MADISON, Wis.—Many credit unions really do the same work of Community Development Financial Institutions (CDFI), but simply don’t have the formal designation. And yet that designation, say a handful of leaders running CDFI-certified CUs, makes all the difference within the communities they serve, with their staff, members and the bottom line.
“This is a badge of honor for the credit union, but we have to back it up with our walk,” said Maurice Smith, CEO of Local Government FCU in Raleigh, N.C., during a panel discussion as part of CUNA Mutual Group’s Discovery 2021 conference.
Like most of the other panelists, Smith said that before his $3.1-billion credit union was CDFI certified, it had been doing the work that most CDFIs do, such as helping the low-income and underserved with specific products.
“We did not have to convince ourselves of the work that we had been doing, we knew what we were about. But, still, that certification became important to us,” stated Smith.
Smith emphasized when his credit union received CDFI status the certification felt “authentic” to his organization, through all ranks.
“It was a recognition of what we've been doing, serving these consistently poor counties,” said Smith.
And with the certification, added Smith, came a greater focus for the credit union on what it is really about.
“We needed that to become more intentional about what we are doing,” he said. “Now we had a credential to share with our members, with our communities. That’s important.”
Smith said that “stamp” made the credit union’s efforts to help the underserved more effective.
“That helped us go out into our communities and do the best we could for them,” explained Smith.
‘A Perfect Fit’
Smith, and panelist Kathy Chartier, CEO of the $41-million Members CU in Cos Cob, Conn., emphasized the business benefits of the CDFI status.
“As we all know, small credit unions are finding it harder and harder so succeed,” said Chartier. “But the CDFI status became a perfect fit for us. It has really helped us to grow and thrive.”
The credit union has added $10 million to its assets over the last two years, according to Call Report data.
“Overall, our performance metrics are above peer,” said Chartier.
Not Just About ‘Good Service’
Charlotte Nemec, CEO of Canopy FCU in Spokane, Wash., explained her credit union had not been focused on the underserved before obtaining CDFI status, and that the move has been a big undertaking for her $191-million organization.
But what it did for Canopy, she explained, was give it something else to market than just good service.
“I think this is one of the best ways for a small credit union to make it,” said Nemec, whose CU has added $35 million to its assets during the past two years according to Call Report data.
“If you continue to tell me that you're known for your service…Every credit union says it is known for its service,” Nemec said. “And when you can't put your arms around that you have to you have to find a way to really articulate to both your members and to your community who you are and why you are here. That certification became a beacon for us, and it also created a greater focus within our organization.”
Downturns Highlight Opportunity
Smith emphasized the growing need for CDFI credit unions, adding that is especially true during economic downturns. He said during downturns the underserved are the ones needing the greatest assistance from their financial institutions. However, what typically happens, Smith pointed out, is their financial rug gets pulled out from under them.
“Their credit lines are lowered, their access to credit is cut off, their rates go up…,” said Smith. “CDFI credit unions do something about poverty—I mean the kind of generational, stubborn poverty that grips communities and households.”