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Have Credit Unions Moved the Needle on Financial Inclusion?

Jules Epstein-Hebert of Inclusv joins us on The Remarkable Credit Union, episode 99

A shared commitment to serving the financial needs of the underserved has long distinguished credit unions from other financial institutions. In this episode, we talk to Jules Epstein-Hebert, the Director of Membership, Growth, and Partnership at Inclusiv, a nonprofit that has been championing the cause of financial inclusion for 50 years.

We reflect on the movement over the past five decades and tackle this month’s BIG question:

How has our economy become more or less inclusive in the 50 years since Inclusiv’s founding, and how has the strategy for closing gaps and removing financial barriers evolved accordingly?

 

Key takeaways:

  1. There’s no silver bullet for the work of financial inclusion. In a day and age when we look to so-called “innovation” to solve all our problems, sometimes we forget that not all solutions require reinventing the wheel. When it comes to financial inclusion, it’s more about getting really good at listening, having a strong commitment to the communities that you serve, and being willing to get creative and be flexible when assessing risk.
  2. Financial inclusion is good for society, but there’s a business benefit too. Jules mentioned how credit unions that are certified as Community Development Financial Institutions, CDFIs, consistently outperform their mainstream peers in a number of different categories, including their loan to asset ratios, new member growth, and return on average assets.
  3. The progress on financial inclusion has been real, but it’s also been incremental. There are positive trends, to be sure, but according to Jules, what we really need is transformative change. Inclusiv can’t do it alone, but with a strong network of member credit unions that have boots on the ground, so to speak, there’s hope of effectively addressing the evolving challenges faced by their communities.

 

Episode references:

 

Read the full transcript:

Katie Stone:
Welcome to another episode of the Remarkable Credit Union podcast. We created our podcast to help credit union leaders think outside of the box about marketing, technology, and community impact. The Remarkable Credit Union is brought to you by PixelSpoke, a digital marketing agency that works with credit unions to create user-friendly, high-converting, award-winning websites. As a B Corp and an employee-owned cooperative, we believe that business can and should be a force for good.

Each episode we bring on expert guests from the credit union and broader cooperative movement for conversations about the intersection of marketing and social impact. Our goal is to challenge your preconceptions about business as usual, and provide you with actionable takeaways that you can use to grow your membership, improve the financial health of your cooperative and better serve your community. I’m Katie Stone, CEO and co-owner of PixelSpoke, and I’m so excited to be joining as the new co-host of the Remarkable Credit Union.

Kerala Taylor:
I’m Kerala Taylor, also a co-owner and PixelSpoke’s Senior Manager of Marketing. I am really excited to be co-hosting this podcast with my colleague Katie. Welcome, Katie. I’m also excited to be welcoming Jules Epstein-Hebert. He’s the Director of Membership Growth and Partnerships at Inclusiv. Just a little background, before we introduce Jules. Inclusiv is a non-profit that’s been helping low and moderate income people in communities achieve financial independence through credit unions for 50 years now. That leads to today’s big question, how has our economy become more or less inclusive in the 50 years since Inclusiv’s founding?

How has their strategy for closing gaps and removing financial barriers evolved accordingly? So a little more about Jules. He represents Inclusiv on the New York State CDFI Coalition’s Board of Directors, and also in their work supporting passage of a public banking law in New York. His educational background’s actually in anthropology and prior to entering the credit union space, he spent six years in community workforce development, providing technical assistance and training to job applicants in New York City. When he’s not thinking about how to better assist community development credit unions, Jules enjoys spending time with friends, experiencing art and music and getting out of town. Jules, thanks for joining us.

Jules Epstein-Hebert:
Thank you, Kerala and Katie. Thanks for having me.

Kerala Taylor:
So I was wondering, Jules, if you could start by just telling us a bit about the problem that Inclusiv set out to solve 50 years ago.

Jules Epstein-Hebert:
Well, there were a number of problems, I think. Inclusiv, when we were founded, we were then the National Federation of Community Development Credit Unions. We were founded around the time that the Great Society programs of the 1960s were winding down. At that time a number of grassroots credit unions in the communities that they were serving or they were organized with the intention of serving, found themselves challenged in accessing capital from traditional sources. Basically it was discrimination, redlining, things like that. So the Federation, as we were known, was tasked with facilitating resources for these credit unions first in New York City and the deep South, and then we expanded and now we’re throughout the country and Puerto Rico.

