Many mainstream credit unions have long thought that community development financial institution status wasn’t something they could or should consider. Our guest, Jamie Strayer, ICUDE, would beg to differ.
Founder of CU Strategic Planning, Tacoma, Washington, Strayer says CDFI status is a great thing for CUs’ ROA, members and communities, as well as for U.S. taxpayers. Strayer knows a lot about it because she has helped CUs get $103 million in CDFI funding in the last 10 years.
“That funding produced $5 billion in loans that the credit unions otherwise would not have done,” she explains. “High-yield lending with every penny covered by loan loss reserves drives ROA.
“And this is where is gets really good,” she adds. “That ROA allows them to grow faster. They can accept more deposits while preserving their net worth. When they approve those loans, people tell their friends and family, ‘That credit union gave me a loan. You should go there.’ The organic growth occurs without spending more money on marketing. This program is rocket fuel for growth for credit unions.”
Strayer also says that the CDFI program reduces the number of people on federal entitlements. If a CU can make a car loan to a low-income worker, for example, that person may be able to stay off unemployment.
“CDFI status is the carrot for trying something new and even inventing new financial products,” Stayer adds. “What’s to prevent a credit union from trying something new when they’re not going to lose even a penny?”
The show also gets into:
· The difference between CDFI status and a low-income designation
· The seven criteria for CDFI status—and how CUs almost always automatically qualify on six of them
· Statistics about how much CDFI status boosts CU ROA
· What to consider before applying for CDFI status
· The current political situation around the CDFI fund
· The most inspiring CDFI project Strayer has worked on in her career
· What you’ll get if you attend Strayer’s session at Execu/Net in August in Big Sky, Montana
· U.S. Treasury CDFI status
· NCUA low-income designation