wlm4 at cornell.edu (Will
01-03-1995, 06:58 AM
The diversity of the groups organizing development Credit Unions is
impressive, for example:
*** Credit Unions serving Inner City poor: Lower Eastside Peoples (NYC),
Northside (Chicago), Watts (CA)
*** Credit Unions serving rural poor: Central Appalachin KY, American
Somoa, Vermont Development, Community Trust (FL migrant farmworkers)
*** Credit Unions serving ethnic groups: First American Indian, Chicancos
por la Causa, La Casa, St Regis Mohawk, Cherokee, National American Indian,
NE Community (CA oriental)
*** Credit Unions serving church memberships: Brooklyn Ecumenical, Israel
MethCom (IL), Second Baptist, Pilgrim Baptist, All Souls, Bethex Gospel
*** Credit Unions serving family farmers College Station (AR), SCICAP (IA)
*** Credit Unions serving Small Business Santa Cruz Community, Self Help
*** Credit Unions serving gay groups Common Ground (TX)
Out of 12,000 Credit Unions nationwide, 300 are Community Credit Unions, 150
belong to the National Federation of Community Development Credit Unions.
The average size of all Credit Unions is $12 million, of CDCUs is $1.5
Million, 2 staff people.
I see a cohesive new development model emerging. The new approach takes the
strengths of Community Credit Unions and adds new tools:
A Not-for Profit corporation
A development corporation
Why add the addtional corporations to our organization? Credit Union's
weaknesses include that they are heavily regulated, they must make a profit,
they can not give tax deductibility for donations, and their size limits
them to small projects. Their strengths are that they are community
controled, they can leverage local deposits, they are seen as legitimate,
and they can provide many financial services. With a Credit Union at the
core, this alliance can fill in the gaps and weaknesses inherent in a pure
Credit Union model. I explore below how some institutions have begun this work.
Four institutions seemed of particular interest to us.
Van City Credit Union in Vancouver Canada
Self Help Credit Union, Durham NC
Santa Cruz Community CU, CA
South Shore Bank, Chicago
SANTA CRUZ COMMUNITY CREDIT UNION, CA
They are about $18 million, they have one busy retail location, they
concentrate on business and personal loans. Santa Cruz is renowned for
putting together large complicated packages for business loans, coop housing
and development. They use participations to build projects much bigger than
their capital would allow. Santa Cruz is a recent entry to mortgage markets
besides home equity lending. They use government loan guarantees extensively.
SELF HELP CREDIT UNION, NC
This organization has three arms: The Self Help Credit Union, Center for
Community Self Help, and Self Help Ventures Fund.
The Center, the first in operation, is a non-profit technicial assistance,
advocacy organization. The Center raises grants and guarantees and does
political lobbying.
The Fund is unregulated and raises funds from entrepreneurs and social
foundations. The Fund is run like a revolving loan fund, and can often make
loans the Credit Union can not due to loan size, loan risk, or regulator
concerns.
The Credit Union has about 1600 members and $24 million in deposits. Self
Help CU serves as a development bank for the whole state of North Carolina
from three offices. They specialize in small (micro) business loans, rural
home lending, home ownership, loans to non-profit orgs, loans to women and
minorities. The Credit Union also buys loans from smaller rural Credit
Unions and provides TA. They uses loan guarantees extensively. They do NOT
have a dynamic retail deposit gathering system.
They rely heavily on national and foundation deposits.
They work with the SBA, CDBG, lending partnerships with smaller Credit
Unions, political relationships, HUD, FHA, FNMA.
SOUTH SHORE BANK, IL
"... the best way to achieve a community development agenda is with the
hard discipline of a business."
South Shore is different from the other examples in that at its core, it is
a privately held bank. It is different from the over 12,000 banks in that
its corporate missions is rebuilding struggling neighborhoods. South Shore
believes ownership, not subsidy, makes Community Development go. SouthShore
works on the premise that for working people in USA wealth is created
through real estate.
During our visit we took a bus tour of SouthShore and their neighborhood.
Actually, the tour started in an adjacent neighborhood, Austin, that had no
bank at all. The housing looked fire bombed. Many streets contained no
buildings (burned for insurance or recreation). Boarded up buildings, empty
lots where buildings once had stood. In the evening gangs collected and lit
fires in oil drums. Any American inner city. This was the same Austin
neighborhood that made Saul Alinski famous for his organizing skills. And
it's also proof that political skills are not enough to develop a neighborhood.
