What credit unions can learn from lending circles to empower underserved communities

Credit unions have long been at the forefront of community empowerment and financial inclusion. In order to continue to effectively serve their communities, credit unions must extend their efforts beyond traditional practices, and actively engage underserved populations. By immersing themselves in these communities and studying their existing practices, credit unions can glean invaluable insights to address their specific needs. This will lead to the development of impactful products, effective marketing strategies, and culturally appropriate educational initiatives.

When we founded My First Nest Egg we were determined to innovate and speak in culture, not just language. This has meant leveraging our own heritages and engaging partners to help us understand financial practices of diverse cultures. One such practice is lending circles. Learning about this common custom can offer credit unions a unique opportunity to honor cultural preferences and tailor their offerings accordingly.

Understanding lending circles

Lending circles, also known as rotating savings and credit associations (ROSCAs), are centuries-old practices found in various cultures worldwide. They operate on the principle of mutual support, where a group of individuals pool their financial resources and take turns receiving lump-sum loans. These lending circles provide access to credit for community members who may have limited or no access to traditional financial institutions.

Cultural significance of lending circles

Lending circles are deeply rooted in cultural traditions, representing trust, solidarity, and communal support. You may have heard any number of the following terms for lending circles, including Susu (used in West African and Caribbean communities), Hui (used in Chinese communities), Tanda (used in Hispanic communities, more particularly in Mexico and Central America), Cudina (also in Hispanic communities like Mexico and Latin America), and Game’ya (used in Middle Eastern and North African communities). By recognizing the purpose and significance of lending circles, credit unions can foster trust and build long-lasting relationships by developing products and services that align with the values and needs of these underserved communities.

Creating tailored products and services

Credit unions have the opportunity to develop innovative products that cater to the financial requirements of communities that engage in lending circles. By embracing the spirit of cooperation and shared responsibility that lending circles embody, credit unions can design lending products that offer fair and affordable access to credit for individuals who may not meet traditional lending criteria. This could include micro-loans, flexible repayment options, and customized credit-building programs.

Moreover, credit unions can establish partnerships with community organizations, leaders, and informal lending circles themselves to understand their dynamics and create financial products that complement their existing practices. This collaborative approach ensures that credit unions provide meaningful solutions that align with the cultural and social fabric of these underserved communities.

Marketing strategies for inclusion

Developing effective marketing strategies is crucial to reach underserved communities and communicate the value credit unions can bring. By engaging in community outreach and forming partnerships with local organizations, credit unions can establish trust and demonstrate their commitment to understanding and meeting the unique needs of these communities.

It is essential to develop culturally sensitive and language-appropriate marketing materials to bridge any communication gaps. This could involve creating content in multiple languages, utilizing culturally relevant imagery, and leveraging community ambassadors or influencers to amplify outreach efforts. By displaying a genuine understanding of the community’s needs, credit unions can foster stronger connections and encourage community members to explore the products and services available to them.

Empowering through financial education

Financial education plays a pivotal role in empowering underserved communities and promoting economic growth. Credit unions can leverage their expertise to provide financial literacy programs that cater specifically to the needs of communities engaged in lending circles. These programs can cover topics such as credit building, savings strategies, responsible borrowing, and entrepreneurial skills.

Engaging with community leaders and organizations involved in lending circles can facilitate the delivery of tailored financial education initiatives. Workshops, webinars, and one-on-one counseling sessions can equip community members with the knowledge and tools they need to make informed financial decisions and build a strong financial foundation.

Youth programming and trust building

Building trust is a critical component of serving underserved communities. By starting with the youth, credit unions have the opportunity to establish long-term relationships and instill financial literacy from an early age. As the Pew Research Center analysis of Census Bureau data reveals, racial and ethnic minority groups skew younger, with the most common ages being 11 for Hispanics, 27 for African Americans, 29 for Asians, and even as young as 3 years old for Americans of two or more races. These statistics highlight the importance of building trust and engaging with younger generations in underserved communities.

When crafting materials, it is important to be culturally appropriate.  That means not simply translating existing content into other languages but instead engaging native speakers and community members to create content. Speaking in culture rather than just language is critical.

Conclusion

In today’s dynamic financial landscape, credit unions must go beyond traditional approaches and actively engage with underserved communities. By studying and learning from these communities, credit unions can develop products, marketing strategies, and educational initiatives that address their unique needs.

Understanding the cultural significance of practices like lending circles provides credit unions with an opportunity to develop tailored lending products that align with the values and aspirations of underserved communities. By building trust through community engagement and youth programming, credit unions can become the generational choice for diverse families.

To support credit unions in their efforts to engage youth and prioritize financial wellness, My First Nest Egg, a digital financial education platform for children, offers a valuable tool. My First Nest Egg helps credit unions leverage the power of youth programming to become a generational choice for families, utilizing a solution that prioritizes financial wellness. As part of our offerings, we have developed a collection of Spanish resources called “Sobremesa,” a term that defies direct translation into English. Sobremesa embodies the invaluable time spent between families after a meal, where meaningful discussions, shared thoughts, experiences, and hopes for the future take place. We believe that this is the foundation for building generational wealth. The articles are natively written, not simply translations of English content. Our youth programming is based on American standards, but rigorously adapted by cultural experts. A key feature of a strong youth program is that it will offer products, not only in diverse languages, but also in diverse cultures.