New York Times Cites New Trend in Individual Philanthropy

(November 13, 2006 – New York, NY)   A growing number of Americans have found a powerful way to help others as they help themselves: investing in community development credit unions (CDCUs).  In “Putting Your Money Where Your Heart Lies,” the New York Times reports that more and more people are choosing to invest in CDCUs and other community development financial institutions as the best way to put their money to work for the greater good.  Two CDCUs are featured in the article, Hope Community Credit Union in Mississippi and Santa Cruz Community Credit Union in California, both long-time members of the Federation.

“There are about a million people who live in underserved communities who know first-hand that CDCUs are a great investment,” said Cliff Rosenthal, the Federation’s Executive Director, “but until now, most socially responsible investors have been unaware of this opportunity.” 

According to the Times, that may be changing.  CDCUs continue to make strides in championing new products and services for communities in need, and their work is attracting attention --and money – from an ever-widening circle of socially responsible investors. 

Socially responsible investments, known as SRIs, generally offer a slightly lower rate of return to individual investors, but deliver higher returns to communities or society at large.   For many SRI investors, what’s most important is helping people in need.  In the Times article, Rosenthal explains that as a socially responsible investor, “you’re essentially accepting a lower rate [or return] to allow these credit unions to be in a business that no other big bank wants to be in.”

Despite these lower returns, the article reports that community investment has become the fastest growing segment of SRI, with just over $19.7 billion in investments in 2005, up from $13.7 billion in 2003. 

Many individuals want to support relief and rebuilding efforts, but hesitate for fear that their donations may be mismanaged by large bureaucratic organizations.  In the search for an efficient, effective and accountable channel for community investment, CDCUs have emerged as the perfect vehicle.

The article cites the example of Sally Mendzela, a FEMA employee living in Rhode Island, who opened an account at Hope Community Credit Union in Jackson, Mississippi and invested in one of their Hurricane Relief Certificates of Deposit.  Ms. Mendzela receives just two percent yield on her C.D., but the community also receives a return on her investment; low-interest deposits have allowed the credit union to make additional loans to hurricane survivors at no or very low interest.

The article also cited Santa Cruz Community Credit Union’s (SCCCU) Individual Development Account (IDA) program.  IDAs are matched savings programs where low-income consumers have their savings matched by the institution, usually at a two-to-one or three-to-one match.  IDA programs allow individuals living on a shoestring to save a substantial amount, traditionally towards education, small-business development, or for first-time-homebuyers. 

As individuals become more financially savvy and progress through the CDCU’s financial products they end up becoming funders of the very programs they once took advantage of.

Another factor that makes CDCUs such ideal vehicles for SRI is that CDCUs are community-controlled financial institutions that link asset-building products with financial education and counseling.  CDCUs operate in some of the poorest communities around the country, and are typically governed by unpaid, volunteer Boards of Directors made up from local residents and community leaders.

In addition to asset-building services, many CDCUs also offer alternative products to combat predatory lending, effectively competing against the loan-sharks and payday lenders that would otherwise strip wealth from the community. 

CDCUs are not-for-profit financial institutions with a primary social mission of serving people of modest means.  “People Helping People” has been the credit union mantra since the first credit union was created in 1908; however few embody this philosophy more than CDCUs, who put their money where their mouth is.

To view a scanned black & white copy of the New York Times article, please click here.

The Federation has been supporting CDCUs for over 32 years, providing them with education and training, technical assistance, and with deposits and investments to help them expand service to low-income populations.  Currently the Federation manages over $25 million in investments in its member-CDCUs. 

For more information about becoming an investor, please click here.