Impetus & Vision
Over the course of about 4, our research showed that banks are not well suited to offer credit products to nonprofits. Accounting is different in for-profits and revenue sources look different. Similar to the problems faced by nonprofits trying to purchase liability insurance in the late 1980s, the commercial providers don’t understand the nonprofit model. Our vision for the American Nonprofits Federal Credit Union (ANFCU) is to emulate the successful approach taken by the Nonprofits Insurance Alliance Group, a cooperative insurer group controlled by the nonprofit sector and serving only its needs. (>more about NIA Group
Over the course of 2011, Jan Masaoka and Pamela Davis had many discussions with interested parties and learned all they could about the challenges and opportunities of creating a credit union. The Wallace Alexander Gerbode Foundation provided a $25,000 grant to Nonprofits Insurance Alliance of California (NIAC) to facilitate that effort. In March of 2012, NIAC provided $100,000 to begin the process of founding a credit union. This grant enabled the hiring of a credit union and community banking expert to take us to the next level. Subsequently, in the Spring of 2013, NIAC provided an additional $150,000 to continue the progress primarily related to research around the credit needs of the nonprofit sector and whether a credit scoring model could be developed to make it efficient to provide small operating loans to nonprofits. In June 2013, Silicon Valley Community Foundation awarded a grant of $50,000 to this initiative.
We conducted an analysis of the market and preliminary survey, identified a potential product base and related capital requirements, and completed the founding of American Nonprofits. Subsequently we completed the work to apply to the National Credit Union Administration (NCUA) for preliminary approval of our Field of Membership. We are very pleased to report that the preliminary approval was granted in July of 2012.
On August 19, 2013, we convened a meeting of the interested parties from around the country to determine interest in raising the additional funds necessary to see this concept through to successful launch. The attendees
left the meeting acknowledging the worthiness of the cause and also somewhat daunted by the work ahead, including the significant amount of capital this effort would entail.
As part of the NCUA chartering process, we sent a survey to send to all American Nonprofit members to document the need for the credit union and determine the right mix of products and services the credit union will offer. While interest is very strong, we were unable to garner sufficient traction in 2013 and 2014 toward raising the required capital. Potential funders were not convinced that nonprofits were sufficiently creditworthy nor that loans could be made efficiently to serve the reported needs for short term operating loans. Consequently, during 2015, Nonprofits Insurance Alliance of California (NIAC), in cooperation with American Nonprofits, has launched a small loan fund to test the credit scoring model that we have developed during the process of working to create a credit union. We are intending to share the credit scoring model with other interested parties as requested so that we may develop a larger test data base. Once we have more data, we intend to re-examine the options for expanding market-based lending to nonprofits.