How Credit Unions Have Used CDFI Grant Money
HOLLYWOOD, Calif.-With the deadline for CDFI Fund applications looming, Jamie Chase of Credit Union Strategic Planning shared how past funds recipients have used their grants and the success they have had.
Hawaii First Federal Credit Union
Awarded nearly $500,000 to cover operating expenses and loan losses for it's Community Resource Center. The center provides budgeting, matching IDAs to promote savings for unsecured education and small business loans, debt consolidation and second chances to vulnerable consumers.
The results: The state average loan-to-share ratio in Hawaii hovers at 50%. Hawaii First's loan-to-share-ratio hovers at and exceeds 100%, while its neighboring credit unions on the Big Island of Hawaii are as low as 30% loan-to-share. This is significant while CUNA's economist Bill Hampel is projecting zero-percent loan growth for credit unions. It is true. Credit unions will not find loan growth fighting for car loans to A and B borrowers. By lending to consumers that need help and providing education Hawaii First is inventing its own qualified borrowers. The brilliance of The CDFI Fund award is that it provides significant funding for the provision for loan loss reserves which mitigate the risk. This protects the credit union as it deploys more loans to those that need the credit. This is a story of a credit union living the credit union philosophy, where good philosophy is also good business.
Newrizons Federal Credit Union
The credit union is located on the site of a company plant that all but shut down. The entire town is depressed as a result and Newrizons is the only financial institution willing to lend to the underemployed and unemployed workers. Yet the credit unions net worth was falling because the credit union branch was difficult for the townspeople to find. The CDFI Fund provided an award of more than $200,000 for the credit union to develop partnerships and outreach in the community to deploy more loans. Even the short-term impact of the award was significant taking the credit union's net worth ratio from 6.94% to above 9%.