Just last week on June 5, great news reached the United States’ credit union community. The United States Treasury announced they had awarded $1.25 billion in COVID-19 relief funds to 863 community development financial institutions (CDFI).
The grants were provided through the Treasury’s Community Development Financial Institution Rapid Response Program (CDFI RRP) and provided appropriate capital for CDFIs to address the economic challenges that have been exacerbated by the COVID pandemic, particularly in underserved communities.
The CDFI Fund combines federal dollars with private capital to empower credit unions to improve initiatives aimed at enhancing social and economic communities throughout the nation that may typically fall short of traditional financing opportunities.
“In serving places that the financial sector historically hasn’t served well, CDFIs lift our whole economy up,” said Treasury Secretary Janet Yellen. “We know that for every dollar injected into a CDFI, it catalyzes eight more dollars in private-sector investment, meaning today’s announcement might lead to an additional $10 billion in investment. By channeling more capital into CDFIs, we are translating those ideals (creating an economy for everyone) into reality.”
Twenty-seven years into the Treasury’s CDFI Fund, their roster is now dominated by mission-owned and driven credit unions equipped with a laser-focus on providing the necessary financing to underserved communities in order to stimulate economic opportunity and revitalize neighborhoods.
That community-first perspective fits into CDFIs’ very mission of recognizing the role digital innovation plays in today’s credit union offerings. CDFIs recognize the importance fintech solutions play in helping communities move forward on the path to improved and inclusive economic recovery from COVID.
While the latest round of funding for the CDFI grants passed on May 3, 2021, how would your credit union take next steps to optimize for the next round of applications? Below, CreditUnions.com shared best practices from grant-winning credit unions from their CDFI work:
- Use outside specialists for filling out the CDFI application. The grants take a lot of time and can be complex
- Gather a top-tier team from all divisions of the credit union to carry out the project before, during, and after the grant application, if awarded
- Make sure you have a dependable system with proven expertise in the right positions to manage necessary risk, especially when factoring in loan losses
- Measuring success and impact is imperative; track results regularly
- Nothing is more compelling or inspiring than storytelling; share success stories that show how your credit union enhanced your community in life-changing ways
- Always remember the difference you’re making in the lives of your community by offering products and services. It shows through in your work
Pablo DeFilippi, senior vice president of membership and network engagement at Inclusiv, says CDFI Funds also bring in revenue for your credit union. “CDFI credit unions have an ROA comparable and oftentimes better than mainstream credit unions, despite serving more challenging markets.”
DeFilippi adds that meeting the needs of the low- to moderately underserved consumers as well as the communities in which they live is not simply a market opportunity but a mandate. “These are all demographics that can be served in a way that is responsible and sustainable. Put bluntly, mission without margin is simply altruism, and margin without mission makes us no different than predatory lenders.”