Two US credit union associations have urged lawmakers to fully fund the Community Development Financial Institutions Program (CDFI).
The scheme helps credit unions in the USA access grants to serve millions of members.
In a letter to the House Appropriations Subcommittee on Financial Services and General Government, the National Association of Federally-Insured Credit Unions (Nafcu) said the grants are an “invaluable resource” for credit unions.
Writing to the subcommittee ahead of a hearing on CDFIs, Nafcu’s Brad Thaler said there are 285 CDFI-designated credit unions, which hold more than 50% of total CDFI assets.
“Over the past two years, CDFI credit unions received roughly $70m in grant funding to aid in their efforts to offer financial services to their low- and moderate-income members,” Mr Thaler wrote. “Without the CDFI Fund grant programme, many CDFI credit unions would not have been able offer new products and loans that provide financial stability for members and their families.”
Mr Thaler added that CDFI certified credit unions were “critical partners” in the fund’s mission. Back in 2016 regulator National Credit Union Administration and the Treasury introduced a streamlined CDFI application for credit unions to encourage more institutions to seek the designation.
Most of these credit unions operate in low-income areas. Nafcu argues that, without the CDFI grants, thousands of customers could find themselves without credit union products.
The grants enable credit unions to provide a range of products to customers, including mortgage lending for first-time homebuyers, flexible underwriting for community facilities, and commercial loans for businesses in low-income areas.
“CDFIs such as some community development credit unions (CDCUs) are charged with supplying low-income, distressed communities with traditional banking services such as savings accounts and personal loans, and offering individuals the tools needed to become self-sufficient stakeholders in their own future,” it said.
“The CDFI Fund uses small amounts of federal dollars to leverage significant amounts of private and non-federal dollars, and has added a tremendous boost to the CDFI industry (which relies heavily upon private sector funds from corporations, individuals, religious institutions, and private foundations).”
As a certified CDFI institution, a credit union can also apply for training and technical assistance opportunities sponsored by the CDFI fund and funding from funders other than the CDFI fund.
Cuna notes that in Johnson City, Tennessee, Appalachian Community FCU secured a US $2.1m CDFI grant two years ago to provide assist over 200 families in its community US $10,500 down payments assistance loans, helping to enhance homeownership.
Similarly, in St Louis, Missouri, St Louis Community CU received a financial assistance grant from the CDFI Fund in 2013 to help launch a programme to provide affordable car loans to those on low- and moderate-incomes. Worth US $849,000, the grant was leveraged into over US $22m in auto loans.
“These examples represent just two credit unions and how the CDFI Fund is being used to grow local economies and serve the most economically distressed communities in the nation. Fully funding the CDFI Fund is a strong investment by the federal government,” added Cuna
Earlier in February President Donald Trump signed the budget deal, which also sets CDFI Fund levels at US $250m for fiscal year 2019.