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By Linda Ezuka | June 17, 2021 | 4 Minute Read

Credit Unions: Friend or Foe?

Woman with words "Credit Unions Friend or Foe" written
Friend! Credit unions can be an essential ally for banks, helping with community development investments and your Community Reinvestment Act (CRA) program. 
Ready for a radical idea? Invest in a credit union to improve your CRA investment portfolio! Not just any credit union, of course, but one of the network of Community Development Credit Unions, Low-Income Credit Unions, or Community Development Financial Institutions (CDFIs). These credit unions serve low-income or disenfranchised families across the country. A credit union with any of these designations can help you reach a segment of the population that your financial institution just can’t on its own.
Community Development Credit Unions (CDCUs) serve populations with limited access to secure financial services. Inclusiv, an advocacy organization formerly known as The National Federation of Community Development Credit Unions, certifies credit unions as CDCUs if they have a mission to serve low- and moderate-income people and communities. CDCUs offer members a place to conduct financial transactions at a reasonable cost and products and services that help members free themselves of high-cost and predatory debt and financial education to help their members learn how to budget and build assets. 

Advantage: Partnering with a CDCU can give your bank opportunities to provide investment funds as well as service hours. Visit the Inclusiv Membership Directory to find a CDCU to partner with near you.

Low-Income Credit Unions are designated by the National Credit Union Administration or a state regulatory agency. Over 50% of its members must be low-income (earning less than 80% of the national median income). The Low-Income Credit Union designation provides certain advantages, such as the right to accept non-member deposits and secondary capital and an exception from the statutory cap on member business lending.

Advantage: To increase your ability to make small business loans, your bank can provide investment funds to credit unions or partner with credit unions. Learn more about Low-Income Credit Unions here
Community Development Financial Institution Credit Unions (CDFI CUs) are mission-driven financial institutions serving disenfranchised communities and are certified by the US Department of the Treasury’s CDFI Fund. CDFI Credit Unions must have a primary mission of promoting community development. They do this by providing activities that improve low-income people’s social or economic conditions or specific target markets and demonstrating that at least 60% of their financial services activities are directed to low-income and underserved populations.
Advantage: Loans, deposits, equity, equity-like loans, and grants to CDFI Credit Unions can be great CRA investments for your bank. To sweeten the pot, banks who invest in CDFIs are eligible for a Bank Enterprise Award, a monetary award for banks that have demonstrated an increase in their investments in the most economically distressed communities throughout the nation.  
Investing in CDCUs, Low-Income Credit Unions, and CDFI Credit Unions is one more strategy that can help your bank improve both your CRA performance and your community. These credit unions have the expertise and the tools to help our bank community members. Reach out today to see how your investment can be the capital they need to build stronger communities. 
To learn more about how to partner with a CDFI, download this high-level checklist.
Tracking your community development can be time-consuming and frustrating. Kadince software makes it easy to track and report your community development efforts and CRA compliance. Schedule a demo to learn how you can save time with Kadince.

None of Kadince, Inc., its affiliates, or its respective employees, directors, officers, and agents (collectively, “Kadince”) are responsible or liable for any content or information incorporated herein. Read full disclosure.

Linda Ezuka | Owner, CRA Today

With over 29 years of community development experience, with an emphasis in CRA, compliance, training, community development lending, and CDFI initiatives, Linda works with financial institutions to provide comprehensive CRA training, up-to-date resources, and proven strategies to remain compliant. She helps CRA professionals master the art of the CRA and transform communities through the power of economic development. To learn more about Linda & CRA Today, visit her website.

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