Credit unions exist to offer affordable services that help people build financial security and to make investments that encourage economic growth in their communities.
Two-thirds of federally-chartered credit unions also carry the “low-income” designation, meaning they serve memberships in which a majority of people belong to households with an income of 80% or less of median family income for their community.
Those credit unions can, by law, take advantage of certain tools and resources, and if they are certified as community development financial institutions, they have access to funding and other assistance from the Community Development Financial Institutions Fund, a department of the U.S. Treasury.
These awards can be significant. For example, up to $3 million can be awarded under the financial assistance grant program, and technical assistance grants are available up to $100,000 to eligible financial institutions. In 2016, the CDFI Fund provided more than $200 million in awards, with $33.6 million going to 22 CDFI-certified credit unions.
Certified credit unions may use these funds to offer financial services to underbanked low-income individuals and make investments in local businesses, affordable housing and community facilities. CDFI-certified credit unions also can apply for multiple CDFI Fund financial and technical assistance grants and bond guarantee programs.
The key to unlocking these resources is certification, and the NCUA has, over the past year, been working with the CDFI Fund to create a streamlined process for qualified credit unions to make the certification process easier.
In this streamlined application process, low-income credit unions submit data on loan originations and their target markets. The NCUA will analyze each credit union’s data, products and services and other indicators to determine its likelihood for certification. If the credit union is qualified to use the streamlined process, the NCUA will provide an application form and the data necessary to complete it. The credit union then completes the application and sends it to the CDFI Fund for final determination.
The NCUA conducted a pilot program in 2016 to test the streamlined application process. Five credit unions were recently awarded certification. One of those, New Covenant Dominion Federal Credit Union, was the subject of a recent article in NextCity magazine, describing how it plans to put these resources to work.
The NCUA and the CDFI Fund now have a full-scale program in place, and we’re encouraging low-income credit unions to consider applying for certification.
We will host three application rounds in 2017. The first one opened Feb. 13 and runs through March 17. The second round will run from May 1 through May 26, and the third round will run from Aug. 7 through Sept. 1.
To be eligible for a CDFI Fund certification, an organization must meet seven criteria:
- Be a legal entity;
- Be a financing entity;
- Primarily serve one or more target markets;
- Have a primary mission of promoting community development;
- Provide development services in conjunction with its financing activities;
- Maintain accountability to its defined target market; and
- Be a non-governmental entity and not be under the control of any government entity (typically excluding tribal governments).
Low-income credit unions that do not qualify for the streamlined program may still obtain a CDFI certification through the standard application available through the CDFI Fund. An online CDFI Streamlined Application Program Guide provides complete information.
If you have any questions about CDFI certification, please don’t hesitate to contact the NCUA’s Office of Small Credit Union Initiatives. We’re here to help, and you can contact us at OSCUICDFI@ncua.gov.
Martha Ninichuk is the Director of the NCUA Office of Small Credit Union Initiatives.
