You’re probably familiar with the term “food desert,” a neighborhood saturated with fast-food restaurants and convenience stores but lacking a full-service grocery store that provides healthy and affordable food options. You may not be as familiar with the term “banking desert.”
Banking deserts are communities with little to no access to mainstream banking services, and like food deserts, they’ve historically and disproportionately existed in lower-income communities and communities of color.
Kansas City, MO’s core African-American community is a banking desert. Instead of mainstream banks, the community is proliferated with check cashing, title loan, and payday loan companies. The lack of banking options is in part a contributor to the disproportionately high percentage of African American in KCMO who are “unbanked,” or not using mainstream banking services.
A 2015 study by the FDIC, found that 12.9% of residents in the Kansas City metropolitan area are unbanked. An analysis of this data from the Kansas City Star shows 45% of the city’s African-American households are unbanked.
Numbers like this, speak to the need for WeDevelopment Federal Credit Union a low-income credit union that has been eight years in the making. At last, an opening day appears close.
“The fact that we’ve been at it so long means we haven’t given up,” says Ajamu Webster, board chair of WeDevelopment FCU.
The idea for the credit union sprang out of a 2008 task force commissioned by former KCMO Mayor Mark Funkhouser to find economic development tools that would work in “economically distressed areas of Kansas City. After the committee completed its work in 2009, Webster, who was chair of the task force, and a few other task force members started to work on the reports recommendation to open a community development credit union.
Getting That Charter
2010 was a tough time to begin work on a credit union.
“We were just coming out of the subprime lending crisis … banks began to retreat from the community and the void was filed by pay day lending, check cashing and title loan companies,” says Webster. “Folks were getting trapped in that cycle and at that point the support for a credit union became even stronger.”
But the subprime crisis caused the government to tighten up regulations on banks and credit unions. Combine that with low interest rate s – the main way credit unions earn money – and it became harder for the financials to work.
As Webster said, the group never gave up. They initially raised $400,000 in capital to fund the bank, but have since gone back and increased that amount to almost $800,000. Even with the additional capital, they still haven’t received their credit union charter, but Webster is certain, they’re close.
In September, they submitted some revisions to their application to the National Credit Union Administration. They’re hoping to have some feedback within a few weeks. Overall, Webster says the NCUA has been fairly helpful.
“It’s not like they’re trying to wash us out. It’s not that at all,” says Webster. “The requirements are pretty stringent because they don’t want you to fail. They want you to have everything in place to be successful.
When WeDevelopment FCU receives it charter, it will be the first new credit union chartered in the area in 15 to 20 years.
In fact, because there hasn’t been one chartered, we’re being treated like that 1st grandchild. The credit unions have been very supportive of us and very encouraging,” Webster says.”
Everything seems in good order, and the board is anticipating a positive result. They’ve hired a CEO, who has been on board and working full time for the past two months. They also have a lease on a location in Linwood Shopping Center, and they even have a budget for renovating the space.
Working for the Members
Credit unions are chartered to serve a “field of membership” and WeDevelopment will be chartered to serve “a contiguous economically distressed area,” with boundaries of the river, to 85th St, to Troost to 435. To be a member, you must either live, work or worship in that area. The estimated membership pool is 130,000 people.
Credit unions are not for profit businesses. There are not any shareholders. Instead, credit unions are owned by the members. For that reason, it’s worth the effort for all of the members to help make the business a success.
One of the major goals of WeDevelopment will be to help grow the financial capabilities of its members.
“That’s where credit unions excel,” says Webster. “You don’t go to a bank to rebuild your credit. Credit unions are the place you go to rebuild your credit.”
WeDevelopment hopes to “rebank” some of that large number of people in Kansas City who are identified as unbanked. More than just financial literacy, which Webster says is just handing out information, the credit union will work with people to show them how to rebuild their credit and strengthen their financial capacity. They’ll stay with them through the process, providing feedback on how they’re doing.
Beyond just making it, the credit union will help members look toward investing for their future and looking even further, discuss how do you pass on generational wealth.