The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Invest in the Community

On April 24th, 2017, posted in: Community, Industry, Uncategorized by

classic cars in black & whiteHow’d you enjoy last week’s comments? Well, here is question #2. Remember, I had the privilege to sit on a panel to discuss what our communities need to be successful. On behalf of SLCCU, I was able to share the story of what a Community Development Financial Institution (CDFI) does in the market. 

Yes, we are considerably different than for-profit banks. Oh, don’t misunderstand me. We must make money as well, but our net income is tempered by a need to ensure that the community is served. The net effect is that banks who are of the community development ilk will make less profit by design. You may want to note that in St. Louis there are no community development banks — and very few nationwide.

As a credit union, SLCCU is not-for-profit, meaning that income after expenses is all returned to our members. What a great model for serving a community in need. Here’s what I said when asked.

 

What can mainstream financial institutions do to better serve low-income communities in need?

One word:  Investment. Whether it be banks, government grants, corporate foundations, public charities and/or private philanthropy…investment is needed. 

Paul (a colleague) and I had the opportunity to serve on a sub-committee of the Ferguson Commission dealing with the issue of “Economic Inequity,” and, as the report indicates, money has to flow into the community not only by investing in municipal bonds and building projects, but capital needs must be met at the consumer level as well. Financial Institutions need to either come to the community, drop their barriers to entry and allow gateways and pathways to mainstream financial services, OR invest in someone who does. 

High-capacity Community Development Financial Institutions (SLCCU is one) and human services providers are great resources for banking investment and are listed as such in the Ferguson Commission’s final report. It is a means by which meaningful CRA (Community Reinvestment Act) transpires with positive, measurable outcomes. As an example, SLCCU received $849,000 in a U.S. Treasury grant for the purpose of loan loss reserve in order that we could make more used car loans to help people with reliable transportation to get and retain better jobs. The loan loss reserve allowed us to lend to more people with damaged credit. To date, we have leveraged that $849,000 into $22.9 million in affordable used car loans to help people in our community who otherwise would not qualify. 

Small-dollar lending, second-chance, third-chance, any-chance-type savings, checking and investment vehicles must be brought to the community. Only then will we begin to abolish the “poor tax” facilitated by the presence of “fringe banking” that destroys the ability to accumulate wealth.  

 

Next week, we’ll discuss the third question. I hope that information imparted here helps you to understand that SLCCU is truly something special. We’re not just saying that for how good it sounds.

Imagine a world without SLCCU. What would our community look like? Not pretty.

I am reminded that Washington University Business School graduate students did a practicum study a few years back and determined that SLCCU’s economic impact on the St. Louis community is in the $20 million-plus range annually. That’s what our neighborhoods would be forced to deal with — a drop in economic impact.

More to come.

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