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For anyone wondering if the purpose of small dollar loans in this country has waned, allow the last couple years and last week’s CDFI Fund news to be a stark reminder of their immense value and fundamental necessity for individuals and families’ financial recovery and overall financial health efforts.

As the COVID pandemic continues, believe it or not, and despite unemployment dropping to 3.5 percent as of July – a record low – many Americans are still feeling financial instability and distress with inflation continuing to be an expensive thorn in consumers’ sides. An August 2022 PYMTS survey found that 61 percent of American consumers were living paycheck-to-paycheck, up 55 percent from the year prior. In fact, 33.5 million Americans spent more than they earned in the past six months.

The challenges weren’t necessarily easier for consumers in the upper income brackets, either. The PYMTS study also found that the largest rise in paycheck-to-paycheck consumers were those earning $100,000 to $150,000, up 11 percentage points from May 2022 to 52 percent in June 2022. Such news emphasizes a stark reality that financial health and wellness in America does not necessarily stop at low-income individuals and communities.

America’s financial institutions rush for CDFI Fund certification

That’s why the news coming out of the Community Development Financial Institutions Fund (CDFI Fund) last week was so significant for the credit union movement and consumers everywhere who continue to look to their local cooperatives for the affordable financial help and knowledgeable mentorship they won’t find anywhere else. 

The Department of the Treasury’s CDFI Fund released the application data for the fiscal year 2022 round of its Small Dollar Loan Program (SDL Program) with astounding results: A total of 92 organizations submitted applications requesting $32.1 million in funding, nearly TRIPLE the amount of CDFI funding that is actually available! Of those 92 applications submitted, 45 came from credit unions (!), 31 from loan funds, and 16 from banks or bank-holding companies. 

The news is absolutely incredible, and reaffirms once again that when it comes to providing the tools to financial inclusion and the resources members across the nation require, the credit union movement answers!

Photo: Timon Studler

The SDL Program is purposed with expanding consumer access to financial institutions by providing alternative sources to high-cost payday lending. As much as $11.1 million in awards is available through the FY 2022 application round. Through the SDL Program, the CDFI Fund offers: 

  • Grants for Loan Loss Reserves (LLR): The awards enable a CDFI to establish a loan loss reserve fund in order to cover the losses on small dollar loans associated with establishing or maintaining a small dollar loan program. 
  • Grants for Technical Assistance (TA): The awards support technology, staff support, and other eligible activities to enable a certified CDFI to establish and maintain a small dollar loan program.

The FY 2022 application period closed July 15, 2022, and the CDFI Fund expects to announce the awards right around the corner in September 2022. 

QCash is so excited to see a whole new crop of credit unions understand the value of being CDFI-certified by submitting their 2022 applications. Mission-driven credit unions are dedicated to financial inclusion and recognize the value of applying for capital or technical assistance grants. In the middle of the pandemic in September 2020, CDFI and credit unions came through big with the Fund awarding $45.8 million to 111 credit unions. 

Additional benefits of the CDFI Program include:

  • Access to additional training resources
  • Exemption from the NCUA’s member business lending cap
  • Membership in a learning community of like-minded credit unions to share ideas
  • Limited exemptions under the CFPB Qualified-Mortgage and Ability-To-Pay rules

QCash is proud to witness the growth of the CDFI community, and looks forward to the opportunity to partner with them and offer Life Event Loan solutions to those members getting back on the path to financial health!