CDFI Grants Help Members. They Help Credit Unions, Too.

The Financial Health Network has released its 2024 trends report, and the results point to a country in distress.

According to the report, 70% of American households are financially unhealthy. What’s more, finances are getting worse for many.

The need for community development financial institutions has perhaps never been greater. CDFI certification enables credit unions serving vulnerable populations to tap into special federal funding to address needs like affordable housing, small business financing, financial literacy, and more.

Same Credit Union, Higher Gear

Karen Madry, president and CEO of Afena Federal Credit Union ($98.3M, Marion, IN) knows all about surviving hardship. Raised by a single mother in Chicago, Madry grew up experiencing economic instability. That firsthand understanding has made her a fierce advocate for the financially vulnerable today.

“I’m no stranger to the school of hard knocks,” the CEO says. “I made a lot of mistakes. I filed bankruptcy. I wanted to take the things I learned along the way and pour them into the community to help people avoid some of those pitfalls.”

Afena serves a mostly rural population, with places like Grant County, IN, recording a 19.3% poverty rate. Major stressors for residents include housing, childcare, and transportation costs. These areas of need, combined with Madry’s background, highlighted where grant funds could make the biggest impact.

In 2022, Afena received a FA grant in the amount of $590,000.

“This grant was easy to implement because it was already a part of our DNA,” Madry says. “It was doing what we normally do, only we were able to kick it into high gear. We focused on single parents and on empowering women by helping them become financially sound through education and coaching. We also noticed a lot of grandparents raising their grandchildren out of necessity while on social security. They can barely take care of themselves, so how can we help them?”

It’s not an understatement to say Afena has changed lives.

In just one example, the credit union refinanced the auto loan of a mother struggling with transportation to make the payment fit within the family’s budget with enough leftover to purchase new tires for the winter.

“That was so exciting to her,” says Shelby Schuh, vice president of marketing at Afena. “She was grateful there was some place that would help her.”

Take The Money And Run

Ft. Randall Federal Credit Union ($40.4M, Wagner, SD) was awarded a $3.7 million Equitable Recovery Program grant in April 2023. The grant helps CDFIs expand lending and investment activities as well as increase organizational capacity through new technology, staff, and other tools.

FRFCU has used the grant to broaden its services and improve its loan portfolio.

“The funding allows us to help more people,” says president and CEO Julie Thomson. “We’ve taken it and run.”

In the cluster of six counties FRFCU serves in southeast South Dakota, the average poverty rate sits at 11.8%. That number grows to as high as 48.6% for Native American tribal lands, such as the Yankton Reservation near the credit union’s headquarters.

CDFI grant funding has helped FRFCU expand and enhance its offerings for those struggling the most, leading to continuous growth in new membership among Native American and Spanish-speaking individuals.

“This year we’ve been able to work with several Native American members to improve their credit so they could get a better interest rate and get into their own homes,” Thomson says. “Last month we opened 35 new accounts.”

The funds have also helped address another challenge: a lack of financial education. All staff members at Ft. Randall have completed HERO Counseling to become certified as community development financial counselors. That’s an important component of providing full-service finances.

“We touch on all the basics such as reminding members they need full coverage insurance,” Thomson says. “But sometimes we forget they don’t even understand what full coverage insurance is.”

As a part of its commitment to its community, Ft. Randall also has introduce Banzai, an interactive financial education platform, into eight area schools.

Weighing Risk With Reward

When comparing third quarter data from 2023 to 2024, both credit unions reported growth in multiple areas.

At Afena, loans grew 6.7%, membership grew 4.2%, and net income increased 233.3%.

Madry says grant funding helped the credit union make changes in its approach to unsecured lending and customer service. Before Madry became CEO, Afena did not approve loans higher than $10,000, and even that required perfect credit.

“We’ve come a long way in changing how we measure risk,” Madry says. “That comes from a lot of training — not judging a person based on a credit score or an income but listening to their story. We pride ourselves on understanding where a person has been.”

Now, loan officers spend as much as an hour and a half with members to ensure solutions meet an individual’s specific financial situation.

“About 40% of our loans are hitting families that are considered low to moderate income, Madry says. “Not all of them get funded, but we are saying yes to approximately 80% of the loans we see.”

At FRFCU, loans grew 13.08%, membership grew 9.17%, and net income increased 1,155.64% in the past year.

Much like Afena, FRFCU has used CDFI grant funds to take on riskier loans — particularly auto loans. Because the credit union serves a remote area, many members face long commutes and need reliable transportation to remain employed.

“We used to never finance more than 100% of the vehicle,” Thomson says. “Based on their credit score, there were some cases we would only finance 75%. Now we finance 100% or 105%.”

PSSST, Pass It On

According to Thomson, FRFCU has promoted changes primarily through word-of-mouth —  especially among the local Native American population. According to a Nielsen survey, 92% of people trust recommendations from friends and family more than other forms of advertising. FRFCU’s approach creates a powerful ripple effect capable of breaking through the noise.

“It amazes me when I see the numbers,” Thomson says. “They’re growing and growing and growing. How is this happening? What are other financial institutions doing to these people that they’re getting upset and wanting to leave? What do I need to be marketing?”

Word has spread similarly for Afena. Madry says this is largely because of its reputation for saying yes when many others say no.

“We do empathy training with our staff, so we have been able to secure a level of trust with a lot of the nonprofit organizations in our community that I think others have not,” Madry explains.

Afena partners with multiple organizations that are focused on helping the same demographics the credit union prioritizes, including low-income families, domestic violence survivors, and people of color. The credit union even has relationships with area banks.

“Banks started calling us and saying, ‘I have a customer I can’t help. Is it OK if I send them to you?’” Madry says. “We love what we do. We love having the opportunity to serve our community. We feel very blessed.”

Thomson at FRFCU echoes Madry’s enthusiasm for going down the CDFI path … with one caveat.

“It was a little overwhelming — I’m not going to say it wasn’t,” the CEO says. “But at the same time, there’s a lot of need and this can help you grow. Do it!”

Performance Benchmarking Made Easy For CDFIs. Are you a CDFI struggling to find meaningful comparisons for performance benchmarking? Callahan’s Peer Suite allows users to create a custom peer group of CDFIs in minutes and compare key metrics like membership, loan, and share growth. Let us show you how. We’ll even provide a free performance report for you to keep at the end of the session. Learn more today.