As Prepared for Delivery on September 21, 2020
Thank you very much – it’s a pleasure to be here today, at least virtually, and I thank you all for joining us.
The World Council of Credit Unions and the Credit Union National Association have both been providing outstanding leadership and representation for the credit industry during this time of trial, and we’re all grateful for your efforts. With the challenges that have emerged in recent months, it’s clear just how critical that leadership is.
If we consider these various challenges that have arisen in just the last few months — a persistent pandemic; a severe economic contraction; and ongoing protests against racial and class injustice in the U.S. and elsewhere — it’s clear they share a common thread: they all force us to confront the inequities that continue to persist in our global society.
For example, here in the United States, communities of color—particularly African-American, Latino communities — have been affected disproportionately by the coronavirus. Likewise, minority-owned businesses have been particularly affected by the suddenness and depth of the economic shock. And the protests throughout America’s cities have revealed the pain, frustrations and anger that have long been simmering throughout the black community.
I’m speaking here about the United States, but the trend is more general — many of you who are joining us today from around the globe are witnessing similar inequities in your own societies and local communities.
So the question we must ask ourselves is: What can we do to remedy those inequities?
There’s no silver bullet to address these systemic challenges. However, there are some things that we, as leaders in the financial services industry, can do to help. And perhaps the most important is doing everything we can to embrace the strengths of diversity, equity, and inclusion — and in particular, encourage greater financial inclusion for all.
This isn’t a new commitment for me; it’s something I’ve been working on for more than two decades, since I began my career working on community investment issues in the private sector, with a heavy emphasis on financial inclusion and shared prosperity. Over the years, and in various ways, that commitment has continued in my public service career. Today, I lead the independent financial regulatory agency that oversees the U.S. system of federally insured credit unions, and financial inclusion is a central part of my agenda here.
But what’s different is that people are becoming more aware of why these issues are important. And that new awareness is something that we should welcome as a foundation to build on.
Toward a Broader View of Diversity
Now, I’d like to pause here for emphasis: I’m not simply talking here about diversity and inclusion at the top. I’m talking about a broader based agenda that promotes opportunity for everyone.
Let me explain that a little more clearly. If you follow the discussions in the media and among corporate leaders, they talk about the need for diversity all the time. And we all welcome that discussion — it’s timely and necessary.
But I’ll confess that sometimes those discussions make me a little uneasy, and here’s why: if we’re just replacing a bunch of holders of Ivy League degrees on the board of directors with a different group of Ivy League degree holders, it’s hard to see how we’ve made an appreciable difference for society. And we’ve certainly done little to address, in a substantive and concrete way, the inequities that are at the root of the stresses and instability our societies struggle with.
I want to get beyond the idea of diversity and inclusion as simply a matter of representation, and move toward thinking about diversity and inclusion more holistically as a matter of participation for a larger group of people.
Which is why I believe financial inclusion is so important:
- Because it’s broad-based;
- Because it makes a big difference in a lot of people’s lives by helping to expand access to capital and break the cycle of dependence; and
- Because it would go a long way toward easing these inequities that are so troubling to all of us.
And I believe credit unions are uniquely well-positioned to address this need. With your commitment to cooperative action and your community roots, credit unions are the ideal vehicle for expanding financial inclusion more widely.
With that in mind, I have been using my position — as the head of NCUA, but also as someone with a long career in the financial services industry — to urge credit unions to take the lead on financial inclusion and to bring more people into the mainstream financial system.
What I’d like to do today is give a brief overview of how credit unions can encourage and incentivize financial inclusion. And I’ll say at the outset that this is not a comprehensive policy agenda, but a set of guiding principles we can use to think about financial inclusion with greater clarity.
Financial Inclusion: What Can We Do?
For the sake of time, I’d like to focus less on the question of internal diversity and inclusion within the industry, which I trust many of you are working on diligently within your own organizations.
Instead, I’d like to focus on the “outside game” of how we can deploy these values to reach and serve a wider range of people. That’s why I’ve argued we must consider diversity in a much more expansive way, beyond the standard categories.
For example, we must ask ourselves:
- Are we doing everything we can to reach people with low and moderate incomes?
- Are we including disabled and differently abled individuals in our financial inclusion plans?
