Shake Your Credit Union’s CDFI Money Maker

On June 3, the House Financial Services Committee held its first ever virtual meeting, and we’re so excited that the topic of this historic event was Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDI)! This is an issue that could not wait for Congress to return to Washington and your credit union cannot afford to wait either.

CUNA, NAFCU, the Opportunity Finance Network and others are lobbying hard for Congress to add an additional round of funding for Treasury’s CDFI Fund, which provides financial and technical assistance grants to financial institutions that intentionally serve the hard working yet financially vulnerable citizens of our country. While the HEROES Act is dead, whispers are going around Capitol Hill that another round of funding will happen in 2020. It will likely be closer to the $251 million already dedicated to the Treasury’s CDFI Fund this year, so there’s still opportunity for additional emergency funding once the details work through Washington’s mysterious machinations. That means more grants to help more consumers, especially during these times of dire need.

Just 324 credit unions are CDFI certified, which is a requirement to receive grant funding. With approximately 5,000 credit unions operating today, that number is far too low! Our research bears out that nearly every credit union can qualify for CDFI Fund grants. As a CDFI, you can apply for up to $2 million per year in grants and awards from the U.S. Treasury to expand your credit union’s offerings to your members and community. We’re leaving a lot of free money on the table that can be leveraged for capital and even further impact.

Credit unions must prepare themselves with their CDFI certifications for the opportunity to obtain the huge potential emergency grants. The government takes a full six weeks to review these applications, so now is the time for your credit union to get ready for when extra funding becomes available. And there are other benefits, too, such as exclusions from qualified mortgage and Reg Z Ability to Repay requirements that could inhibit expanded service in our most vulnerable communities.

For credit unions, the CDFI Fund certification application process is actually rather simple. The NCUA has an automated process that streamlines the qualification process based on loan analysis. Even if that doesn’t qualify your credit union, a few other methods can be effective, including:

• 60% of your membership is low- to moderate-income;
• 60% of your membership has been traditionally disenfranchised;
• You’re serving a low-income geographic area; or
• A blended approach.

Even if your credit union was already turned down through the NCUA’s process, a great opportunity still exists.

Warning: Ensure your application is complete. While the process is relatively easy, the Treasury CDFI application reviewers are sticklers for completion, so if you’re missing pieces it will not get reviewed and your materials will be returned.

Despite CDFIs’ overwhelming success, inequality in underserved markets continues to grow, emphasizing the ever-increasing need for the community and economic development work of mission-oriented credit unions. CDFI credit unions are unique in their ability to leverage equity for lending, which enables them to multiply the impact of every dollar invested many times over and truly make a difference in low-income communities.

As the CDFI industry continues to mature, CDFIs can play a much larger role in bridging social, political and infrastructure gaps in the regions they serve. The more credit unions that become CDFI-certified and successfully apply for funding, the more CDFI Fund dollars can go toward improving members’ lives.

Jamie Strayer is the Founder of CU Strategic Planning in Tacoma, Wash.