NEW YORK — The National Federation of Community Development Credit Unions is seeing its longstanding effort to raise money for community development credit unions to use as capital starting to gather some real momentum.
At a recent San Francisco meeting of the West Coast Financial Literacy Forum, an event sponsored in part by the Federal Reserve Bank in San Francisco, the Federation announced that it has raised $8.5 million in investments and commitments in an effort to add $25 million to its investment program.
"We started our investment program in 1982 with little more than a vision," explained Federation Executive Director Clifford Rosenthal, who participated in its original design. "Social investing, program-related investing by foundations, the Community Reinvestment Act for banks–all these now-common capital channels were in their infancy at that time. The Federation was virtually alone as a national intermediary raising funds from these sources and channeling them into grassroots institutions like CDCUs."
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Investors in the most recent push have included philanthropic organizations and foundations, the U.S. Government through the U.S. Treasury Departments Community Development Financial Institutions Fund and at least one charitable organization tied to a
major bank.
"We have the most extensive, diversified portfolio of any community development financial intermediary," said Rosenthal. The Federation's investments have gone to inner-city, rural, and reservation-based credit unions from Vermont to Hawaii, and over the last two years, it has made significant investments in CDCUs rebuilding New Orleans and the Gulf region, the Federation said.
Investment funds have flowed into federally insured deposits for general lending operations of CDCUs; deposits to share a portion of the default risk of anti-predatory lending; equity-like secondary capital to support fast-growing CDCUs; and purchases of affordable mortgages originated by CDCUs, enabling them to free up their capital for additional lending to low- and moderate-income members.
The Federation offers investors a range of investment opportunities with varying levels of return. "Our nominee deposit program, for example, makes it possible for investors to place up to $10-million in federally insured deposits in a widely diversified portfolio of credit unions," Rosenthal noted. Investments in the Federation's CDCU Mortgage Center, LLC provide a higher yield than the federally insured deposit program and are "an excellent way to promote responsible, affordable lending at a time when it is more needed than ever."
The Federation's recent innovations have made it possible for credit unions to invest in various ways that were not previously possible, Rosenthal commented. "We look forward to expanding dramatically the movement's investments in low-income communities over the next two years."
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