Pinpointing the challenges and opportunities for CDFIs, small CUs
October 26, 2018 12:21 PM
Passman, Aaron
As credit unions gathered for Inclusiv’s annual conference this week in Clearwater, Fla., attendees were treated to insights into reaching new markets, new growth opportunities, and a focus on how to best tackle the challenges facing community development credit unions and those they serve. Read on for a look at the highlights.
Becoming more Inclusiv
The conference kicked off with a rebrand for the hosts, as the National Federation of Community Development Credit Unions relaunched itself as Inclusiv. For more converage, click here .
Untapped markets
Credit unions have a chance to serve a growing demographic in the United States – if they position themselves for the opportunity.
More than 50 million people in the U.S. (16.3 percent) identify as Latino or Hispanic, according to research compiled by the U.S. Census, Pew Hispanic Center and Selig Center for Economic Growth. This population holds $1 trillion in buying power and has experienced a 56% growth population-wise between 2000 to 2010.
And if credit unions want that business, they’re going to need to adjust how they present themselves.
“You can’t just translate the website and hire a few bilinguals,” said Victor Miguel Corro, thenewly appointed CEO of Coopera (pictured above) . “You don’t have to re-invent your credit union, you need to make small tweaks.”
But CUs must also be aware of the differences between various generations within this demographic said Corro, who was joined by Mia Mendoza, CEO of the Mendoza Group.
While first-generation immigrants are most likely to speaking Spanish as their primary language and are in the process of acculturation, second-generation immigrants may be more tech savvy and bilingual, while the third generation may prefer to interact with the credit union in English only. But there are larger trends at play, they added, pointing out that second-generation immigrants will likely outnumber first-generation by 2020.
So how can CUs attract this burgeoning market?
Mendoza recommended for credit unions to get involved and meet the local trusted gatekeepers of the communities that they serve. She also sugessted that CUs host “friendly roundtables” with community leaders.
The panelists urged credit unions to conduct an analysis to see which demographic countries Hispanic and Latino members originate from and which respective languages that they best identify with.
“If you don’t speak the language, then learn how to speak the culture,” Mendoza said.
More than 50 million people in the U.S. (16.3 percent) identify as Latino or Hispanic, according to research compiled by the U.S. Census, Pew Hispanic Center and Selig Center for Economic Growth. This population holds $1 trillion in buying power and has experienced a 56% growth population-wise between 2000 to 2010.
And if credit unions want that business, they’re going to need to adjust how they present themselves.
“You can’t just translate the website and hire a few bilinguals,” said Victor Miguel Corro, the
But CUs must also be aware of the differences between various generations within this demographic said Corro, who was joined by Mia Mendoza, CEO of the Mendoza Group.
While first-generation immigrants are most likely to speaking Spanish as their primary language and are in the process of acculturation, second-generation immigrants may be more tech savvy and bilingual, while the third generation may prefer to interact with the credit union in English only. But there are larger trends at play, they added, pointing out that second-generation immigrants will likely outnumber first-generation by 2020.
So how can CUs attract this burgeoning market?
Mendoza recommended for credit unions to get involved and meet the local trusted gatekeepers of the communities that they serve. She also sugessted that CUs host “friendly roundtables” with community leaders.
The panelists urged credit unions to conduct an analysis to see which demographic countries Hispanic and Latino members originate from and which respective languages that they best identify with.
“If you don’t speak the language, then learn how to speak the culture,” Mendoza said.
Andrew Harrer/Bloomberg
McWatters speaks
The conference also included remarks from NCUA Chairman Mark McWatters, who touched on the agency's push for third-party vendor oversight, support for small credit unions and more. For full coverage, click here .
One year after Hurricane Maria
Puerto Rico's cooperativas have come a long way, but there's still more work to be done. That was the message from José Julián Ramírez-Ruiz, executive director of Puerto Rico's Asociacion de Ejecutivos de Cooperativas, who offered attendees a look at credit unions based on the island territory.
Puerto Rico in 2017 was home to 114 credit unions with 260 branches, with total assets of $8.56 billion and $443.7 million in gross income. Hurricane Maria resulted in a migration of more than 140,000 individuals, but about 60,000 people are expected to return to the island within the next year, he said.
And Maria had a significant impact on banking in the territory.
"Seventeen cities didn't have banks in operation and were being served by a credit union" after the storm, he said, adding that CUs opened their doors even for businesses who weren’t members as electrical outages across the island left supermarkets depleted and resulted in technological blackouts.
Despite the Puerto Rican bond crisis and Hurricane Maria, said Ramirez-Ruiz, the island’s cooperativas are growing in assets while banks are shrinking. Assets in local banks dropped 34 percent from April 2010 to June 2017 whereas cooperativa assets climbed by 15.8 percent.
