New Mexico’s Nusenda Credit Union ($1.8B, Albuquerque, NM) is going global in its efforts to offer micro-loans to entrepreneurs and small-business people across the Land of Enchantment.
“We have capital we can lend, but lending parameters are such that we can’t take on the risk associated with small-dollar loans,” says Robin Brulé, the credit union’s senior vice president of community relations and special assistant to the president.
That’s why the credit union developed a program in which four community partners underwrite an array of small loans from borrowers such as farmers, film workers, and construction contractors.
Robin Brulé, SVP of Community Relations, Nusenda Credit Union
Through Co-Op Capital, Nusenda provides the origination and the funds; the community partners guarantee repayment.
The program flips the traditional model of a borrower applying for a loan through a financial institution, Brulé says.
“Character-based, community circle micro-lending is not new, especially internationally,” she says. “But the practice of offering loans through member organizations versus a formal banking institution is a largely untried model in the United States.”
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Nusenda’s partners — the University of New Mexico, La Montanita Co-Op, local film union IATSE Local 480, and concrete contractor Noel Co. — have loaned more than $400,000 to more than 85 borrowers since the program began in 2014. Those borrowers have myriad opportunities being financed by the loans, ranging from a university education — Nusenda is the former New Mexico Educators Federal Credit Union — to raising food stuffs to be sold through the half-dozen stores operated by La Montanita.
La Montanita Co-op partners with Nusenda through its LaM Fund. Here’s what potential borrowers see when they apply online.
Lower Barriers Encourage Growth
CU QUICK FACTS
NUSENDA CREDIT UNION
Data as of 06.30.16
HQ: Albuquerque, NM
12-MO SHARE GROWTH: 9.6%
12-MO LOAN GROWTH: 20.0%
The Co-Op Capital borrowers often come from underbanked or unbanked backgrounds, people for whom loans can lower barriers.
“Traditional lending practices — which depend on personal and business assets, credit histories, and bank transactions — exclude many low-income people and people of color,” Brulé says. “These practices perpetuate economic disparities and discourage business growth and innovation.”
That’s especially cogent in a city like Albuquerque, where nearly one-third of households speak a language other than English and the average credit score ranked in the bottom 13% nationally in 2014, according to a blog Brulé wrote for the Living Cities website.
3 Tips To Launch A Lending Circle
Robin Brulé, senior vice president of community relations at Nusenda Credit Union, offers advice on how to support community micro-lending through a member-owned organization.
Adapt and scale what’s already in place. “In our case, the SEG Pledge loan fit the needs of a broader set of entrepreneurs,” Brulé says.
Couple the loan with other financial services. “At UNM, recipients also participate in financial capability training, and when certain milestones are met, the loan is forgiven.”
Be discerning. “We focus on some type of membership network, like unions, associations, cooperatives, etc. This enables us to adhere to the [seven cooperative principles of credit unions) and not lose sight of who we are.”
Brulé says the award-winning Co-Op Capital program is an expansion of the SEG Pledge loan the credit union began offering in 2010. Nusenda created that loan in conjunction with Albuquerque’s Living Cities program and requires borrowers become credit union members with savings and checking accounts and access to the Nusenda’s suite of services and rewards programs.
Co-Op Capital’s default rate has been low, and Nusenda is developing an RFP process for more potential partners to get involved in the program.
“We plan to make at least 300 new loans within 10 years to severely marginalized populations who would otherwise not be able to access credit that can move them into the economic mainstream and improve their upward mobility,” Brulé says.
Organizationally, Nusenda considers the program a community partnership rather than a money maker. That’s why it’s under the purview of the credit union’s community relations and member development staff, which led the effort to create a new foundation.
“Co-Op Capital uses the best of the international micro-lending model coupled with the cooperative principles of credit unions,” Brulé says. “Low-income workers and business owners can access capital based on their relationships with their networks rather than credit score and collateral.”