Money from CDFI laying firmer foundations for first-time awardees

WASHINGTON – Starting a marketing effort, renovating a new building and buying a new computer system are among the ways money from the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) fund will help community development credit unions this year. CDFI’s Small and Emerging CDFI Assistance (SECA) program awarded money to 10 credit unions this year and Credit Union Times asked the first-time awardees who had been given the largest awards what they planned to do with the money. At $560,000 and 693 members, Church Koinonia FCU, Chatanooga, Tenn. is the smallest of the three, but the credit union’s small size belies its potential, according to credit union manager Eric Waldon. CDFI awarded Church Koinonia FCU $125,000 total – $50,000 in technical assistance in managing and launching a marketing program, $50,000 in a five year deposit, and $25,000 in secondary capital that the credit union will have to repay in seven years. The credit union derives its potential both from its young age – it’s a little over two and a half years old – and its large potential field of membership, according to Waldon. The credit union grew out of an association of Chattanooga pastors which had been meeting for years and which had grown to support various programs to help lower income people with emergency bill paying and other efforts, Waldon said. “The credit union was a natural next step,” he said. Now, the association officially dedicated to participating in the credit union has grown to 33 of the 112 churches that are members of the pastors’ group and Church Koinonia FCU’s potential field of membership has grown to 10,000 potential new members that the credit union needs to reach. “The technical assistance grant is really to help us craft a way to reach those potential members,” Waldon said. The deposit and the secondary capital will help ground the institution while we grow, he added. Many people don’t understand that CDFI is really the only source of funds specifically available to financial institutions dedicated to helping low-income people, said Cliff Rosenthal, executive direct of the National Federation of Community Development Credit Unions (NFCDCU) and chairman of the CDFI Coalition. The CDFI Coalition consists of community development financial institutions that informally organized to help found the CDFI fund and have organized formally to try to protect the program’s funding in tighter budget times. “The CDFI fund doesn’t give awards for maintenance or the same old same old,” Rosenthal said. “The fund seeks to support institutions with a plan and a vision for growth and service,” he added. For the $4.2 million Northwest Baptist Credit Union, based in Seattle, Washington, the issue impeding growth was not one of newness or stability, but of space. The 44-year old credit union with 965 members had served the Mount Zion Baptist Church from the church basement since its founding, but adding the membership of four other Seattle-area Baptist churches as potential members had increased the potential membership to 8,500. In addition the Mount Zion church announced that it would no longer subsidize the credit union by providing free phone service, free heat and other utilities, according to Robert Coleman, Jr. Northwest Baptist’s president and CEO. “It really became clear that we needed more space and different space,” Coleman said, “in order to grow and serve our growing membership’s needs.” So, in Northwest Baptist’s case, the CDFI granted the credit union $200,000 to renovate a nearby 3,000 square-foot building that the credit union will be able to lease under very favorable terms for an extended period of time, provided the renovations are completed. “The Northwest Baptist grant is a good example of the kind of credit union the CDFI likes to fund,” Rosenthal said. “It’s probably among the most progressive faith-based credit unions around with many different innovative approaches to growth and providing different services for their members. The building renovation is the kind of change they needed for growth that the financial institution could not have financed out of its own resources.” The $2 million, 2,400 member Covenant Savings Credit Union, based in Copperas Cove, Texas, needed a new computer system to continue growing. Although only $2 million in assets, Covenant offers its members share drafts, certificates of deposit, IRA accounts and other services not usually offered by a credit union of that size, and the credit union needed a new computer to keep track of all of its different accounts and transactions, according to Joann Matthews, chairman of the credit union’s Board. The CDFI awarded Covenant $106,000, the bulk of which is dedicated to the purchase of the new computer system. “We’re about five minutes from the northwest gate of Fort Hood, one of the largest military bases,” Matthews said, and that proximity has always given the House Of Prayer, the church which originally sponsored the credit union in 1995, access to a varied and diverse membership. The Church members are the credit union’s field of membership, Matthews said. Matthews explained that the credit union has added its products and services in response to member requests, many of which were coming in from around the country and around the world as the credit unions’ military members have been posted in different places. She also explained that the federally chartered credit union had to work long and hard to both explain its members’ need for the credit union’s services to the NCUA and the need for a new computer system to keep track of it all to the CDFI. “We didn’t just want to buy any computer system,” Matthews said. “Since we plan to grow we wanted a system that can grow with us, incrementally,” she added. In addition to military members, Matthews said, the credit union also has the family members of military personnel who are members as well as a growing number of members who work on the base but who are not military. [email protected]