The picture isn’t all rosy, though. The average cooperative member is age 55 or older, said Ramírez-Ruíz, while the island’s bond crisis continues to be a threat along with a declining population and a continuous economic recession dating back to 2006.
Opportunities are present on the island though, he said, including increasing revenue and strengthening capital ratios. For more on the challenges and opportunities ahead for Puerto Rico’s cooperativas,click here .
Puerto Rico in 2017 was home to 114 credit unions with 260 branches, with total assets of $8.56 billion and $443.7 million in gross income. Hurricane Maria resulted in a migration of more than 140,000 individuals, but about 60,000 people are expected to return to the island within the next year, he said.
And Maria had a significant impact on banking in the territory.
"Seventeen cities didn't have banks in operation and were being served by a credit union" after the storm, he said, adding that CUs opened their doors even for businesses who weren’t members as electrical outages across the island left supermarkets depleted and resulted in technological blackouts.
Despite the Puerto Rican bond crisis and Hurricane Maria, said Ramirez-Ruiz, the island’s cooperativas are growing in assets while banks are shrinking. Assets in local banks dropped 34 percent from April 2010 to June 2017 whereas cooperativa assets climbed by 15.8 percent.
The picture isn’t all rosy, though. The average cooperative member is age 55 or older, said Ramírez-Ruíz, while the island’s bond crisis continues to be a threat along with a declining population and a continuous economic recession dating back to 2006.
Opportunities are present on the island though, he said, including increasing revenue and strengthening capital ratios. For more on the challenges and opportunities ahead for Puerto Rico’s cooperativas,
Maintaining missions and margins
According to Charlotte Ducksworth, board chair for DC Credit Union, “young people want to get involved in a movement – they want to get involved in something that will change the world.”
With that in mind, Duckworth and her colleagues have made efforts to incrase diversity and millennials on the credit union’s board, seeking out new members who understand social media and technology in order to boost innovation at the CU.
While all demographics need financial literacy training, said Ducksworth, the need is particularly acute among millennials. And credit unions, she added, “need to understand how mobile apps are supposed to look” – a task younger staff and board members can help with.
And working to add new, younger board members has paid off. According to Ducksworth, 7 percent of the credit union’s membership is now under age 24, and an initiative to bring new Americans into the fold has resulted in 20 percent total Latino membership at DCCU.
The cultural and language barriers may be the biggest obstacle for Hispanic and Latino membership, according to Latino Community Credit Union CEO Luis Pastor, who joined Ducksworth. Not only do those consumers face discrimination in housing and lending, he said, but fear of law enforcement and fraud are other deterrents.
"We may speak with an accent but we don't think with an accent," Pastor said.
With that in mind, Duckworth and her colleagues have made efforts to incrase diversity and millennials on the credit union’s board, seeking out new members who understand social media and technology in order to boost innovation at the CU.
While all demographics need financial literacy training, said Ducksworth, the need is particularly acute among millennials. And credit unions, she added, “need to understand how mobile apps are supposed to look” – a task younger staff and board members can help with.
And working to add new, younger board members has paid off. According to Ducksworth, 7 percent of the credit union’s membership is now under age 24, and an initiative to bring new Americans into the fold has resulted in 20 percent total Latino membership at DCCU.
The cultural and language barriers may be the biggest obstacle for Hispanic and Latino membership, according to Latino Community Credit Union CEO Luis Pastor, who joined Ducksworth. Not only do those consumers face discrimination in housing and lending, he said, but fear of law enforcement and fraud are other deterrents.
"We may speak with an accent but we don't think with an accent," Pastor said.
Thinking micro
When it comes to lending practices for low-income consumers, it’s all about social purpose. That's according to Scott Butterfield, principal of the adviser agency Your Credit Union Partner, PLLC.
Butterfield discussed the microenterprise field and its opportunity in supplementing low wages and providing increased flexibility with employment. Microenterprise is different from other business ventures because the products and services are less complex and a lower capital investment is needed, Butterfield explained.
Microenterprise also brings a swath of opportunities for credit unions including:
• Growth from unserved market (with high loan demand)
• Profitability
• Service aligned with philosophical roots
• Grant funding to increase capacity
• PR and greater brand recognition
He recommended that small businesses look into local partners, such as with universities and colleges, local chambers of commerce and the economic development corporations.
Cindy Armstrong, senior lender and mortgage loan officer of Arkansas-based Diamond Lakes Federal Credit Union and CDCU Mortgage Center veered on a different direction than microenterprise.
She explained how her home state is ranked 49th for overall economic opportunity and household income, yet holds the second highest share unbanked households of any state.
“I had a couple come in and visit us when buying their first home and they were so scared because they used cash their entire lives,” Armstrong said.
Armstrong reiterated Butterfield’s call to social purpose and encouraged the credit unions to forage more partnerships.
