In July 2021 , the NCUA approved the credit union charter application of Community First Fund, a CDFI Loan Fund. It was an exciting development in that it was approved in the previously unheard time frame of approximately 6 months, from submission to approval. As a community and economic development lender Community First Fund has been making loans to entrepreneurs and small business operations since 1992, with a proven record of financial and business expertise. Their decision to add a credit union operation to their business strategy raised a number of interesting opportunities for both their CDFI service community and the burgeoning effort to increase the number of de novo credit unions. Here are some of the answers to the questions you may want to consider when adding a credit union charter to your business strategy.
What are the strategic advantages for my CDFI?
Your CDFI certainly performs its primary purpose by meeting the loan needs of your local community businesses, but what about the rest of the financial service and product needs that are required to manage a successful business? Even the smallest start-up business needs business checking and access to credit and debit card services. How about customized digital services for business online and mobile banking? Many a business depends on banking services that accommodate ACH processing for both credits and debits, or remote deposit capture. All these services and more can be accommodated within the service menu of your credit union operation, making you the single shopping solution for your small business community.
Almost as importantly, how can you better accommodate the retail consumer financial needs of your business owners and their employees? What about the opportunity to meet the needs of the unbanked and underbanked consumers in your zone of economic influence, many of whom may be the customers of your business borrowers? These and many more community needs can be solved by adding a credit union charter to your business strategy.
Why is my CDFI a desirable candidate for a credit union charter?
You are an on-going concern already familiar with many of the challenges of running a financial institution in your community. You know and understand, what credit unions call, the “common bond” the defines your field of membership. You are, by your very nature, experts at building business plans and identifying funding resources to meet the needs of your community. You already represent and actively practice the co-operative principles and that are at the root of every credit union. These skills are at the very core of what made the chartering process easier and faster for Community First Fund in their federal chartering journey with the NCUA.
What are the challenges and opportunities for a de novo charter in today’s regulatory environment?
Every de novo initiative has the chartering option of either a federal or state charter. Today’s NCUA board has been extremely vocal and active in their commitment to supporting every effort to increasing de novo activity (see www.ncua.gov) and many state regulatory agencies are also accommodating to expanded chartering efforts under their state credit union acts (see www.nacuso.org). The sensitivity of today’s regulators to streamline and facilitate the chartering process is one of the reasons for this being an excellent time to pursue a credit union charter for your community.
We’re excellent lenders, but are there others in the credit union community who can help my CDFI support an expanded menu of product and service solutions?
Over the last 30 years, over 800 hundred Credit Union Service Organizations (CUSOs) have been formed to support the operational, service and delivery channel needs of credit unions of all sizes. This has allowed all credit unions to provide many member service solutions, which often require significant economic scale and capital or technological skill and expertise, through the use and practice of the co-operative business model. Even the smallest credit union can avail itself of CUSO business strategies that allow for it to meet product and service needs of its membership by participating in these collaborative business machines. Auto lending, mortgages, core processing, insurance solutions, liquidity and alternative funding resources, card processing, in bound and outbound call centers are just a few of the cooperative solutions offered by today’s CUSOs that make can make any credit union of any size a successful community partner. To learn more about CUSO go the www.nacuso.org or www.cusochallenge.com to learn more about how CUSOs are supporting de novo credit unions.
So, if your Loan Fund CDFI is thinking about how to expand its value proposition in your community you might consider a credit union charter, we’re here to help you evaluate that very opportunity.