A spokesman for NCUA has confirmed that loans a credit union might make in partnership with Kiva.org, an online organization that allows individuals to invest in development micro-loans around the world, could still count against their cap on member business loans.
Credit union are precluded by law from lending more than 12.25% of their assets in member business loans (except for CDCUs and certain other credit unions). Kiva has launched two efforts to fund micro-loans in the U.S. and the most recent one, in New Orleans, involves a credit union, ASI Federal Credit Union, as it field partner.
The MBL cap question arose in regard to Kiva lending because while a credit union might initially fund a Kiva loan, and collects interest from it, the loan is “backfilled” by Kiva investors and thus does not represent CU funds past a short initial period.
“As long as the loans are for a business purpose they would be subject to the provisions of NCUA Rule 723 Member Business loans,” wrote NCUA spokesman David Small in an email response to an inquiry about the issue. “The length of time the loan is outstanding does not impact the classification, even if it is only outstanding for a short period of time.”
But Small also noted that the size of the loans might also keep them from being included in a the cap for most CUs.
“723 contains an exclusion to the Rule if the aggregate outstanding loan balances, including the new financing, for the borrower an associate members are less than $50,000,” Small wrote. “In this situation that may be the case as the funding is for micro-credit loans,” he added, but emphasized that the $50,000 calculation is based on the entire business loan relationship between the CU and the member and that borrowers receiving Kiva backed loans would still have to be credit union members.