Role of Credit Unions in Helping the Poor

To the Editor:

In the article “A New Way to Curb Poverty” (April 15), you highlight with accuracy many of the issues related to those organizations that seek to improve the financial well-being of America’s consumers.

While I appreciate your desire to shed light on activities currently being undertaken to solve the financial-literacy and wealth-accumulation problems of millions of people, you missed an integral part of the story by not identifying the ongoing activities of the nonprofit financial-services sector.

Your article spoke of the need to find the best ways to operate in poor neighborhoods while making a profit. Why must a financial institution make a profit to operate in these neighborhoods? The nation’s credit unions, many in partnership with the National Credit Union Foundation, as well as other nonprofit credit-union organizations, have been working for years in unserved and underserved neighborhoods to help residents overcome what seem like insurmountable financial conditions. Credit unions, by their very design, are not-for-profit financial institutions, and have long been the lone financial-services providers in many of the nation’s poorest communities.

The World Council of Credit Unions’ International Remittance Network (IRnet) program is a great example of how credit unions are helping people worldwide. The network, an electronic funds-transfer service, was developed by the council, a grantee of the National Credit Union Foundation, to provide credit-union members a safe and inexpensive way to send money overseas or domestically.

According to the U.S. Census Bureau, 11.7 percent of the population is foreign-born. Many of these immigrants return a portion of their earnings to friends and relatives back home. In El Salvador, international money transfers equate to 12 percent of the country’s gross domestic product, while $10-billion crosses the border into Mexico each year. For those living in the home country, this money is vital to help pay for food, housing, education, to start new businesses, and to save for the future.

Unlike remittance providers operating out of convenience stores or check-cashing outlets, credit unions are trusted, regulated, and insured institutions that care for the welfare of their members. With other providers, the poor exchange rates and exorbitant fees of up to 28 percent often mitigate the potential benefits of these transfers. IRnet does not charge foreign recipients any fee for accepting transfers and exchange rates are consistently better than the competition. Senders are guaranteed the rate of exchange and informed of the amount of foreign currency to be picked up by the recipient at the time they make the transfer. It is conservatively estimated that consumers saved more than $10-million in fees in 2003 by using credit unions and the IRnet to send international remittances.

Credit unions have been, and will continue to be, a driving force working within unserved and underserved communities throughout the United States. Credit unions are not working in those neighborhoods in order to make a profit. And no one has to dangle a carrot to get them to do so. It’s a part of every credit union’s guiding principle of operating not for profit, not for charity, but for service.

Daniel A. Mica
Chief Executive Officer
National Credit Union Association
Washington