Austin traced a pattern of capital withdrawing, credit leaving, institutions
leaving, no jobs left, people who are able leaving. There was not a
development organization left with dollars to meet the size of the problem.
Only two forms of low income development dollars are presented in
traditional models: government and philanthropy.
What happened in Austin started to happen in South Shore, but SouthShore
Bank stopped it. SouthShore proposed a new paradigm in the mid '70s. Bring
capital and credit to a neighborhood on the verge. Their model would
leverage dollars, it would be legitimate, and management would be at risk to
perform. It would be of sufficient size to deal with neighborhood problems
and it would be self perpetuating.
The old neighborhood Bank had lost half its deposits and wanted to move to
the suburbs. A group of university activists bought the bank when owners
couldn't get relocation approval.
SouthShore came to a declining neighborhood of 78,000 houses, to which the
old bank had given only two mortgages in the last year before the sale.
The housing stock had devalued. There were many beautiful buildings
abandoned. Residents watched prices plummet and equity disappear. No one
would finance in South Shore: classic racially influenced redlining.
For the next ten years SouthShore devoted all its resources ($200 million in
assets) to single family lending. Block by block they reopened houses.
After 10 years other banks followed them into neighborhoods. With other
home lending taking place, In the '80s SouthShore switched its focus to
apartment lending. They developed a core of 200 "mom and pop" landlords who
would buy and rehab apartment buildings. SouthShore will not lend for
ownership changes: no loans unless rehabilitation is a part of the package.
They now lend mostly for multi-family housing and large commercial developments.
SouthShore found, however, that Banks can't do the development job alone.
Banks are passive and react to applications, they don't "act". SouthShore
formed:
- a for-profit development corporation (to buy renovate, operate, resell
multifamily buildings at a profit),
- a Non-profit corporation (to secure federal trants)
- a MESBIC for investments in minority owned small business
all owned by a bank Holding Company.
They aggresively solicited deposits (3% of Illinois pension funds).
SouthShore combines dissimilar sources of funding (grants, loans, subsidized
and market rates, developer, state agency, federal guarantee, private
entrepreneurs, federal tax credits and guarantees) all working together.
SouthShore has a retail operation no bigger than Alternaitves. They have
some innovative retail features: special hours for elderly and account
problems. They, however, feel local deposits are not enough to develop
their community.
They saved a neighborhood. Yet, SouthShore is one of a kind. No other Bank
in the country has done this to an inner city neighborhood. SouthShore is
the darling of ethical investors, but this better mousetrap didn't see the
banking world beat a path to its door. This model has been applauded but
not adopted.
It's difficult to deliver to people in need. It's even more difficult to
engineer a community particpating in its own revival. SouthShore has become
less convinced that communities need to be involved in their own
development. SouthShore itself has started development subsidiaries in
rural Arkansas, upper Michagan, the Austin neighborhood of Chicago, a
minority owned bank in Kansas, and Poland. SouthShore is also backing off
from the idea of private initiatives and looking again to the government.
SouthShore is now proposing that government create incentives (enterprise
zones?) to spur interest in inner city development.
Banks are different than CUs, and that applies to SouthShore as well.
SouthShore has little concern with ownership and equity. It has no small
business loans (6 business loans granted in 1991, totaling $24 million).
It has little community input. It is owned by stock-holders. 60% of the
deposits are raised nationally. They use government guarantees on loans
extensively- SBA, FHA, Student.
VAN CITY CREDIT UNION
VanCity is noteqorthy simply because it is the largest community development
institution in the World - $3 billion in Vancouver Canada. They concentrate
on residential mortgages, sponsor an Ethical growth fund, have 23 branches
with branch counsels.
They have a seed capital fund to incubate and start small businesses, to
give interest free loans. They have a $1.5 million foundation that gives
high risk loans, grants, and Technical Assisatance. They also own Van City
Enterprises - a for profit real estate development firm providing low cost,
affordable housing.
Their mission plays a strong role in the institution. They see themselves
as a Catalyst in the growth of community economic development for
disadvantaged groups. They have large experiments in Team borrowing, in
innovative solutions to housing affordability, in skills transfers, in
running incubator facilities, in setting up emergency day care centers.
