Low-income communities need credit unions to be creative, says community development innovator William Bynum.
These hard-hit areas need relief from payday lenders, more public and private investment, and greater access to mainstream financial products and services, he says. But achieving these aims is "hard and it is getting harder.
"Let's not fool ourselves—it is really tough out there," says Bynum, CEO of $161 million asset Hope Credit Union, Jackson, Miss., and its sponsor, Hope Enterprise Corp.
The organizations provide commercial financing, mortgages, and technical assistance for businesses, entrepreneurs, home buyers, and community development projects in the economically distressed areas of Arkansas, Louisiana, Mississippi, and Tennessee.
"We really have to be creative at taking the relatively limited tools that we have at credit unions and applying them as effectively as possible," Bynum says.
He says credit unions seeking to serve low-income populations should focus on:
► Serving the unbanked and underbanked. A mass exodus of banks from low-income communities has occurred in recent years, followed by growth in payday lending outlets in these areas. Credit unions need to find ways to close the gap.
► Influencing investors. Credit unions should work with private investors as well as governments to bring resources into communities that need development.
“Credit unions are a drop in the bucket relative to the need that is out there,” Bynum says. “So we have got to influence the big buckets of resources.”
► Efficiencies. Investigate cooperative approaches—and mergers where they make sense—to keep services in the communities that need them and to manage expenses.
Microbranches and mobile services can be effective in serving low-income communities, he says.
“We think [mobile apps] will allow us to be in communities where we can’t have a physical presence,” Bynum says. People “can have the power of the branch in their hands.”
Since 1994, Hope Enterprise Corp. has generated more than $1.7 billion in financing for entrepreneurs, homebuyers, and community development projects, and assisted more than 130,000 individuals in low-income communities.
Bynum addressed the 2013 Annual Conference of the National Federation of Community Development Credit Unions in Baltimore.
The discussion boards on CUNA’s Compliance Community featured an interesting discussion last week: what is the difference between the terms “share draft” and “checking account”? The correct use is important since credit unions pay dividends, not interest.