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The Federation and CDFIs: A Retrospective
One of the Federation's greatest advocacy triumphs came in September 1994, when the Community Development Financial Institutions (CDFI) Fund was signed into law by President Bill Clinton. The Federation had pressed for such a fund since the mid-eighties, and in 1990, it assembled a group of community development credit unions, community loan funds, and community banks, which became known as the Coalition of Community Development Financial Institutions, which led the struggle to establish the CDFI Fund.
The CDFI Fund made its first investments in 1996. Since that time, it has provided millions of dollars in grants and deposits to CDCUs and to the Federation itself. CDFI Fund awards have enabled CDCUs to establish new branches, add new products and services, upgrade their technology, and dramatically increase their net worth.
The Fund's support of the Federation fueled the dramatic growth of our Community Development Investment Program and helped launch the CDCU Institute™.
With this national success under our belt, the Federation established the New York Coalition of CDFIs in 1995. This coalition, which has been solely staffed and operated by the Federation, was instrumental in advocating for the creation of a CDFI grant program through the New York State Division of Minority and Women's Business and the Empire State Development Corporation.
A new challenge emerged in 2003 when the Federal CDFI Fund abruptly eliminated SECA -- the Small and Emerging CDFI Assistance Program -- which had proven the most accessible to CDCUs. Working with the CDFI Coalition, which Federation President/CEO Cliff Rosenthal chaired, the Federation fought successfully to revive SECA. That same year, Congress also restored $10 million in CDFI Fund appropriations that had been slated for cuts by the Bush Administration. Congress has continued to support CDFIs by increasing its federal appropriations to the Fund in every year.
Currently, with the United States facing a massive financial crisis and looming economic recession, the Federation and its fellow CDFI advocates have reached out to Congress and the Obama administration to support affordable and responsible financing by CDFIs. There have been signs from both Congress and the Obama administration that CDFIs will play an increasingly important role in our national economic recovery.
Technical Assistance for Credit Unions
In addition to our CDFI advocacy, our Technical Assistance Department provides resources and information to credit unions interested in becoming CDFI certified and to those applying for awards.
To access Federation's CDFI Fund resources and information, please click here.
Advocacy, News and Events
NCUA, Treasury Agree to Modify "Viability Standards for CDCUs
(April 13, 2010 - New York, NY) Responding to a request by the Federation, NCUA and the U.S. Department of the Treasury have agreed to modify the viability standards for credit unions applying to the Community Development Capital Initiative.
According to a letter from Tawana James, Director of NCUA’s Office of Small Credit Union Initiatives, “NCUA has adjusted its evaluation criteria with respect to non performing loans... [and the] new formula will give greater weight to LICU’s cushion against delinquencies even in worst-case scenarios… Preliminary review of the latest data indicates that by using NCUA’s new formula, additional LICUs will qualify for CDCI without matching funds,” her letter read.
Based on the results of the new formula, credit unions will be notified if the new standards change their eligibility to participate in the program.
To view NCUA's letter to the Federation on the new "viability" standards, please click here.
To read our full press release, please click here.
CDCUs to Gain Access to Treasury Capital
(February 3, 2010 – Washington, DC) At a meeting with key leaders of community development credit unions (CDCUs) and community development banks, Treasury Secretary Tim Geithner announced yesterday a major capital investment program for depositories certified as community development financial institutions (CDFIs). The CDCU movement was represented at the private session by Clifford N. Rosenthal, Federation President/CEO, and Luis Pastor, CEO of Latino Community Credit Union (Durham, NC), one of the most prominent CDCUs in the nation.
While final terms and guidelines for the program have not yet been announced, Rosenthal estimated that as much as $200 million could be invested in more than 100 qualifying credit unions serving low-income communities. “This program is a milestone in the history of the CDCU movement,” explained Rosenthal. “The Federation has worked for more than two decades to win support for credit unions that serve low-income communities across the country. The establishment of the CDFI Fund in 1994 was a great victory. This is another.”