There are some ideas gaining foreground that we have not agreed with:
That retail deposit gathering can't be profitable
That CDCUs can't be run with government support
We also saw that many CDCUs do not hold the whole cluster of ideals that we
hold. Many Credit Unions were not interested in:
Environmental concerns
Democratic process
community involvement
Gender, sexual, equality
************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********
This post transferred from the cdb-l mailing list
impressive, for example:
*** Credit Unions serving Inner City poor: Lower Eastside Peoples (NYC),
Northside (Chicago), Watts (CA)
*** Credit Unions serving rural poor: Central Appalachin KY, American
Somoa, Vermont Development, Community Trust (FL migrant farmworkers)
*** Credit Unions serving ethnic groups: First American Indian, Chicancos
por la Causa, La Casa, St Regis Mohawk, Cherokee, National American Indian,
NE Community (CA oriental)
*** Credit Unions serving church memberships: Brooklyn Ecumenical, Israel
MethCom (IL), Second Baptist, Pilgrim Baptist, All Souls, Bethex Gospel
*** Credit Unions serving family farmers College Station (AR), SCICAP (IA)
*** Credit Unions serving Small Business Santa Cruz Community, Self Help
*** Credit Unions serving gay groups Common Ground (TX)
Out of 12,000 Credit Unions nationwide, 300 are Community Credit Unions, 150
belong to the National Federation of Community Development Credit Unions.
The average size of all Credit Unions is $12 million, of CDCUs is $1.5
Million, 2 staff people.
I see a cohesive new development model emerging. The new approach takes the
strengths of Community Credit Unions and adds new tools:
A Not-for Profit corporation
A development corporation
Why add the addtional corporations to our organization? Credit Union's
weaknesses include that they are heavily regulated, they must make a profit,
they can not give tax deductibility for donations, and their size limits
them to small projects. Their strengths are that they are community
controled, they can leverage local deposits, they are seen as legitimate,
and they can provide many financial services. With a Credit Union at the
core, this alliance can fill in the gaps and weaknesses inherent in a pure
Credit Union model. I explore below how some institutions have begun this work.
Four institutions seemed of particular interest to us.
Van City Credit Union in Vancouver Canada
Self Help Credit Union, Durham NC
Santa Cruz Community CU, CA
South Shore Bank, Chicago
SANTA CRUZ COMMUNITY CREDIT UNION, CA
They are about $18 million, they have one busy retail location, they
concentrate on business and personal loans. Santa Cruz is renowned for
putting together large complicated packages for business loans, coop housing
and development. They use participations to build projects much bigger than
their capital would allow. Santa Cruz is a recent entry to mortgage markets
besides home equity lending. They use government loan guarantees extensively.
SELF HELP CREDIT UNION, NC
This organization has three arms: The Self Help Credit Union, Center for
Community Self Help, and Self Help Ventures Fund.
The Center, the first in operation, is a non-profit technicial assistance,
advocacy organization. The Center raises grants and guarantees and does
political lobbying.
The Fund is unregulated and raises funds from entrepreneurs and social
foundations. The Fund is run like a revolving loan fund, and can often make
loans the Credit Union can not due to loan size, loan risk, or regulator
concerns.
The Credit Union has about 1600 members and $24 million in deposits. Self
Help CU serves as a development bank for the whole state of North Carolina
from three offices. They specialize in small (micro) business loans, rural
home lending, home ownership, loans to non-profit orgs, loans to women and
minorities. The Credit Union also buys loans from smaller rural Credit
Unions and provides TA. They uses loan guarantees extensively. They do NOT
have a dynamic retail deposit gathering system.
They rely heavily on national and foundation deposits.
They work with the SBA, CDBG, lending partnerships with smaller Credit
Unions, political relationships, HUD, FHA, FNMA.
SOUTH SHORE BANK, IL
"... the best way to achieve a community development agenda is with the
hard discipline of a business."
South Shore is different from the other examples in that at its core, it is
a privately held bank. It is different from the over 12,000 banks in that
its corporate missions is rebuilding struggling neighborhoods. South Shore
believes ownership, not subsidy, makes Community Development go. SouthShore
works on the premise that for working people in USA wealth is created
through real estate.
During our visit we took a bus tour of SouthShore and their neighborhood.
Actually, the tour started in an adjacent neighborhood, Austin, that had no
bank at all. The housing looked fire bombed. Many streets contained no
buildings (burned for insurance or recreation). Boarded up buildings, empty
lots where buildings once had stood. In the evening gangs collected and lit
fires in oil drums. Any American inner city. This was the same Austin
neighborhood that made Saul Alinski famous for his organizing skills. And
it's also proof that political skills are not enough to develop a neighborhood.
