The Filene Research Institute announced that 28 credit unions from across the U.S. and Canada have committed to participate in an 18-month incubator to test five programs designed to meet the needs of underbanked minority households.
The initiative, called "Reaching Minority Households," was created by Filene in collaboration with Visa and the Ford Foundation, and will test solutions designed to "improve the financial lives of minority families."
Under the initiative, each participating credit union will test at least one product chosen based on "potential scalability and impact," among other factors.
The financial products include:
Community Microfinance Small Business Lending:Developed by Alterna Savings Credit Union of Toronto, Ontario, this initiative helps entrepreneurs from primarily underserved and under-represented groups start or expand their own businesses.
Data Mined Auto Loans: Established by the National Credit Union Foundation, this program uses sophisticated data mining techniques to identify households that may benefit from an affordable auto loan.
Non-Citizen Lending Program: Developed by Point West Credit Union, a $97-million institution based in Portland, Ore., this program offers credit cards, personal loans and vehicle loans to non-citizens at the same rates as "traditional" consumer lending products.
Payday Payoff Installment Loans: Using a risk model from LexisNexis Risk Solutions, the program was developed by Kinecta Federal Credit Union, a $3.9-billion institution based in Manhattan Beach, Calif., and relies on alternative data that allows borrowers to consolidate up to $2,500 of high-cost payday loan debt into an affordable installment loan.
QCash: Built by Washington State Employees Credit Union, a $2.5-billion institution based in Olympia, Wash., and offered by QCash Financial, this "omni-channel" lending solution offers relationship-based underwriting without a credit check to members in search of small, short-term unsecured loans with funding in less than 60 seconds.
Goal: Helping Minority Communities
Filene noted that while minorities represent about 30% of all U.S. households, they hold only 13.4% of deposits, 7.5% of retirement investments and 10% of total wealth in the country.
However, Filene points out that "minorities" in the US span a highly diverse swath of people of various income levels. Indeed, Filene noted that black and Hispanic households are "far more likely" to face large financial gaps than white and Asian households. For example, 55% of black households reported less than $10,000 in household wealth, versus 52% for Hispanics, 30% among Asians, and 24% among whites.
"Our research has shown that efforts to serve minorities aren’t simply altruistic—they benefit both members and the credit union overall," said Andrew Downin, managing director, innovation for Filene, in a statement. "Consumers now have access to affordable financial services and can take critical steps to create a more stable financial future for themselves and their families, and the credit union taps into a new population with an increasing ability to access financial services."
Helping Members Realize Their Dreams
Jeff Jackson, chief lending officer for Michigan State University FCU, one of the participating CUs, said that his institution decided to join the Reaching Minority Households Incubator and test the Community Microfinance Small Business Lending Program "because we want to make sure that any segment of our membership, including those with lower means, can realize their dream of owning or starting a business."
Filene added that it will work closely with each credit union to provide implementation expertise and resources throughout the pilot.
The U.S.-based credit union testers in the initiative will include:
- Alive Credit Union ($127 million in assets, based in Jacksonville, Fla.)
- AP Federal Credit Union ($34 million, Toledo, Ohio); California Highway Patrol Credit Union (Sacramento, Calif.)
- Cherokee County Federal Credit Union ($30 million, Rusk, Texas)
- Deseret First Credit Union ($546 million, Salt Lake City, Utah)
- El Paso Area Teachers Federal Credit Union ($609 million, El Paso, Texas)
- Embark Credit Union ($99 million, Great Falls, Mont.)
- First Commerce Credit Union ($500 million, Tallahassee, Fla.)
- Freedom First Credit Union ($443 million, Roanoke, Va.)
- GECU ($2.37 billion, El Paso, Texas)
- Illiana Financial Credit Union ($215 million, Calumet City, Ill.)
- Lower East Side People's Federal Credit Union ($47 million, New York)
- Members Credit Union ($28 million, Cos Cob, Conn.)
- Michigan State University Federal Credit Union ($3.3 billion, East Lansing, Mich.)
- North Side Community Federal Credit Union ($8.5 million, Chicago)
- NorthCountry Federal Credit Union ($509 million, South Burlington, Vt.)
- NRS Community Development Credit Union ($1 million, Birmingham, Ala.)
- Peninsula Community Federal Credit Union ($166 million, Shelton, Wash.)
- People's Trust Federal Credit Union ($518 million, Houston)
- Point West Credit Union ($97 million, Portland, Ore.)
- Pyramid Federal Credit Union ($144-million, Tucson, Ariz.)
- Seattle Metropolitan Credit Union ($705 million, Seattle, Wash.)
- Seven Seventeen Credit Union ($897 million, Warren, Ohio)
- Telco Plus Credit Union ($65 million, Longview, Texas)
- Turbine Credit Union ($26 million, Greenville, S.C.)
- Wakota Federal Credit Union ($25 million, South St. Paul, Minn.)
- Weststar Credit Union ($158 million, Las Vegas)
Other credit unions wishing to join the project can still do so if they sign up with Filene by September 15.
