Churches Open Credit Unions to Help Poor

Sept. 10, 2001 -- All churches want to save their parishioners' souls. The Church of God Credit Union wants to save their money, too.

"Sometimes people of the congregation needed financial help as well as spiritual help," explains LeAne Cloud, president of the Wichita, Kan.-based institution.

The Church of God Credit Union is one of a growing number of faith-based credit unions around the country, created to help members and people in need. There are roughly 500 around the nation, set up in church basements and donated office space, and staffed mostly by volunteers. Most, but not all, are affiliated with churches in low-income neighborhoods.

Faith-based credit unions are run independently of their parent churches, however, and are federally chartered and monitored just like thousands of other, more traditional, credit unions. As a group, they have more than $2 billion in assets.

They represent a variety of faiths and denominations, including Protestant, Catholic and Muslim, officials with the National Credit Union Administration say.

With new regulations and support from the Bush administration, faith-based credit unions are set to go forth and multiply. Several have recently begun offering services to people outside the church's community.

Part of the Mission to Help Poor and Needy

Some faith-based credit unions are set up primarily to help members invest their money according to their religious values, but most see their financial services as an extension of their ministry's efforts to help the poor and needy.

"We were started in the church and we go by Christian principles of helping people who need our help," says Rita Haynes, the treasurer and manager of Cleveland's 50-year-old Faith Community United Credit Union, one of the oldest faith-based credit unions the country.

Even today, with 4,000 members, the credit union has only five paid employees.

"There are a lot of folks out there getting ripped off," agrees Shiloh of Alexandria Federal Credit Union officer John Dupree Jr., citing the glut of check-cashing shops and pawnbrokers in the low-income Parker Gray neighborhood of Alexandria, Va., where his 900-member church is based.

"They need help. That's part of our philosophy."

Shiloh of Alexandria Federal Credit, which was created by Shiloh Baptist Church in 1993, has no full-time staff. Two of their three loan officers are deacons in the church. They offer secured and unsecured loans for cars and other purchases, and are hoping to issue credit cards and offer more mortgages soon. Shiloh doesn't issue ATM cards. Like many others credit unions, it emphasizes financial counseling and money management skills.

"We'll sit down and tell them what a checking account is, compound interest is — major banks won't do that," says Dupree.

He says the credit union has been a resounding success, and organizers are eager to expand.

New regulations are making that much easier for Shiloh and other faith-based credit unions. Shiloh was granted permission this week to accept members from the community around their church, even if they don't belong to the church. The credit union believes opening membership will make it stronger financially and able to help more poor people.

Checks and Balances

Dennis Dollar, the recently appointed acting chairman of the government agency that oversees credit unions, is convinced that faith-based credit unions are a good idea. Tight regulations and annual reviews ensure their financial health, he says, and help from his agency, the National Credit Union Adminstration, has turned deacons and pastors into successful credit union directors.

Like other faith-based credit unions, Cleveland's Faith Community United, has had to learn how to push people to pay back loans and sometimes repossess property from problem debtors — not typical activities for church-affiliated organizations.

Still, officials there say they do what's necessary to keep their institution healthy.

"We have to run this as a regular business," insists Haynes.

Government officials say as a group, faith-based credit unions have low default rates, and many boast of having a lower percentage of problem loans than the industry average.

"We have stayed in business for 50 years, so we are living proof that poor people pay," Haynes says. "They might pay slower," she admits, but "they will pay and they will save."

Leveraging the Church’s Ties to the Community

Dollar says that because of their strong ties to their communities and existing networks of volunteers, churches can use faith-based credit unions to reach out to poor people in ways that other financial institutions cannot.

His agency has not had troubles with churches using their credit unions primarily to proselytize, he says.

"Historically, it's not been a problem," he says.

Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions, agrees, but he worries that many faith-based credit unions are in danger of stagnating.

Some smaller faith-based credit unions are content to offer only limited services and restrict their membership to church members, he says. He worries they may lose their more prosperous customers to larger, commercial banks.

Rosenthal supports the Bush administration's efforts to encourage faith-based credit unions, citing their unique role in poor communities.

"They can probably go where virtually no other kind of institution can," he says.