Austin traced a pattern of capital withdrawing, credit leaving, institutions
leaving, no jobs left, people who are able leaving. There was not a
development organization left with dollars to meet the size of the problem.
Only two forms of low income development dollars are presented in
traditional models: government and philanthropy.
What happened in Austin started to happen in South Shore, but SouthShore
Bank stopped it. SouthShore proposed a new paradigm in the mid '70s. Bring
capital and credit to a neighborhood on the verge. Their model would
leverage dollars, it would be legitimate, and management would be at risk to
perform. It would be of sufficient size to deal with neighborhood problems
and it would be self perpetuating.
The old neighborhood Bank had lost half its deposits and wanted to move to
the suburbs. A group of university activists bought the bank when owners
couldn't get relocation approval.
SouthShore came to a declining neighborhood of 78,000 houses, to which the
old bank had given only two mortgages in the last year before the sale.
The housing stock had devalued. There were many beautiful buildings
abandoned. Residents watched prices plummet and equity disappear. No one
would finance in South Shore: classic racially influenced redlining.
For the next ten years SouthShore devoted all its resources ($200 million in
assets) to single family lending. Block by block they reopened houses.
After 10 years other banks followed them into neighborhoods. With other
home lending taking place, In the '80s SouthShore switched its focus to
apartment lending. They developed a core of 200 "mom and pop" landlords who
would buy and rehab apartment buildings. SouthShore will not lend for
ownership changes: no loans unless rehabilitation is a part of the package.
They now lend mostly for multi-family housing and large commercial developments.
SouthShore found, however, that Banks can't do the development job alone.
Banks are passive and react to applications, they don't "act". SouthShore
formed:
- a for-profit development corporation (to buy renovate, operate, resell
multifamily buildings at a profit),
- a Non-profit corporation (to secure federal trants)
- a MESBIC for investments in minority owned small business
all owned by a bank Holding Company.
They aggresively solicited deposits (3% of Illinois pension funds).
SouthShore combines dissimilar sources of funding (grants, loans, subsidized
and market rates, developer, state agency, federal guarantee, private
entrepreneurs, federal tax credits and guarantees) all working together.
SouthShore has a retail operation no bigger than Alternaitves. They have
some innovative retail features: special hours for elderly and account
problems. They, however, feel local deposits are not enough to develop
their community.
They saved a neighborhood. Yet, SouthShore is one of a kind. No other Bank
in the country has done this to an inner city neighborhood. SouthShore is
the darling of ethical investors, but this better mousetrap didn't see the
banking world beat a path to its door. This model has been applauded but
not adopted.
It's difficult to deliver to people in need. It's even more difficult to
engineer a community particpating in its own revival. SouthShore has become
less convinced that communities need to be involved in their own
development. SouthShore itself has started development subsidiaries in
rural Arkansas, upper Michagan, the Austin neighborhood of Chicago, a
minority owned bank in Kansas, and Poland. SouthShore is also backing off
from the idea of private initiatives and looking again to the government.
SouthShore is now proposing that government create incentives (enterprise
zones?) to spur interest in inner city development.
Banks are different than CUs, and that applies to SouthShore as well.
SouthShore has little concern with ownership and equity. It has no small
business loans (6 business loans granted in 1991, totaling $24 million).
It has little community input. It is owned by stock-holders. 60% of the
deposits are raised nationally. They use government guarantees on loans
extensively- SBA, FHA, Student.
VAN CITY CREDIT UNION
VanCity is noteqorthy simply because it is the largest community development
institution in the World - $3 billion in Vancouver Canada. They concentrate
on residential mortgages, sponsor an Ethical growth fund, have 23 branches
with branch counsels.
They have a seed capital fund to incubate and start small businesses, to
give interest free loans. They have a $1.5 million foundation that gives
high risk loans, grants, and Technical Assisatance. They also own Van City
Enterprises - a for profit real estate development firm providing low cost,
affordable housing.
Their mission plays a strong role in the institution. They see themselves
as a Catalyst in the growth of community economic development for
disadvantaged groups. They have large experiments in Team borrowing, in
innovative solutions to housing affordability, in skills transfers, in
running incubator facilities, in setting up emergency day care centers.
There are some ideas gaining foreground that we have not agreed with:
That retail deposit gathering can't be profitable
That CDCUs can't be run with government support
We also saw that many CDCUs do not hold the whole cluster of ideals that we
hold. Many Credit Unions were not interested in:
Environmental concerns
Democratic process
community involvement
Gender, sexual, equality
************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********
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