Nov 06 2015

CDFI Credit Unions: Foundations for Success

Community development is a growing field and business model in the credit union system. Over 2013–2014 the number of community development financial institution (CDFI) credit unions grew by 28%, to 241. While this trend points to community development becoming a credit union business model of the future, it also recalls the credit union system’s genesis.

Despite credit unions’ legacy of member focus, there remains a great deal of confusion among credit unions concerning the field of community development. Misconceptions about the definition of low-income consumer and concern over the potential for additional regulatory scrutiny have proven off-putting. Similarly, other practitioners of community development, including local and state government agencies and certain nonprofits, are largely unaware of credit union leadership in the field of community development stemming from the operating principles on which credit unions were founded.

This study sets out to clarify and demystify the community development business model for credit unions, as well as to build understanding both within and beyond the credit union system of the potential for credit union involvement in the community development field. By increasing this understanding, greater impacts for credit union members and their broader communities are possible.

This report:

  • Looks at the three designations used to indicate a credit union’s commitment to serving underserved consumers.
  • Summarizes the benefits and limitations of each designation.
  • Presents findings showing that a CDFI certification or low-income designation alone does not increase profitability.
  • Identifies community development activities that correlate with increased profitability.

Filene thanks its generous supporters for making this important research possible.

Report Number 378