The program will be limited to community development credit unions and community development banks certified as community development financial institutions by the Treasury Department’s CDFI Fund. “There are currently more than 150 credit unions certified as CDFIs,” said Rosenthal. “We know that many more CDCUs qualify for this designation, and we will work intensively with our members and other interested credit unions over the coming months to help them become certified.
Since 1994, the U.S. Treasury Department’s CDFI Fund has invested over $1 billion in community development financial institutions nationwide. The Federation drafted the original concept paper used to advocate for creation of the CDFI Fund, and served as co-founder of the CDFI Coalition, which represents the spectrum of community development financial institutions of various types. Federation President/CEO Cliff Rosenthal was the first elected chairman of the CDFI Coalition, where he continues to serve on their Board of Directors.
The Federation is itself a certified CDFI Intermediary with more than $50 million in assets under management through its Community Development Investment Program (CDIP).
To read the full press release, please click here.
Federation Meets with CDFI Fund
Addresses Need to Restore Funding Balance
(November 12, 2009 - Washington, DC) Access to capital dominated the national policy agenda that National Federation of Community Development Credit Union (Federation) leaders brought to the nation’s capital throughout a series of meetings on November 12 with the National Credit Union Administration (NCUA) and the U.S. Treasury Department, Community Development Financial Institutions (CDFI) Fund.
The Federation’s delegation included Board Chairman Randy Chambers, CFO of Self-Help CU (Durham, NC); former Board Chairman Eunice J. Rogers, CEO of NRS Community Development FCU (Birmingham, AL); Governmental Affairs Committee Chairman Deyanira Del Río, Board Chair of the Lower East Side People’s FCU (New York, NY) and Governmental Affairs Committee members Helen Godfrey-Smith, CEO of Shreveport FCU (Shreveport, LA) and Shirley Spruill, CEO of Renaissance Community Development FCU (Somerset, NJ); as well as Federation President/CEO Cliff Rosenthal.
In its meeting with CDFI Fund Director Donna Gambrell, the Federation focused on the extremely low share of CDFI Fund awards that went to credit unions in the most recent round. “We were stunned by the results of the latest CDFI Fund award round,” said Chambers, “when credit unions only received two-percent of the total $50 million in funding.”
The Fund’s mandate is to seek both geographic and institutional diversity among its awardees. “The minute share that went to CDCUs – by far the lowest in the Fund’s history – suggests that something needs fixing,” Chambers said. A heavy majority of all funding has always gone to unregulated community development loan funds.
According to Director Gambrell, CDCU scores on the application were 19 points lower than for other applicants, for reasons not readily apparent to the Fund. While the Fund uses, Gambrell said, “only credit union people” to read credit union applications, the Federation identified several “quality control” issues. For example, one unsuccessful CDCU applicant was penalized because it didn’t explain to the reader “why it didn’t have FDIC insurance.” That suggests a serious flaw in the process, Rosenthal argued.
Rectifying the situation would not require a legislative fix, according to Director Gambrell. The Federation has proposed several possible remedies for the imbalance. “We think that financial services are systematically undervalued by the Fund,” said Chambers. “There really is no way for a credit union to receive points for the many individuals it serves, the thousands of transactions it executes, the members it saves from paying exorbitant interest to payday lenders or credit cards or debt-trapping overdraft fees, or the financial counseling it provides. Incorporating these indicators could change the funding outcome dramatically.”
Another alternative suggested by the Federation would rank credit unions against credit unions and establish broad guidelines for allocating funding proportionately across the various institutional types – community development credit unions, banks, loan funds, venture funds, and microenterprise funds. “We’re not suggesting a hard quota, but a range of funding for the various sectors, so that credit unions might receive between 15% and 25% of the awards in any given year, depending on the quality of applications,” suggested Del Río.
The Federation also expressed dismay at the lack of smaller awards for small institutions. “In the past,” Rosenthal said, “it was not unusual for 15 or 20 CDCUs to get awards of $50,000 to $100,000 under the ‘SECA’ and technical assistance programs. This fall, no award of less than $350,000 was made. We think there is a strong argument for going back to the earlier approach, which benefits a greater number of institutions.”
