Operating a credit union in the Deep South, a region with some of the deepest entrenched poverty in the country, comes with added challenges. Hope Credit Union, headquartered in Mississippi, boasts 34,000 members, but on any given day, two-thirds of those members have fewer than $1,000 in their bank account and nearly the same amount earn less than $50,000 annually. The region’s high rates of unbanked or under-banked residents allow payday and subprime lenders to flourish.
According to Bill Bynum, CEO of Hope Credit Union, that has meant they need to get creative with building liquidity.
“When you’re in wealth-starved, dirt-poor places, you have to import capital,” Bynum, says. “People do not have the savings, the deposit, that traditional banks rely on to buy low-cost liquidity to make loans.”
Hope Credit union has done that by bringing in a series of high-profile corporate members — including Netflix, PayPal and Nike — as part of a program they’re calling the Transformational Deposit Initiative.
They launched the initiative in June 2021 and quickly received their first $10 million deposit from Netflix. For Netflix, that investment was part of a pledge the company made to put 2% of their cash holdings, totaling about $100 million, in Black financial institutions. According to Aaron Mitchell, director of human resources at Netflix Animation Studios, they’re hoping to encourage other large companies to do the same.
“Many companies make statements and donations, but we wanted to change how we conducted business every day to tackle issues like the racial wealth gap,” Mitchell says. “Black banks have been fighting to better their communities for decades, but they’re disadvantaged by their lack of access to capital. The major banks, where big multinational companies including ours keep most of their money, are also focusing more on improving equity, but not at the grassroots level these Black-led institutions like Hope can do.”
The company created a three-part mini-series on YouTube called Banking on Us. The series identifies some of the topics Black Americans face in acquiring wealth. The series explores the difficulties Black Americans have in acquiring wealth and some of the systematic racism of financial institutions, such as the hardships of Blacks in acquiring a mortgage or business loan, which are continuous barriers to economic mobility.
Bynum says Netflix put Hope Credit Union through a rigorous process of examining the Credit Union’s management and financial condition to make sure they would be good stewards of their resources.
The deposit ensured liquidity but it also “brought attention to this strategy,” Bynum says. “We couldn’t buy the recognition that brought. Netflix was very intentional about getting the word out about this, encouraging other companies to follow their lead and they did.”
In the latter half of 2021, Hope Credit Union received $116 million in Transformation Deposits from 443 individuals, businesses and nonprofits. The Credit Union estimates each $10 million deposit helps finance more than 2,500 entrepreneurs, homebuyers and consumers, largely from marginalized communities: Of Hope Credit Union’s members, 77% are black and 60% are women.
“We are able to use those deposits to stand in the place of those checking accounts and savings accounts that you so readily find in prosperous communities, but are not to be found in places that we serve,” Bynum says.
At .10%, the enticement for the deposit provides more of a social return than a financial one. The institutions understand the “importance of their future workforce and future customers,” Bynum says. And since the money is a deposit and not a donation, the banks can withdraw it anytime they want.
“We’ve seen a lot of individuals, a lot of families who have proven that they can do anything that anyone else can do when they have the tools,” Bynum says. “So our work is to try to bring those tools to bear for people who lack access to those tools. … We really feel fortunate to be able to lend a financial hand, lifeline and facilitate their movement up the economic ladder.”
However, that ladder can sometimes be a little slippery. The past two years have been hard on many Americans, but it’s been especially hard on Black Americans. In a 2021 study, the Hamilton Project at the Brookings Institution found that while all Americans, regardless of socioeconomic background, have been affected by COVID-19, Black Americans from economically disadvantaged communities have been hit particularly hard. The reports’ authors write that while all Americans have been affected by COVID-19, “Many Black Americans and their communities lack sufficient income and wealth to buffer both the job loss crisis and the economic crisis that have resulted from the COVID-19 pandemic.”
This is a fact Bynum knows well, but he sees the reaction of corporations as a ray of hope. The attention raised by the large corporate donations they received, as well as Netflix’s series, has continued to build momentum. Last December, Hope Credit Union was awarded $88 million through the Emergency Capital Investment Program (ECIP) by the U.S. Department of the Treasury, the largest community development investment the organization has received yet.
“There seems to be more attention over the past two years in the wake of George Floyd’s murder,” Bynum says. “And a bit of an awakening and recognizing that the gaps exist and are not sustainable. So I will look at that as a window of opportunity, but we’ve got to maximize the opportunity.”
This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is generously supported by Partners for the Common Good. Sign up for PCG’s CapNexus newsletter at capnexus.org.
Connie Aitcheson is a freelance writer based between Florida and Kingston, Jamaica. She worked for many years at Sports Illustrated and has been published in Essence, PTSD Journal, Cosmopolitan and espnw.com.