Kerala Taylor:
Well, I love knowing a little bit about how you started, because I actually don’t know your full story and it’s kind of mind-blowing to think about 50 years. A lot has changed. My kids always like to tease me about how I was born back in the 1900s and to them I think 50 years seems like a long time ago. So I’m just curious for your thoughts. I know you haven’t been with Inclusiv for all of those 50 years, but how would you say the credit union movement has changed and evolved in that time and have these changes… I’m sure some of them have helped your work and are there some that have also posed new challenges?

Jules Epstein-Hebert:
Absolutely. So I’ve been with Inclusiv 10 years this month actually. So some of this history I learned from talking with my colleagues, our CEO Kathy Mann, our former CEO Cliff Rosenthal. The next stage of the evolution, I think of the Federation, what’s now Inclusiv, happened in the 1980s. Regulators’ focus shifted away from assisting with the organization of new charters and new credit unions. So our work expanded to meet that need and the need for capital sources for these specialized credit unions. That became more and more apparent in the mid 1980s. So that’s when we started organizing to establish what became known as the CDFI Fund, the Community Development Financial Institutions Fund that was established in the early nineties. Since then, we’ve evolved to meet the challenges that were exposed in 2008 and the aftermath of the financial crisis. Then we saw COVID-19 and the pandemic and the many strains that put on already vulnerable communities.

As our understanding of climate change has evolved, we now know its impacts are really acute and oftentimes first affect those communities, these vulnerable communities that we’re working with already. We’ve expanded to support solutions that credit unions provide in addressing these problems and then to build out additional programs. Since then, we’ve expanded to provide services I mentioned for Cooperativas in Puerto Rico in the wake of Hurricane Maria. We also work with credit unions in the US Virgin Islands. We partnered with the University of New Hampshire to offer free solar and green home lending training as well as technical assistance programs. Then we recently learned… Sort of the latest evolution or stage is that we recently learned that we’re a recipient of an EPA Greenhouse Gas Reduction Fund grant for all types of green lending. So that’s sort of where we are now and that’s as we’re entering 2024 and our next 50 years, some of the focus areas for us.

Kerala Taylor:
That’s great. I wanted to mention too, that we have had folks from Inclusiv on this podcast before, because you guys… You touch on a lot. We can’t really capture the full scope of the work you do in one podcast, but we have had folks on to talk about climate finance, which was really enlightening for me. I wasn’t sure before that conversation how to connect the dots between climate change and credit unions, even though I knew that there were really impactful ways credit unions could address that. Also about the whole CDFI process and what it means to be a CDFI credit union. So we can certainly include links to those other podcasts in our show notes.

Jules Epstein-Hebert:
Thank you.

Katie Stone:
Thanks, Kerala. Yeah, and thanks for sharing all that, Jules. It’s clear that you all have responded to all of the changes we’ve experienced over the last 50 years globally, locally, and our economy has changed a lot over the last 50 years as well. So I’d love to hear from you. Broadly speaking, do you think the economy’s become more or less inclusive? What are the main financial barriers that underserved populations are facing today?

Jules Epstein-Hebert:
I think there are a couple ways to look at it. On the one hand, in the credit union movement, we see the ranks of credit unions that are CDFI certified, community development financial institutions growing, and that certification recognizes the work that these credit unions are already doing in the communities that they serve. So I think that’s an indication of inclusivity, growing inclusivity. We also view that as very much in line with the core missions of the cooperative movement and the credit union movement. So this is really in line with the work that credit unions were setting out to do in the beginning. I’m also seeing… I think we all see more diversity in the credit union movement, both at the [inaudible 00:08:10] and in the different perspectives and life experiences that are visible and featured at various events like America’s Credit Unions GAC, those sorts of events.

They’re getting less overwhelmingly white and male than they have and certainly in the 10 years I’ve been in the movement. But how do we measure inclusivity? I think it’s about access to resources, community control over outcomes, across rural and urban environments and across different racial groups. So a key indicator of that is, and a key indicator of wealth certainly is homeownership in the U.S. So I was looking at some studies. In a recent study, it was a report from Axios, I think last year based on data from Zillow that shows that… This is specifically Black versus white homeowners, that the typical value of U.S. homes with Black owners is 18% less than those of white owners. So that’s a consistent, persistent inequality that we’re seeing and we see that gap persist and this is all over from the deep South to the Midwest to New York state, Connecticut.

It’s really across the country. It’s not a specific area. We also see how existing credit and appraisal systems continue to be biased against Black and brown folks. Then there’s sort of other ways of looking at it. I’ve looked at the top 50 Fortune 500 companies. In 1980, the top 50 were all run by white men. Now, it’s a little bit better. 43 are run by white people. Then I think two are led by African-Americans, two by Latin American or people of Latino background, a male and a female. then three are run by South Asians.