- What about people in hard-pressed urban communities, or conversely, distressed rural communities, where financial service options are limited?
We should be thinking hard about these kinds of questions, because they are at the core of true financial inclusion.
Second, we must use financial technology in ways that will result in greater financial inclusion. I recognize that all of your institutions are looking at how fintech can be used to improve efficiency or customer service, especially as the pandemic has driven increasing numbers of banking customers into a digital world. But let’s not forget that fintech tools can also enable us to connect with minority communities, rural communities, and other underserved populations. There are tremendous opportunities here, so let’s continue the great work our industry is doing on that front.
For example, I know that the World Council of Credit Unions, through its Technology and Innovation for Financial Inclusion project, is working with financial institutions in West Africa to create a digital credit union. By exploring opportunities for partnership with technology and business development providers, the project’s goal is to improve small and medium enterprise lending strategies in developing countries. That’s a great example of how fintech is making a real difference where it’s needed most.
Third, we need continued innovation in financial products that promote greater inclusion. Credit unions have shown great creativity in developing new types of products, and I urge you to keep up the good work. One area that seems like a particularly promising avenue for change is social impact investing.
For example, not too long ago, we saw the launch of a new exchange-traded index fund in the U.S. markets that focuses on investing in companies with “strong racial and ethnic diversity policies,” to encourage investment in companies that are leading the way on diversity. Along similar lines, some financial institutions have launched faith-based investment vehicles that allow people to save and invest in accordance with the doctrinal principles of their religious traditions. Those are compelling and interesting approaches.
We should also be looking at other types of social impact investing that could help support underserved urban populations or encourage investment in distressed rural areas. And I’d like to see that same spirit of innovation put to work on behalf of microfinance projects or alternative lending products that will help us to put other unbanked or under-banked populations on the road to prosperity.
Finally, we need to invest more fully in financial literacy education and training that helps people understand how to navigate an increasingly complex world of financial services. Just about two weeks ago, the U.S. Department of Treasury released the 2020 National Strategy for Financial Literacy (opens new window), a document that details a number of ways to strengthen consumers’ financial capability. I’m proud to say that my agency, the NCUA, serves on Treasury’s Financial Literacy and Education Commission, and made a number of contributions to the strategy document.
The strategy cites a government study that found that, in the United States, for every dollar spent on financial education, about $25 is spent on financial marketing. Now, I understand as well as anyone that marketing is important for any business enterprise, but you can imagine the effect we could have if we could balance that ratio in the other direction.
Again, this is an area where credit unions have always led the way — the industry has a long and proud history of helping people of modest means develop the tools they need to engage knowledgeably with financial services. But it’s still an area where we should continue to invest to bring more people into the system of legitimate financial services.
Some of my discussion may appear to be more U.S.-specific in its immediate application, but these ideas might serve as a useful spur to innovative thinking for some of our participants in other countries around the globe. We all know that good ideas are not constrained by national borders, so I’m happy to share my ideas with our larger global audience. And of course, we’re always open to hearing your ideas for what we can do to improve our own commitment to financial inclusion and economic opportunity.
But it’s not enough to simply diagnose the problem and then hope that somehow it gets better. The key thing is that we need to take action now to make this happen.
If we create conditions where people can gain access to credit and capital; break the cycle of debt and dependency; and achieve financial security and resilience for themselves and their families, we’ll have gone a long way toward addressing the inequities that are fueling so many of the social challenges we face. It’s why I believe so strongly that financial inclusion is the civil rights issue of our time, and why I’ve made it a central focus of my work as a regulator — and why I’m so relentless in encouraging the financial services industry to take this up as your cause.
I’ll conclude with a quote from the great U.S. President Abraham Lincoln, who said in 1862 that “It is not ‘can any of us imagine better?’ — but, "can we all do better?"….. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew.” That was in a message to Congress at the height of the U.S. Civil War. I don’t believe the challenges we face today, serious though they are, are as difficult as they faced then. But we should still be asking ourselves: How can we all do better?
I believe the answer to that question begins with a renewed commitment to these principles of diversity, equity, and inclusion in our business models, and with a renewed commitment to real financial inclusion to bring more people into the legitimate financial system. With that commitment, we can make real strides toward, as Lincoln suggested, thinking anew and acting anew. Let’s rise to this occasion. Thank you very much.