 300 credit unions have been recognized as Community Development Credit Unions (CDFI) by the U.S. Treasury. The numbers are rising quickly for several reasons:

A return to our philosophical roots and a desire to do well. The reason consumers need credit unions more today than ever before is to help the millions of American consumers who have found themselves without personal emergency savings, are deeply leveraged, credit-impaired, and lack the basic financial skill set needed in this new economic reality we live in. Scores of credit unions are returning to serving this group and, when they do, finding growth and greater relevance.

Loan and new member growth. The fact is, LID credit unions are performing better than their non-designated peers. Last year, NCUA Board Chairman Debbie Matz reported that LID credit unions are “lending more than other types of financial institutions and growing stronger.” She also noted that LIDs are “national trendsetters” and that “the collective success of low-income credit unions demonstrates that credit unions can do well while serving people of modest means.”

Brand differentiation. Doing well by doing good is a powerful brand differentiator. I can think of no better way to win the hearts and minds of a community than finding ways to improve the financial health of its citizens – especially those who need the most help. Consumers who are actively engaged in asset-building contribute more to their community and enjoy a better quality of life.

Access to resources. Never before have so many resources been available to community-focused credit unions. The regulatory relief provided by the LID designation allows credit unions to pursue secondary capital, expand MBL’s, and much more. The CDFI U.S. Treasury is providing millions of dollars in technical assistance to fund salary expenses and financial assistance that is being used for loan-loss reserves and capital. Each is focused on leveraging loan and community-development activities. Access to expertise has never been greater, with professionals experienced at developing community partnerships, expanding charters into lower income and targeted communities, creating 501 c3 affiliate structures, building Community Resource Centers, creating Financial Education curriculums, and designing unique services ranging from Volunteer Income Tax Assistance to Microenterprise Small Business programs.

Is your credit union bigger than its products and services?

I suggest three measurements of success when it comes to answering this question. First, ask yourself: do community stakeholders seek you out on a regular basis? Second, are your membership growth rates higher than peer? Finally, is loan deployment consistently high? If your measures are less than you desire, consider your local opportunities for impact. After all, I believe its impact that makes a credit union bigger than its products.

Find resources here:

Regulatory relief:

http://www.ncua.gov/Legal/Documents/LowIncomeDesignationFactSheet.pdf

Financial resources:

http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=7

Community development expertise:

http://www.cdcu.coop/expertise/consulting-services/cu-breakthrough-team/

Training and education:

http://www.cuna.org/Training-And-Events/Training-by-Business-Area/Financial-Counseling/Credit-Union-Financial-Counseling-Certification-Program/

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