But we see that doesn’t match the demographics of America. Hispanic Americans make up more than 19% of the population. African-Americans make up more than 12% of the population. Asian American and Pacific Islanders people, those backgrounds make up more than 7% of the American population. So there’s a long way to go there. They’re sort of at 2% in terms of leading these major corporations. So progress is being made on some level, but I would say it’s not happening fast enough. It certainly does not come close to reflecting our national demographics and we have a lot of work still to do.

Katie Stone:
Thanks for that, Jules. You touched on homeownership, which is, as we all know, a huge factor in the racial wealth gap, which leads me to my next question. I want to talk about the racial wealth gap, which certainly existed 50 years ago and still persists today, as you just touched on. I’d love to hear from you, what are some of the most innovative and or effective initiatives your member credit unions have deployed to close this gap in their communities?

Jules Epstein-Hebert:
Well, one of the things that we like to say is there’s no silver bullet for the work of financial inclusion. But there are some really innovative things going on amongst our members in terms of partnerships, green lending products that you heard about on the other podcast, mortgages for borrowers without social security numbers, so ITIN borrowers, things like that. But perhaps I would say the most effective approach is not necessarily rocket science, it’s not about innovation, it’s just about having a strong commitment to the communities that you serve, understanding your members’ needs, having leadership in a board that looks like the communities that you’re serving. That can be a process, right, as communities evolve. Being creative and flexible when assessing risk. So just some numbers around the impact that we’re seeing. We provide CDFI reporting assistance to our members with certifications. Of the nearly 200 credit unions we worked with last year, 33% of their 2022 loans were originated in neighborhoods that were majority people of color, matching the proportion of U.S. communities that are now considered majority minority.

We also looked at a pool of nearly 200 mortgages that were purchased from 25 inclusive member credit unions that same year. We found 48% of these home buyers to be people of color, far above the 12% of U.S. home buyers in 2022 that were non-white. We see these inclusive strategies are effective and sustainable. For instance, the CDFI credit unions that we look at, I guess the entire group of CDFI credit unions, they consistently outperform their mainstream peers in a number of different categories, including their loan-to-asset ratios, new member growth, return on average assets, et cetera.

Kerala Taylor:
That’s great. I am hearing a lot more about CDFIs in the broader credit union space, and there does seem to be a growing interest in getting that certification, but also delivering on the mission of what it means to be a community development financial institution. So that seems to be a promising trend.

Jules Epstein-Hebert:
It’s exciting for us to see for sure.

Kerala Taylor:
Yeah, maybe you know the stats, I can’t remember the exact numbers, but the number of CDFI credit unions over the last… I don’t know how many years, it’s really increased by quite a lot.

Jules Epstein-Hebert:
Yeah, it’s more than doubled in the past 10 years.

Kerala Taylor:
Wow. Yeah, that’s great. That’s great. I know we have quite a few clients we started working with who have become CDFIs during the course of our work with them. So it’s just a small slice of the credit union movement, but it’s really encouraging to see. So we talked a little bit before about climate change and all of us know it’s evolved as a major threat in recent years, and I am already hearing about all these studies and reports showing that the already vulnerable communities are really bearing the brunt of the impact of increasing natural disasters. I’m just curious if you have examples from the credit union space and from your membership, credit unions that are really, really trying to proactively address climate change and its impacts.

Jules Epstein-Hebert:
Well, at this point in time, it’s impossible to talk about this stuff… The resources that are available and the work that credit unions are doing in this space without getting into an alphabet soup of EPA, GGRF, CCIA, so I’ll try to keep that to a minimum. I mentioned our solar and green lending training and technical assistance programs. These are just some of the programs run by Inclusiv’s Center for Resiliency and Clean Energy. Already community lenders from 120 credit unions have gone through the program, developing solar and green lending program frameworks at the consumer and commercial levels, and all of the credit union participants in that program have been really cutting edge. In the coming months, we’ll also share more information on how Inclusiv intends to deploy more than $1.8 billion in funds that we were awarded… We made this announcement, I think two weeks ago. We were awarded by the EPA as part of the Greenhouse Gas Reduction Fund’s Clean Communities Investment Accelerator.

This is intended to facilitate more green lending, solar and electric vehicle loans, but also loans from home weatherproofing and efficiency upgrades among other categories. There’s a lot of different categories and flexibility about how these grants can be deployed to members and consumers as loans, but a lot of this is the type of lending that credit unions are already doing. We’re even now seeing credit unions established with the express purpose of doing this sort of lending. You mentioned before the call, Clean Energy Credit Union. I also wanted to mention them as an example of this in Colorado.

