The hope of winning $1.5 billion moved nearly 300 million Americans, including me, to go out of our way to buy tickets to enter last month's historic Powerball lottery. It didn't matter that our odds of winning the Powerball were less likely than our odds of being struck by lightning—twice. As the lottery's marketing slogan urged us, "You've got to be in it to win it!"
By sheer coincidence, one week after the largest Powerball jackpot in history was divided among three lucky winners, NCUA signed a partnership agreement that will provide many hundreds of credit unions with access to another government program that has awarded more than $2 billion: the Community Development Financial Institutions Fund administered by the U.S. Treasury and funded by Congress.
The odds of receiving a grant from the CDFI Fund are much better than winning the lottery or being struck by lightning. And it's not based on luck; it's based on your credit union's commitment to community development. However, the grant program has one thing in common with the lottery: You've got to be in it to win it.
Billions Granted for Community Development
Since it was established in 1994, the CDFI Fund has invested more than $2 billion in grants, investments and loans to Community Development Financial Institutions.
Certified CDFIs use those cash infusions to serve economically distressed communities by providing credit, capital and financial services that are often unavailable from mainstream financial institutions. CDFIs have loaned and invested billions of dollars in our nation's most distressed communities.
Even better, their loans and investments have leveraged billions more dollars from the private sector for small businesses, affordable housing, and other development activities in low-wealth communities across our nation.
This public-private partnership is truly a win-win.
So far, $157 million—about 8 percent of the $2 billion—has been granted to credit unions certified as CDFIs. Those 295 credit unions have used CDFI grants to pilot innovative lending products and expand services to consumers who had no access to any other insured financial institution.
More Credit Unions Can Qualify
However, NCUA data indicate that as many as 1,800 credit unions are eligible for CDFI certification. That's because many of the qualifications for CDFIs are related to the qualifications for low-income credit unions, which are designated by NCUA to serve fields of membership where the majority of members earn less than 80 percent of the median income.
Yet, some credit unions that would qualify as CDFIs have not applied, because they either are not aware of the program or have found the CDFI certification process would be time-consuming and expensive for them to complete on their own. Unfortunately, many of the credit unions that are not in the CDFI program are small credit unions that could benefit most from multi-million-dollar CDFI grants.
Agreement to Double Participation
Sensitive to this dilemma, NCUA offered to analyze data our Office of Small Credit Union Initiatives receives in the normal course of business to identify credit unions that would qualify as CDFIs, and then to share this information with staff of the CDFI Fund. Treasury and CDFI officials readily agreed, and last month we entered into a memorandum of understanding to implement this initiative. In signing this agreement, our goal is to double the number of credit unions certified as CDFIs to 590 by December 2016.
The streamlined process for identifying potential CDFI-qualified credit unions will save credit unions time and money. It will also allow the CDFI Fund more time to make funding decisions. In turn, this will provide significantly more low-income credit unions with access to funding, training and technical assistance available through the CDFI Fund.
Reach an Even Higher Target
As we continue to work with Treasury into the future, I believe we can reach an even higher target. We can build on the success of NCUA's initiative to automate the low-income designation process, which has more than doubled the number of low-income credit unions from 1,000 to 2,300 since August 2012. Our ultimate goal, over the next several years, is to certify all 1,800 CDFI-eligible credit unions.
NCUA's agreement with Treasury and the CDFI Fund opens up enormous possibilities for credit unions. CDFI-eligible credit unions have the potential to serve tens of millions more underserved consumers and to expand affordable financial products and services in thousands of low-income communities across our nation.
We're excited about this agreement. We're eager to work with Treasury, the CDFI Fund, and CDFI-certified credit unions to enrich the lives of consumers, secure their financial futures and build wealth in their communities. We're confident that this agreement will enable more credit unions to finally be in it to win it!