NY Fed: Credit Unions Drive CDFI Growth
Researchers say federal grants and promotion by Inclusiv might have accelerated credit union participation.
Credit unions have been the leading force in the rapid growth of Community Development Financial Institutions (CDFIs) in the past five years, according to a study released Wednesday by the New York Fed.
The study, “Sizing the CDFI Market,” found that credit unions accounted for two-thirds of CDFI assets in this year’s first quarter.
The study found the number of CDFIs grew from 1,066 in 2018, including 288 credit unions, to 1,487 CDFIs in May 2023, including 529 credit unions. The credit union count rose to 531 by June.
The NY Fed estimated credit unions accounted for $300.1 billion of the total CDFI assets of $452.3 billion at the end of March.
The NY Fed found 443 of the credit unions were U.S. credit unions overseen by the NCUA, while 88 of the credit unions were from Puerto Rico, and were outside of NCUA jurisdiction.
A CU Times analysis of NCUA data for the 443 credit unions showed their assets grew 69% from $172.3 billion in March 2018 to $291.5 billion in March 2023. Membership rose 22% to 19.7 million.
Asset growth was faster than the 57% gain over the five years for all credit unions, but was about on par with the 21% membership gain for all credit unions.
Congress created the CDFI program in 1994 and put the Treasury Department in charge of certifying financial institutions. Institutions with CDFI certification are eligible for competitive federal awards to finance activities including mortgages for first-time homebuyers, flexible underwriting for community facilities and commercial loans for businesses in low-income areas.
The NY Fed said possible reasons for the fast growth in CDFIs since 2019 included the creation of the Emergency Capital Investment Program (ECIP) in 2021, which provided $9 billion to CDFIs and minority depository institutions to encourage lending to low- and moderate-income communities during the pandemic.
“While many newly certified institutions did not receive awards from the program, it is possible that this program demonstrated that having a CDFI designation would open access to government support in future crises,” the NY Fed researchers wrote.
But why so many credit unions? “Part of this might be attributed to the combination of two factors: a years-long effort to spread awareness of and promote CDFI designation among credit unions specifically, driven by organizations like Inclusiv, and the opportunity presented by federal funding such as ECIP. The outreach and promotion campaign may have meant that community development credit unions were primed to apply for certification once the federal funding became available,” the researchers wrote.
Inclusiv, which represents credit union CDFIs, was one of the organizations involved in creating the CDFI.
Inclusiv EVP Pablo DeFilippi said the NY Fed report confirms the impact of its efforts to encourage credit unions to embrace and leverage the CDFI model.
“CDFI certification is a critical building block of community finance and development,” DeFilippi said. “It provides a framework that helps credit unions measure how impactful and inclusive their lending is and reaffirms their role as engines for the economic empowerment of historically redlined and other financially underserved communities and populations.”
The NY Fed listed the 10 largest CDFIs based on their assets as of March, including seven credit unions. The 10 CDFIs were:
- Suncoast Credit Union, Tampa, Fla. ($16.9 billion in assets, 1.1 million members).
- VyStar Credit Union, Jacksonville, Fla. ($13.8 billion in assets, 889,301 members).
- The First Bank, Hattiesburg, Miss. ($8 billion in assets).
- Bank Plus, Belzoni, Miss. ($7.2 billion in assets).
- Veridian Credit Union, Waterloo, Iowa ($7 billion in assets, 319,961 members).
- Kinecta Federal Credit Union, Los Angeles ($6.7 billion in assets, 270,115 members).
- Gesa Credit Union, Richland, Wash. ($5.5 billion in assets, 285,003 members).
- Washington State Employees Credit Union, Olympia ($5.1 billion in assets, 302,432 members).
- Travis Credit Union, Vacaville, Calif. ($4.8 billion in assets, 243,624 members).
- Community Bank, Mississippi, Flowood ($4.7 billion in assets).