Move Over Pavlov, CUs Have Their Own Trained Response

Oh, just admit it. As soon as you read these three words, "Serving the Underserved," you immediately conjure up images and a response in your mind. Just as Pavlov had his dogs, credit unions have their "serving the underserved." The dogs salivated at the ringing of a bell, while at those six syllables credit union execs start thinking "ridiculous federal mandate" or "antiquated remnant of CU philosophy" or "we tried that" or "we're not a check-cashing store" or perhaps, "Thank you, NSF income!"

Some say serving the underserved is a "mission." And others respond that "So was the Alamo, and you see how that turned out" (an opinion wholly dependent upon your point of view and, given the influx of Hispanics into the U.S., perhaps school textbooks will someday have a different take).

People used to be poor. In today's politically correct world of euphemisms aimed at somehow disguising life's harshness, they are "wealth challenged." Credit unions used to spare a cooperative dime, brother. Today, credit unions "enhance an individual's financial path." Financial institutions never used to see any reason (profit) to operate in poor-sorry, wealth-challenged-neighborhoods. Today, those folks are "underserved."

The whole concept of service to the underserved and even the phrase itself was popularized by former NCUA chairman Norm D'Amours. I'm sorry, did I use the word "popular" and Mr. D'Amours' name in the same sentence? Forgive me. D'Amours raised some good points, and today some might go so far as to suggest he was ahead of his time in recognizing a market opportunity for credit union growth. Unfortunately, by the end of his term, Mr. D'Amours could have extolled the virtue of home-baked apple pie at the July 4 picnic and many within the credit union community would have said they were opposed to both.

Fast-forward a half-dozen years and the concept of serving the underserved has evolved into a business strategy that is slowly taking hold, as more begin to recognize that there is principal to be had in the principle. Embracing new ideas is also always easier when membership growth is flat. In short, all those industry pioneers known only in faded black-and-white photographs had it right when they coined the "not for charity" piece of the equation.

Slowly, serving the underserved is being recognized as a good way to serve the credit union itself. Ironically, part of the credit for this epiphany goes to the check-cashing stores and pawn shops that have been the subject of much criticism from consumer advocates and credit unions. True, Jessie James may have used a gun and these near ubiquitous lenders use a little something called APR, but they have demonstrated there is a market to be served-and profitably.

A reflection of this growing business sense is the Social Impact Management Institute (SIMI) recently hosted by the National Credit Union Foundation. Piloted with about three-dozen attendees at IslandWood near Seattle, the program was aimed at "demonstrating how that role provides a real social value and a competitive advantage that can be leveraged and embraced by current members, new members, and new markets."

The NCUF's executive director, Steve Delfin, said SIMI was a test of how to structure discussion of cooperative value and how it can be translated into pragmatic business strategies with low-income households and prospects. A good part of the SIMI program involved looking outside credit unions for examples, and included a presentation by John Weiser, who co-authored the book, "Untapped: Creating Value in Underserved Markets" (which can be found on Amazon for less than $20). As Delfin explained, the book posits that "institutions that understand the future" know future growth will come from low-income markets that are currently "untapped."

"We have to rethink how we look at low-wealth households," said Delfin. "It's not something we have to do, but something we need to do. The whole idea behind SIMI was to raise the level of discussion as a way to grow credit unions. There were a lot of pragmatic ideas shared."

The Seattle SIMI was held on an island, and the concept has officially been voted off of it, as Delfin noted 17 credit union leagues have expressed interest in hosting a similar meeting for credit unions in their state. To facilitate that, the NCUF has created a Credit Union Center for Social Impact Management, on which it is partnering with Boston College's Center for Corporate Citizenship, and under which a number of programs will eventually fall, including its Development Educator program. A one-day version of the SIMI is already planned for the California/Nevada leagues' Big Valley meeting next Spring. At least four SIMIs are to be held during 2007.

"It's been designed so we can parachute it in," said Delfin, adding that pricing has not been developed but the goal is not to be cost-prohibitive but to recover costs. "We're trying to raise awareness. There are the believers, those on the fence, and the disbelievers. We're trying to reach those on the fence who are not sure where to go. This is about enlightened self-interest, and we believe it will hold up even as we reach those who are more skeptical."

Frank J. Diekmann is Publisher of The Credit Union Journal and can be reached at fdiekmann<at>cujournal.com.