ALEXANDRIA, Va.—The pandemic has shined a bright light on the work of credit unions that serve the underserved, but for those communities to succeed economically it's going to require the entire country working diligently to support the needs of diverse and low-income communities, according to Bill Bynum.
During NCUA’s second DEI Summit, Bynum, the CEO of Hope Credit Union said the work of CUs that serve the underserved is being noticed during the health crisis.
“Over the past 20 months, during the pandemic and after the social justice crisis from the murder of George Floyd, more people are paying attention to these issues and have seen the important role that minority depositories are playing,” said the leader of the Jackson, Miss.-based Community Development Financial Institution (CDFI). “And we are probably talking now less about minorities and more about the emerging majority, because the country is becoming increasingly diverse.”
Bynum pointed out analysis by McKinsey shows if the country can reduce the wealth gap it would add $1.5-trillion, roughly, to GDP, over the next 10 years.
“That’s jobs and income. That’s revenue to support infrastructure,” he explained. “Yet, we still leave so many people on the outside of the economy, unbanked and underbanked. We're shooting ourselves in the foot. I think it's something that, quite honestly, crosses political philosophical lines.”
Losing Ground
Bynum emphasized that if the country doesn’t have productive workers, the U.S. is losing ground.
“If we don't have people who can support their families and buy stuff from your business, then we're not going to realize our potential as a country,” Bynum said. “You know, we can't leave a trillion-and-a-half dollars on the table. And we do that by not making sure that everyone can participate fully in the economy. And one of the first rungs on the economic ladder is access to basic financial tools.”
Yet, so many banking deserts exist within low-income communities.
“These are areas in which you don't have a credit union or bank, and all you have are predatory lenders that are disproportionately in the communities that we're talking about,” said Bynum. “If this continues, again, we're not going to realize our potential as a country. It's just so obvious that it's in our collective interest to close these wealth gaps. We, as credit unions, play a critical role.”
Bynum pointed out that within the U.S. there are roughly 280 credit unions run by African-Americans to serve that community, among others, as opposed to 20 Black-run banks.
“That's incredible,” Bynum said about the lack of banks dedicated to serving African-Americans.
What is concerning is those 280 credit unions are “woefully undercapitalized,” added Bynum.
“The average assets are $25 million for those credit unions compared to a $275-million average for the 20 banks,” he said. “But the capacity and the potential is there, some of them are very small credit unions that need support. And I think there's some opportunities for the credit union industry, collectively, and NCUA to do more to help those smaller credit unions.”
Bynum gave NCUA kudos for moving quickly to revise the rules on subordinated debt and the emergency capital improvement investment program.
Sometimes challenges bring opportunity, noted Bynum, who said that’s what happened to his credit union following Hurricane Katrina.
“We were able to grow from $4 million in assets to $50 million over a three-year period—one of the fastest-growing credit unions in the country then, responding to the needs in New Orleans,” he said.
Banks Closed
Banks closed in record numbers in the Deep South following Katrina, Bynum said. That led to dramatic branch growth for his now $425-million cooperative.
“We went from eight to 30 branches in just over a decade,” he said. “I really appreciate the NCUA working with us to grow, we couldn't have done that without secondary capital.”
Bynum stressed his credit union could not have grown, would not have had the necessary capital to expand, by relying on the deposits of people within communities in which the wealth has been extracted.
In June 2020, Hope CU received a $10-million deposit from Netflix as part of the streaming service company’s $100-million plan to invest in Black lenders. In a previous report Hope CU stated the $10 million will provide financing to more than 2,600 entrepreneurs, home buyers and consumers of color.
Bynum turned back to the issue of the wealth gap.
“If we don't invest in an increasingly diverse America, then we're going to fall even further behind, and the divisions we've seen over the past few years, they are going to get worse,” said Bynum. “But if we use those tools and invest in minority institutions, particularly those smaller ones…there's a lot more that we can do…I think there's some opportunities to really move the needle on inclusion, and it's an exciting time.”