Credit unions get their due: as more banks turn their backs on community needs, the lure of credit unions is stronger than ever - includes related articles on credit unions for children members and how to start a credit union

Black Enterprise, Sept, 1993 by Carolyn M. Brown

As more banks turn their backs on community needs, the lure of credit unions is stronger than ever.

FOR THE PEOPLE LIVING IN CENTAL BROOKLYN, New York, finding a needle in a haystack might be a snap compared with finding a local bank. In fact, there are only two banks that serve the area's mostly black community of 750,000.

These New Yorkers, though, are hardly waiting for a Citibank or Chemical to set up new branches in their backyard. Taking control of their own financial destiny, they've set out to do their own "thang."

In fact, it was a group of activists from the under-30 "hip-hop" crowd who took matters into their own hands last January when they founded the Central Brooklyn Federal Cerdit Union. Offering savings accounts, loans and other financial services to individuals, churches and businesses in the neighborhood--the grass-roots credit union is putting Central Brooklyn back on the financial map.

"We decided it was time to resume the work of the civil-rights and black power movements," declares Mark Winston Griffith, the credit union's president. "Building a community-owned financial institution is [pushing] the financial frontier."

The Central Brooklyn Federal Credit Union is but one example of how the nation's 13,200 credit unions are taking fiscal accountability to a new level. Operating solely to meet the needs of their members--rather than make profits--credit unions are empowering communities, churches and employee groups to spread their collective wealth as they see fit.

It's no surprise, the, that the credit union motto: "Not for profit, but for service," resonates more loudly than ever before. Over the last decades, as banks grew larger and catered increasingly to more affluent depositors and corporate accounts, many more Americans have flocked to credit unions. Today, says the Madison, Wis.-based Credit Union National Association (CUNA, these institutions count over 65 million members and $280 billion in assets. Credit unions are based on a simple operating principle: People should pool their money and, in turn, make loans to one another.

Historically, credit unions have provided loans to the kind of customers that banks often shun: small businesses, low-income home buyers and rural communities. They offer a special appeal to blacks, who for decades have been subjected to loan bias and discrimination. credit unions also inspire a sense of ownership among members. Everyone who joins a credit union becomes a "shareholder", acquiring a share for opening up an account.

Today's credit unions are preparing for an even larger national role. A proposal put forth by President Clinton favors the creation of a national network of community development financial institutions and embraces the concept of credit unions. If the plan becomes reality, a Community Banking and Credit Fund would provide $382 million over four years to help expand and launch these types of community-based projects.

One institution likely to benefit under such a program is the South Central People's Federal Credit Union (SCPFCU) in Los Angeles. Chartered last November, the SCPFCU plans to offer small-business loans and other financial services to the 650,000 residents of riot-torn South Central Los Angeles. "A credit union is the best vehicle for community-driven reinvestment," says Clyde Johnson, chairman of the SCPFCU and president of the SCPFCU's founding company, Black Employees Association. "Our primary goal is to rebuild South Central's infrastructure and to expand the economic base."

Membership Has Its Privileges

Like other financial institutions, credit unions are closely regulated. Nearly 60% operate under federal charter and fall under the jurisdiction of the National Credit Union Administration. The rest are state chartered and regulated by state agencies. But make no mistake about who runs the show. Credit unions are operated by people who have a common bond: neighbors, churchgoers, union members and co-workers.

There's a great advantage to keeping your money among friends. While the local bank may require you to plop down a minimum deposit of $200, credit unions will typically open an account for as little as $5. And instead of relying on stuffy loan officers, most credit unions make loan decisions by committee. Applicants, in other words, are judged by their peers.

The largest credit unions by far are those built by employees. According to CUNA, about 78% of these organizations are occupational, including government, education and manufacturing. Another 14% are associations and 6% are residential.

By definition, credit unions are member-owned, and don't strive to boost shareholders earnings. Instead, "earnings are returned to members in the form of higher savings rates, lower loans rates and enhanced services," says Jerry karbon, editor of News About Credit Unions, an industry newsletter affiliated with CUNA. Indeed, Gallup Polls show that shareholders are more satisfied with the services they receive at a credit union than bank customers are with their institutions.