Kerala Taylor:
Yeah, Clean Energy Credit Union is a PixelSpoke client and they focus almost exclusively on green lending. They also offer deposit accounts as well, and actually was talking at a client round table with our contact there, and I think it was just after the announcement from Inclusiv about all these funds and she was over the moon about it. Sounds really exciting.

Jules Epstein-Hebert:
We all were.

Katie Stone:
Was mentioned it a couple of times on the round table. Jules, pivoting just a little bit, I’d love to talk about one more pillar of your work, which is creating an inclusive economy for immigrants and particularly immigrants from Latin American countries. Can you talk a little bit about the primary financial barriers that this particular population has faced and what are some of the things you all are seeing credit unions do to address those barriers?

Jules Epstein-Hebert:
There were a host of challenges that immigrants coming to America face from… Wherever they may be coming from. From language and citizenship or residency barriers, identification issues, stereotypes and discrimination, working in low income or cash-based industries, sometimes social isolation, finding your community, so it goes on, the list goes on. So accessing loans is a challenge, but also just getting at basic depository services is also a challenge. We have the Juntos Avanzamos program, which stands for Together We Advance, which was started by the Cornerstone League in Texas and we partnered with them to expand it nationally. Juntos Avanzamos credit unions are committed to offering comprehensive multilingual services for new American communities, especially Hispanic immigrants.

This creates a standard expectation of service for consumers who enter a Juntos Avanzamos credit union. They know that they’re going to get these bilingual services, they’re going to get access to specific loan products, access to specific partnerships and materials. These credit unions are expanding their membership and services by, for instance, they’re partnering with the Mexican consulate network and are developing creative ways to provide loans to borrowers who may only have an ITIN number. A lot of the work that we do is around supporting our members that provide ITIN mortgage products and helping them develop those types of products further.

Kerala Taylor:
I know Katie and I were at a Juntos Avanzamos event here in Portland, Oregon last summer, and it was so inspiring to see how many credit unions are already certified or are interested in the certification process and just how many really genuine, authentic conversations are being had about how to better serve this population.

Jules Epstein-Hebert:
Yeah, it’s a very mission driven group of folks.

Kerala Taylor:
I’m curious both, if you were talking to a credit union who wasn’t Juntos Avanzamos certified or is not yet part of the Inclusiv network, what would be your sales pitch? Why should a credit union consider joining your network and how would they benefit and how would they benefit their members?

Jules Epstein-Hebert:
Well, it’s sort of two different answers, because Juntos Avanzamos is slightly different. It’s a specific program and for that it really is again, sort of about access to resources for developing some of these bilingual services, access to a network of credit unions that are doing this work. Partnerships with the Mexican consulate, as I mentioned, and really differentiating yourself in the community, to be the recognized source of services for these immigrant communities. For credit unions that are interested in joining Inclusiv, it is a very mission-driven core group of credit union professionals and credit unions that are focused on providing a broad array of services and products to underserved communities.

Joining Inclusiv means you’re joining the only national network of credit unions committed to financial inclusion. So it really is about a set of values, treating all members with respect and dignity, and offering fair and affordable financial products along with these comprehensive development services. You’d be joining 500 other credit unions in our network of all shapes and sizes with a diversity of approaches to serving their members. We have members that are over 16 billion, with a b, dollars in assets and credit unions that have less than a million dollars in assets. So we try to provide different programs and different services to meet their diverse needs and feature their diverse approaches amongst the network.

Kerala Taylor:
As a quick follow up, I’m so excited to be going to your conference in May. It’s coming up very soon and I’ve never been before. We’ve had a few folks on our team go, but what should I expect as a first-time attendee? I know this one is extra special, because you are going to be celebrating your 50th anniversary, but what do you find that folks get out of your annual conference?

Jules Epstein-Hebert:
Well, I think that the annual conference is one of the best ways to experience our network. So I’m really excited and it’s a lot of work for the Inclusiv staff, but we have a great time and really get excited and just jazzed off of all the stories and experiences in exchange with our members in the network. So this year, it’s next month, it’s May 7th through the 9th in New York City, our home city, where we started and where we’re headquartered. So that’s very exciting. It’s also going to be our largest gathering yet with some incredible speakers and some really cool offsite activities. So I’m very excited to see the PixelSpoke team there, but also hoping to see some of you out there as well.

