New Report: Impact of Community Development Credit Unions

Posted by on March 17, 2006

CDCUs Increase Impact through Innovative Structures

High-performing community development credit unions (CDCUs) have developed innovative structures to expand their impact, according to a newly released publication of the National Federation of CDCUs.

?Community Banking Partnerships: Legal Structures that Work? reports on the experience of eight prominent CDCUs in using multi-part organizational structures to enhance the financial and related services of credit unions serving the low-income market. Written by the Federation?s executive director, Cliff Rosenthal, the study resulted from an international collaboration between the Federation and several organizations in the United Kingdom, including the New Economics Foundation (nef), the National Association of Credit Union Workers (NACUW), and Community Finance Solutions (CFS), an initiative of the University of Salford. The report was released on November 15 and 16 at meetings of the Debt on our Doorstep network and NACUW respectively, at which Rosenthal made a series of presentations.

?There was international motivation for this study,? notes Rosenthal. ?CDCUs in the United States are constantly searching for ways to do more for their communities, while keeping their balance sheets and operations within the bounds prescribed by regulation. In the United Kingdom, CDCUs generally are smaller and younger than in the U.S., and have grown up along side other community development financial institutions (CDFIs) with different powers and functions. Our colleagues in the U.K. are searching for organizational solutions that can achieve synergy by linking the two types of financial institutions in a common framework.?

The study was launched at a Federation seminar for eight CDCUs at Southern New Hampshire University in October 2004. The participating institutions are among the most prominent and successful in the CDCU movement, including:
? Alternatives FCU (Ithaca, NY)
? Appalachian FCU (Berea, KY)
? 1st Delta FCU (Marks, MS)
? Hope Community CU (Jackson, MS)
? Neighborhood Trust FCU (New York, NY)
? Santa Cruz Community CU (Santa Cruz, CA)
? Self-Help CU (Durham, NC)
? Opportunities Credit Union (Burlington, VT)

The most common motivation for establishing affiliate or group structures included gaining access to resources unavailable to credit unions, expanding flexibility in lending and investment; providing non-transaction services such as financial counseling; and facilitating membership expansion. The study identified legal and regulatory issues, best practices of governance and administration, recommendations for division of functions, marketing, and potential vulnerabilities of affiliate structures.

?Serving the low-income market means assuming and managing additional risk and cost,? the report notes. Established and operated properly, affiliate structures can help CDCUs meet their ambitious social agenda without jeopardizing their status as regulated financial institutions.

The publication is free to Federation members and Community Development Partners (others: $20 including shipping and handling). To order, please call Oulga Caesar at 212-809-1850, ext. 206 or visit our website (http://www.cdcu.coop) to download an application form.