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Let’s just say it: minority depository institutions are having a moment, and we’re here for it. 

According to the NCUA’s recently released annual MDI report to Congress, findings revealed MDIs – representing one in 10 federally-insured credit unions –  experienced growth in membership, assets, and loans in 2022, while expanding access to financial services for their members and communities. Total loans outstanding were reported to be $42.2 billion, a full $8 billion increase from the year prior. 

In fact, the NCUA noted MDIs’ 2022 performance metrics improved so much that several categories outpaced the growth in the credit union system itself. 

“Minority depository institutions are an essential component of the credit union system, providing access to safe, fair, and affordable financial products and services within well-resourced communities,” NCUA Chairman Todd Harper said. “MDIs during 2022 showed us just how essential they are. Not only did they give millions of Americans the chance to build better and more successful futures, their performance metrics in several categories were stronger than the credit union system overall.” 

Detroit MDI credit union perfect case study for financial inclusion

The power of the MDI – defined as any depository institution where 51 percent or more of the stock is owned by three or more “socially and economically disadvantaged individuals” – and the accomplishments reached in the last year and a half isn’t lost on Catherine Dorsey. Featured in CNote, the Detroit resident had always dreamed of being a nurse, and had actually begun medical school in Ohio. 

While Catherine worked her way through her coursework, her accumulating monthly bills started to take a toll. In order to pay for her school loans, car loan, and other miscellaneous expenses, Catherine borrowed on her credit cards. Unfortunately, she doubled down on her difficulties by taking out those loans from a predatory payday lender. 

“The first loan that I got wasn’t enough for me to do everything I needed to do,” Catherine confessed. “So then I had another one just to get enough money to move and get to school. I wasn’t even thinking about rates and terms. I was just thinking that I needed money fast. I have to get gas. I have to get food. I have to get to work.”

Just when she thought [financial] matters could get any worse, it wasn’t until the bills started flowing through the mailbox that she knew something was seriously off with her lending payments. Catherine quickly realized the numbers were really high; like, exorbitantly high. Abusively high. The first $4,000 loan would cost Catherine $12,000. On the second loan of $3,000, she would be paying $10,000. 

That predatory payday lending for you: A $22,000 total, from a loan of just $7,000.

Fortunately, Catherine unknowingly had an ace up her sleeve, an ace she had in her possession since becoming a member at One Detroit Credit Union back in 2017. Good fortune, because One Detroit just happened to be both a certified low-income designated minority depository institution and a community development financial institution (CDFI). 

Upon first walking through the door at One Detroit in 2021, Catherine glanced at a brochure on a teller’s desk for a “credit-building loan.” That was just the beginning of her reawakening to the power of an MDI credit union. Following a few questions, she was happily referred to the branch manager who reviewed Catherine’s situation. After hearing her story, the branch manager asked, “Has anybody ever talked to you about consolidating your debt?”

Yahtzee! The branch manager proceeded to explain how the MDI could save her literally thousands of dollars over the life of the collective loans she’d acquired. For Catherine, this development seemed entirely too good to be true. 

A few days later, the call arrived from One Detroit. Her consolidated loan had been approved. New loan terms, new life! Instead of owing $1,000 a month, Catherine would be paying just $320. “I was crying. I couldn’t believe it. I kept asking – are you sure, are you sure?”

Prior to the consolidation, Catherine was strictly working just to pay the bills. After One Detroit worked its magic, Catherine could then begin saving and then make purchases she had been delaying for years. That’s the MDI difference – financial inclusion in action.

Photo: Johan Waiter Bantz | Unsplash

MDIs more effectively targeting their efforts

It bears repeating: An $8 billion increase in loans outstanding for a total of $42.2 billion in 2022. Assets and memberships increased while net worth and return on average assets stayed strong. Even after all those accomplishments, MDIs don’t seem to be resting on their laurels. 

NCUA Chairman Harper advocated support for expanding MDIs by continuing research in ways to more effectively target the designation’s efforts. Such efforts included cementing plans to modify its examination processes to recognize the “distinctive business model of MDI credit unions.”

“Based on that report and other research and discussion, the NCUA has laid out a plan for its MDI preservation activities in the future,” Harper continued. “One step has already been completed; at the agency’s request, Congress added the MDI designation as an eligibility category for the Community Development Revolving Loan Fund funding.”

Of the 503 MDI credit unions, 411 also held the low-income credit union designation, while 104 were also CDFI-certified. QCash represents a perfect potential partner with MDIs’ mission to lift up low-income and financially-challenged credit union members and communities. The combination of MDIs’ access to specific, targeted neighborhoods, coupled with QCash’s AI-driven Life Event Loan products, allows for the potential of millions of members’ near-instantaneous access to affordable small-dollar lending and financial relief when life happens, sudden emergencies arise, or unexpected bills drop through the mailbox. 

Together with MDIs and their communities’ need for improved financial inclusion and well-being, QCash is ready to join in the cause to get fast funds to those looking to stabilize their lives and set their sights on a better financial future!

To keep up to date on QCash, fintech, or financial health within the credit union industry, follow QCash on Twitter, LinkedIn, and the QCash blog.