Minority Depository Institution CUs Provide $324M in Benefits

Minority depository institution (MDI) credit unions represent an important way in which credit unions are fulfilling their mission by advancing financial inclusion and well-being for minority and underserved communities, CUNA wrote to a House subcommittee Wednesday for a hearing on minority depository institutions.

“MDI credit unions play a critical role in advancing financial inclusion and the economic wellbeing of minorities and underserved communities. MDI credit unions form an integral part of the credit union movement and despite field of membership restrictions, the relatively large number of MDI credit unions compared to banks highlights our commitment to financial inclusion and DEI [diversity equity and inclusion] generally,” the letter reads. “At the same time, we recognize that given the preponderance of small MDI credit unions, they are more vulnerable to consolidation. If consolidation takes the form of merging with other MDIs, allowing them to maintain their focus on a minority population and expand services, then members and their community stand to benefit.”

MDI credit unions represent approximately 10% of all credit unions and serve approximately 3.9 million memberships (representing 3% of all credit union memberships). As of March 30, there were over three times as many MDI credit unions (535) as MDI banks (148), representing 10% of the total number of credit unions compared to 3% of banks.

These MDI credit unions held 3% of loans and 3% of total credit union assets compared to MDI banks, which held 1% of total bank assets. Nearly 80% of MDI credit unions hold the low-income credit union designation.

“CUNA estimates that during the twelve months ending March 30, 2019 MDI credit unions provided approximately $324 million in direct financial benefits to their members as a result of lower rates on loans, lower fees, and higher rates on deposits compared to banks. These benefits are equivalent to $85 per member or $179 per member household,” the letter reads. “While significant, these figures underestimate the benefits provided by MDI credit unions to members and their communities. For example, these figures don’t consider the benefits of tailored products and services offered by MDI credit unions to their members such as financial education and counseling; small dollar loans for borrowers with poor or no credit as alternatives to payday loans; lending to borrowers with poor or no credit if they participate in direct deposit; and bilingual services.”

CUNA notes that MDIs has merged or liquidated at a slightly higher rate than all credit unions, and that small MDI credit unions face several challenges typical of small credit unions in general but face the same regulatory requirements as larger credit unions.

The letter also notes CUNA’s support for NCUA’s MDI Preservation programs, which it believes is “well placed to support MDI credit unions’ resiliency in the face of industry challenges.”