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March 03, 2005
Community Credit Union Brings Hope to Low-Income Residents of the Mississippi Delta
    by William Baue

Hope Community Credit Union launched a $15 million initiative supported by corporate investment and New Markets Tax Credits to promote economic justice in the Mid-South.

While the Delta region of Mississippi, Louisiana, and Arkansas boasts rich soil from Mississippi sedimentation deposits, it is arguably home to the nation's most impoverished population. This economic disadvantage is often exacerbated by lack of access to traditional financial institutions. In addition to the physical absence of bank branches from poor neighborhoods, mainstream banks often deny credit to low-income residents, who represent increased risk of default in their eyes.

A Delta region community development financial institution (CDFI) seeks to give residents hope. Since its founding in 1995 in a church in Jackson, Mississippi, Hope Community Credit Union (HOPE) has generated over $150 million in financing to assist more than 10,000 individuals in low-income communities throughout the Mid-South.

HOPE launched a $15 million initiative late last year to expand its services and increase its support of those in need. Six corporations--AmSouth (ticker: ASO), BankPlus (BPLS.PK), Bank of the Ozarks (OZRK), Beau Rivage, Entergy (ETR), and Trustmark (TRMK)--stepped up as lead investors, committing $5.5 million in the inaugural step of the initiative.

HOPE has already used this investment to open a new branch in New Orleans' Central City, a largely African American community of about 20,000 that thrived in the early- to mid-1900s but has not hosted a mainstream bank branch for at least two decades.

"So many people in Central City were operating small businesses from their homes, such as catering or fixing bikes, that we knew if they had access to some capital they could open a real, physical business," said Rev. Hill Riddle, retired pastor of Trinity Episcopal Church, which supported the location of a Hope branch in Central City. "But residents there were having a very difficult time trying to borrow money from a traditional banking institution."

The first loan from the branch supported First Evangelist Housing and Community Development Corporation, which already manages nearly 100 units of housing for low-income people in the Central City area, to purchase four neighborhood duplexes.

HOPE can also leverage the corporate investments because they were made through the New Markets Tax Credit (NMTC) program, established by the federal government in 1999 to provide investors federal income tax credits for supporting specific CDFIs. One such CDFI is Enterprise Corporation of the Delta (ECD), the primary sponsor of HOPE, and HOPE is the only community credit union in the country using NMTC. Essentially, HOPE can double the $5.5 million corporate investment, as NMTC provides federal insurance coverage on deposits up to twice the amount invested for tax credit.

"A New Markets Tax Credit award has enabled ECD/HOPE to secure private capital for loans in the nation's most distressed region," said Bill Bynum, CEO of ECD/HOPE. "Last year, every mortgage loan that we made in the Delta was for a first-time homebuyer, and more than 70 percent of our small business loans were turned down by traditional lenders."

NMTC leveraging applies to investments in certificates of deposit (CDs) made through the first quarter of 2005, ranging from 6-month CDs earning an annual percentage rate (APR) of 2.15 percent to 60 month CDs earning a 3.70 percent APR.

"In addition to these federally-insured deposits, several religious orders and foundations have provided low-interest loans (between zero and three percent) that support our development lending activities," Mr. Bynum told

These investments will help HOPE promote economic justice in the region over the next seven years by providing 4,000 affordable mortgages totaling over $250 million to low-income borrowers, and $60 million in loans to small businesses supporting 2,500 jobs.

This seven-year projection may be affected by President Bush's proposed budget for fiscal year 2006, as it calls for a dismantling of the of the Community Development Financial Institutions Fund, which administers the NMTC program. While the budget proposes to keep the NMTC program intact, support for CDFIs would be severely impacted by budget cuts and restructuring, impinging the ability of ECD and HOPE to thrive as they have done under the CDFI Fund.

"The ability of a skeleton staff at the CDFI Fund to adequately manage this program is questionable," said Mr. Bynum. "Consequently, potential investors may be deterred by the questionable stability of the NMTC program."

"It would be a mistake to retreat from an initiative that has already demonstrated significant value, after just a fraction of the investments have been made," he added.

Congress has yet to approve the budget, so it remains to be seen if the proposed restructuring and budget cuts of the CDFI Fund are accepted, rejected, or altered. The outcome carries significant implications for CDFIs such as ECD and HOPE as well as for their clients, who are already economically disadvantaged.


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