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
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
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."
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 SocialFunds.com.
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.
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
"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.