Kerala Taylor:
I’m looking forward to it.

Katie Stone:
Sounds like a great conference. I won’t be making it this year, but hope to in the very near future.

Jules Epstein-Hebert:
I hope so, Katie.

Katie Stone:
All right, let’s delve a little bit more into… Jules, I’m going to ask you a few rapid fire questions before we close out here. First of all, if you could have dinner with one historical person, who would it be and why?

Jules Epstein-Hebert:
Well, my initial response was going to be something like Lenin or Marx, and by that of course, I mean Groucho Marx or John Lennon. But I think that generally speaking, our heroes rarely meet our expectations, our lofty expectations for them. So I really am at a loss. I don’t know. I don’t want Groucho or John to ruin it for me.

Katie Stone:
That’s an interesting take. I like it. All right. If you were pursuing a different career, if life had led you down a different path, what would you do?

Jules Epstein-Hebert:
I think it would probably be something maybe adjacent to this work, like community organizing, or something completely left field, like working in the arts.

Katie Stone:
Oh, great. Very satisfying and valuable things. What’s the best advice you’ve ever received?

Jules Epstein-Hebert:
Well, this is something that I try to keep in mind, but I’m not always successful, but I think it’s the golden rule. Treat others the way you’d like to be treated. I’m striving to do that on a daily basis.

Katie Stone:
Hard to go wrong with that. Yep.

Kerala Taylor:
That’s a good one. All right, well, it’s time for our final take. So as a reminder, our big question, and it was indeed a big question today was how has our economy become more or less inclusive in the 50 years since Inclusiv’s founding? How has your strategy for closing gaps and removing financial barriers evolved accordingly? So in just a few sentences, Jules, do you think you can sum up your thoughts on this?

Jules Epstein-Hebert:
I don’t think so, but I’ll do my best.

Kerala Taylor:
Give it a shot.

Jules Epstein-Hebert:
I would say the progress on inclusivity in our economy, the progress on financial inclusion, it’s been real, but it’s been incremental. What from my perspective we need is transformative change. So we’re working to get there, but it really does take a whole network of individuals to change the system. Inclusiv has evolved to advocate effectively for the resources needed by our members and the communities they serve. As those needs shift over the past 50 years and over the coming 50 years, we’ve expanded to create programs that address the changing challenges faced by our communities. We continue to support our member credit unions that are on the ground every day working in and who understand the needs of these communities. So we really take guidance from our members.

Kerala Taylor:
Well, I’d say you just did a great job summing up an answer to a very complex question. Thank you so much for joining us. Again, I’m excited…

Jules Epstein-Hebert:
Oh, my pleasure.

Kerala Taylor:
Excited to meet you in a few weeks, and we really appreciate you taking the time.

Jules Epstein-Hebert:
Likewise. This was a lot of fun and a real pleasure. Thank you.

Katie Stone:
Thanks so much, Jules.

Jules Epstein-Hebert:
Thanks.

Kerala Taylor:
All right folks, it’s takeaway time. So for the first takeaway, I loved what Jules said, “There’s no silver bullet for the work of financial inclusion.” I think in a day and age when we look to so-called innovation to solve all our problems, sometimes we forget that not all solutions require reinventing the wheel, or we don’t need some shiny technological solution with lots of bells and whistles. Really, when it comes to financial inclusion, it’s more about getting really good at listening, about having a strong commitment to the communities that you serve, and about being willing to get creative and flexible when assessing risk. As far as takeaway number two goes, I think most listeners will agree that financial inclusion is good for society, but it’s also important to recognize the business benefit. Jules mentioned how credit unions that are certified as community development financial institutions, aka CDFIs, consistently outperform their mainstream peers in a number of different categories, like their loan to asset ratios, new member growth and return on average assets.

Lastly, the progress on financial inclusion has been real, but it’s also been incremental. There are some positive trends to be sure, but according to Jules, and I would agree with him here, what we really need is transformative change. Inclusiv can’t do it alone, but with a strong network of member credit unions that have boots on the ground, so to speak, I think there’s hope of effectively addressing the evolving challenges faced by their communities.

Well, thanks again for joining us for another great episode. The Remarkable Credit Union is brought to you by PixelSpoke, a digital marketing agency that works with credit unions to create user-friendly, high-converting, award-winning websites. As a B Corp and worker-owned cooperative, we believe that business can and should be a force for good. You can learn more and check out our work at pixelspoke.coop. That’s PixelSpoke all one word, dot C-O-O-P. Until the next time, I wish you the best of luck in making your credit union remarkable.

 

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