To read the full press release, please click here.
Federation Joins President Obama for Small-Business Announcement
(October 21, 2009 – Landover, MD) “We will make capital even more affordable to the community development financial institutions that focus on providing credit to America's small businesses in our hardest hit rural and underserved communities,” declared President Barack Obama at the roll-out of a series of Obama Administration initiatives to spur small business lending.
The President’s address was delivered amid ceiling-high racks of documents in the warehouse of Metropolitan Archives, a building that this small business purchased with the help of a loan from the Small Business Administration (SBA). The President was joined by Treasury Secretary Tim Geithner, SBA administrator Karen Mills, Maryland Governor Martin O'Malley; U.S. Senator Ben Cardin; U.S. House of Representatives Majority Leader Steny Hoyer; U.S. Congressman Chris Van Hollen; U.S. Congresswoman Donna Edwards; and various other elected officials.
Cliff Rosenthal, Federation President/CEO, was one of approximately 60 invited guests at the announcement. Among credit union movement attendees were Bill Bynum, President and CEO of Hope Community Credit Union/Enterprise Corporation of the Delta (Jackson, MS) and Chairman of the Community Development Financial Institutions (CDFI) Advisory Board of the U.S. Treasury Department; CUNA President and CEO Dan Mica; and NAFCU President and CEO Fred Becker.
To read the full press release and learn about the program details, please click here.
CDFI Fund Awards $3.3 Million to CUs in Recent Award Rounds
(October 3, 2009 – Milwaukee, WI) Donna Gambrell, Director of the Treasury Department’s Community Development Financial Institutions (CDFI) Fund, today announced the recipients of the FY2009 CDFI Financial Assistance (FA) awards at a ceremony in Milwaukee, Wisconsin. Democratic Congresswoman Gwen Moore was also on hand for the event. Moore represents Wisconsin’s Fourth Congressional District, which includes the entire city of Milwaukee and most of its working-class suburbs.
Of the 62 CDFIs receiving awards, just two awards totalling $850,000 went to community development credit unions (CDCUs), less than 2% of total FA awards this round. The CDCU awards were $350,000 to Neighborhood Trust FCU (New York, NY) and $500,000 to Union Settlement FCU (New York, NY). The Fund also made awards of $750,000 to the National Federation of Community Development Credit Unions (Federation) and $1 million to the Self-Help Venture Fund (Durham, NC), an affiliate of Self-Help CU. Combined, these four awards account for less than 4% of the total $52.7 million that was awarded.
Despite the Federation’s award, Rosenthal voiced concern about the small share of grants directed towards CDCUs. “Two excellent credit unions, Union Settlement and Neighborhood Trust, received awards along with the Federation, but the extremely low representation of credit unions among awardees concerns us greatly: credit union funding in this round totaled less than four-percent, an all-time low.”
To read the full press release, including a breakdown of credit union CDFI awards, please click here.
CDFI Fund Awards Over $17 Million to CDCUs for Economic Recovery
(June 29, 2009 – Bronx, NY) Nine community development credit unions (CDCUs) today were awarded a total of $17.15 million in capital from the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund. The awards were announced at a ceremony in the Bronx, New York, by Treasury Secretary Tim Geithner. The nine CDCUs accounted for approximately 19% of the total $90 million awarded to 59 organizations. All are members of the National Federation of CDCUs.
The nine CDCU winners represent 30% of the 30 credit unions that applied to the CDFI Fund in the current round. The $17.15 million they received amounted to 40% of the total dollars requested by credit unions. “We would always like to see a larger credit union share, of course,” said Rosenthal, “but these percentages are a marked improvement over recent CDCU performance in previous award rounds. Given the stress on the credit union industry, the CDFI Fund’s investments could not come at a better time.”
Rosenthal also praised the CDFI Fund for their “hard work in making these awards on an accelerated timetable.”
To read the full press release, and for a breakdown of the CDCU awards, please click here.
