Community Development Credit Union Movement

* In the USA, 200 CDCUs (of a total of nearly 8,000 credit unions) provide banking and finance services to low-income people in urban and rural areas.

Discussion

Mike Lewis and Pat Conaty:

"Because of the challenges in servicing lowincome households cost-effectively, some of the fastest growing CDCUs have evolved a“group company structure.” CDCUs, like other community development financial institutions (read“people-worthy banks”), have two key functions:

a) community development (a public good) and

b) provision of financial services (typically a market good).

The most innovative CDCUs use a group company structure to permit these two functions to be funded separately through trading, contracting, and subsidy mobilization. Community development can be funded primarily through grants and service level agreements.

The financial services can be funded through interest income, fees for service, and other charges.The company group structure and/or overlapping boards enables a CDCU to harness together a credit union for personal lending, a community development loan fund for corporate lending, and a nonprofit organization for the delivery of advisory services for financial education, debt and tax advice, house purchase and repair, business advice and other needs. British CBPs have taken legal advice and professional guidance from the American CDCU movement to develop their corporate structures." (source: makingwaves volume 20, number 3)

Example

A good example of a CDCU is North Carolina’s Latino Community Credit Union. Founded in 2000, it now has a membership of about 50,000,most of them low-income Latin American immigrants. This rapid growth is due in part to an integration of the credit union’s banking, savings, credit, and budgeting services with the financial literacy, credit counselling, and money advice delivered by an affiliated nonprofit, the Latino Community Development Center. A second key factor in the success of the credit union has been its strategic partnerships with Self Help Credit Union (one of the largest CDCUs in the U.S.A.) and the even bigger North Carolina State Employees Credit Union.The former has provided mentoring and the latter provides the CDCU with back office administration and ATM services at low cost." (source: makingwaves volume 20, number 3)