Serving “overlooked” populations: An opportunity for credit union growth

It’s not uncommon for credit unions to work with non-traditional industries and financially-vulnerable populations. In fact, offering financial services to unbanked people such as recent immigrants and other disadvantaged groups dates back to the credit unions’ beginnings. The first credit unions were formed in Germany in the 19th century and were based on principals of self-help, equality, social responsibility and caring for others. Since then, the credit union industry has played a critical role in serving the underserved, as credit unions are often willing to provide a helping hand to small businesses and individuals that might be overlooked by banks.

While the people who formed the first credit unions certainly were not thinking about getting rich, serving these “overlooked” populations has proved to be an avenue for growth for many organizations. Below are three different examples of credit unions reaching non-traditional populations.

• Credit unions play an active role at times of hardship. During the recent government shutdown, many credit unions established programs to provide access to low- or no-interest loans with favorable repayment terms to an estimated 800,000 families, as well as Native American communities which depend on the Federal Government financing. For example, Navy Federal Credit Union, the largest credit union set up a zero-percent interest rate up to $6,000 for federal government employees.
• Microfinance programs serving poorer urban and rural areas became an important lifeline for these communities. Minority-owned credit unions account for only 10% of all credit unions in the US according to the NCUA data but provide vital services to low-income clients. For example, Native American-owned credit unions such as Tongass FCU customize lending products for indigenous communities to match the income cycles that are tied to hunting and fishing. Tongass’ assets increased by 10% to $85M in 2018. Some credit unions such as Point West Credit Union of Portland, Oregon, have ITIN lending programs to immigrants without Social Security numbers based on their Individual Taxpayer Identification Numbers (ITIN). For credit unions serving these communities grows membership and income. Point West’s portfolio of ITIN loans increased to $15M in June 2018 from $1.6M in June 2015, while performing as well or better than other loan types in its overall portfolio.
• As mission-driven organizations, credit unions are well-positioned to address the financial needs of enterprises that traditional banks might dismiss. Realizing potential growth opportunities, more and more credit unions join a small but steadily growing group that offers financial services to the emerging cannabis market. According to the U.S. Treasury Department, first credit union engaged in this line of business in 2014, and, by the end of 2018, 111 credit unions provided services to marijuana related businesses. This, often controversial, industry frequently encounters financial roadblocks, which credit unions are uniquely positioned to address. Credit unions provide the cannabis industry participants with the same financial benefits used by traditional businesses, including access to online banking, checking accounts, debit cards, cash management and payroll services. The desire to work with the emerging marijuana market epitomizes the reason credit unions were founded in the first place – to serve underserved or underbanked communities. This is a win-win proposition for both cannabis related businesses and credit unions servicing them. For example, in 2018, Partner Colorado Credit Union’s assets increased nearly 19% to $418m, while credit union median asset growth was 1.7% nationwide.

With a foundation based on the principle of people helping people, it’s not surprising to see credit unions thinking of creative ways to serve members. As a credit union leader, do not hesitate to think outside the box when it comes to growing your organization and serving members – brainstorm all possibilities, regardless of how crazy they may seem. As the three examples noted above demonstrate, opportunities that others overlook may be an excellent way to increase engagement and value to members while enhancing your organization’s growth.