Butterfield discussed the microenterprise field and its opportunity in supplementing low wages and providing increased flexibility with employment. Microenterprise is different from other business ventures because the products and services are less complex and a lower capital investment is needed, Butterfield explained.
Microenterprise also brings a swath of opportunities for credit unions including:
• Growth from unserved market (with high loan demand)
• Profitability
• Service aligned with philosophical roots
• Grant funding to increase capacity
• PR and greater brand recognition
He recommended that small businesses look into local partners, such as with universities and colleges, local chambers of commerce and the economic development corporations.
Cindy Armstrong, senior lender and mortgage loan officer of Arkansas-based Diamond Lakes Federal Credit Union and CDCU Mortgage Center veered on a different direction than microenterprise.
She explained how her home state is ranked 49th for overall economic opportunity and household income, yet holds the second highest share unbanked households of any state.
“I had a couple come in and visit us when buying their first home and they were so scared because they used cash their entire lives,” Armstrong said.
Armstrong reiterated Butterfield’s call to social purpose and encouraged the credit unions to forage more partnerships.
It’s always sunny
Opportunities abound for credit unions interested in solar energy lending, said two experts speaking during the conference, but credit unions will have to effectively present that as an option to members if they hope to harness that potential business.
Paul Schwabe, senior energy analyst at the National Renewable Energy Laboratory, noted that local electricity prices are a key factor to developing solar energy, meaning that the bulk of interest in solar lending has come from states “with comparatively higher electricity prices.”
California, North Carolina, Arizona, Nevada and Texas have had the biggest solar energy impact to date, according to the SEIA/GTM Solar Market Insight Report, but Schwabe and others noted that those projects can be effective in other places as well.
Schwabe was joined by Stewart Sarkozy-Banoczy, senior advisor at 100 Resilient Cities, who emphasized that forces such as natural disasters can threaten cities’ operational functions. Resilience, he said, can reduce and help prevent the impact of those shocks, resulting in an accelerated recovery and improved quality of life.
And credit unions can help with that, he said, by encouraging the use of solar energy. While solar lending programs has its challenges – including unsecured loans, specialized underwriting, custom documentation, and the risk of non-payment and unretrieved collateral – he said it may be worth the risk both for CUs and consumers, since such programs sometimes carry rates as low as 0 percent and also often include rebates.
But, he noted, credit unions must present these opportunities effectively, such as through community solar programs like solar farms that invest in one project but allow for multiple subscribers. Those sorts of projects, he added, can give flexible loan offerings and an introduction to solar lending to a lower credit consumers. The idea is that the community solar project transcends into a bridge program in the future toward another type of loan program.
Schwabe and Sarkozy-Banoczy emphasized that education and advocacy are pivotal in the mass integration of solar energy and that, ultimately, credit unions have to look at how borrowers want to work with solar
“I’m willing to bet that where there’s been disasters in place – maybe in Puerto Rico – there may be movement faster [for solar integration] in those places because there’s a necessity to make it happen in the next few months to years, whereas in other places it’ll be more contextual based on the demand from education,” Sarkozy-Banoczy concluded.
Paul Schwabe, senior energy analyst at the National Renewable Energy Laboratory, noted that local electricity prices are a key factor to developing solar energy, meaning that the bulk of interest in solar lending has come from states “with comparatively higher electricity prices.”
California, North Carolina, Arizona, Nevada and Texas have had the biggest solar energy impact to date, according to the SEIA/GTM Solar Market Insight Report, but Schwabe and others noted that those projects can be effective in other places as well.
Schwabe was joined by Stewart Sarkozy-Banoczy, senior advisor at 100 Resilient Cities, who emphasized that forces such as natural disasters can threaten cities’ operational functions. Resilience, he said, can reduce and help prevent the impact of those shocks, resulting in an accelerated recovery and improved quality of life.
And credit unions can help with that, he said, by encouraging the use of solar energy. While solar lending programs has its challenges – including unsecured loans, specialized underwriting, custom documentation, and the risk of non-payment and unretrieved collateral – he said it may be worth the risk both for CUs and consumers, since such programs sometimes carry rates as low as 0 percent and also often include rebates.
But, he noted, credit unions must present these opportunities effectively, such as through community solar programs like solar farms that invest in one project but allow for multiple subscribers. Those sorts of projects, he added, can give flexible loan offerings and an introduction to solar lending to a lower credit consumers. The idea is that the community solar project transcends into a bridge program in the future toward another type of loan program.
Schwabe and Sarkozy-Banoczy emphasized that education and advocacy are pivotal in the mass integration of solar energy and that, ultimately, credit unions have to look at how borrowers want to work with solar
“I’m willing to bet that where there’s been disasters in place – maybe in Puerto Rico – there may be movement faster [for solar integration] in those places because there’s a necessity to make it happen in the next few months to years, whereas in other places it’ll be more contextual based on the demand from education,” Sarkozy-Banoczy concluded.
