Deborah McKetty said there have been gaps created in lending to middle- to low-income borrowers as larger banks have moved away from community lending.
That is where CommunityWorks — the nonprofit entity for which McKetty serves as president and CEO — tries to step in. CommunityWorks is certified by the U.S. Department of the Treasury as a Community Development Financial Institution in the Upstate. It is among nearly 1,000 CDFI institutions in the nation.
The difference between CommunityWorks and a traditional lending institution is that CommunityWorks works with those potential borrowers other banks would deem “unbankable” due to debt or low credit scores. Recently, the Treasury Department gave CommunityWorks a $700,000 grant to further that mission of focusing on the needs of underserved markets.
“One of the things that we are still grappling with is the aftermath of the recession,” McKetty said. “Just because the employment was up, didn’t change the fact that people still didn’t have good credit because they may have fell behind during the recession.
“People are still trying to recover and get their feet back on the ground.”
The initiative began with the mission of seeking out new ways to provide affordable housing in Greenville County. McKetty said that mission has evolved over the eight years the nonprofit has been in existence.
“We started with an affordable housing mission, but it is like an onion and as we peeled the layers away, we recognized a wealth of other needs like small businesses and if we can help them with their self-employment needs and even help generate a new job that is a big benefit to our local economy,” McKetty said.
McKetty said CommunityWorks has a loan fund of between $3 million and $4 million that has been used to provide loans to groups aiming to provide affordable housing for low- to moderate-income homebuyers as well as to small business owners who may otherwise struggle with bank financing from a larger institution. Additionally, the CommunityWorks Federal Credit Union — an arm of CommunityWorks — has a membership base of 1,000 customers and has nearly $2.4 million in assets in its first two years in business.
One of the aims of both the credit union and CommunityWorks is educating people on money management.
“You can make great income, but if you can’t manage your money or have never learned how, it can be a problem,” McKetty said.
The credit union began with the help of Hollingsworth Funds and the United Way of Greenville County as CommunityWorks tried to look for ways to help customers who had been trapped by predatory lending where institutions charge an excessive percentage in fees to borrowers.
“We are seeing members that have been caught up in the predatory lending and it is not uncommon for us to see someone pay 299% on a title loan,” said Kerri Smith, manager of CommunityWorks Federal Credit Union. “It’s the people that can least afford it that are getting caught in these cycles.
“We try to help get them out of that cycle and finance them at a much lower rate to save them thousands of dollars.”
Both Smith and McKetty acknowledge there is a risk to what they are doing. They said they try different strategies to manage that risk and currently their delinquency is 3.25% — within the margins of their charter and regulations.
“There is always risk when you are lending,” Smith said. “We try to do a lot of up-front education and we will look and explain their credit report. There is a general misconception that people with poor credit scores cannot manage money and that is a misnomer.”
Even though the banking industry can be competitive, McKetty said area banks have been helpful and some have even partnered with CommunityWorks.
“A lot of our banks have been very supportive,” McKetty said. “A lot of our referrals are coming from the banks that we partner with that could not help.”
The credit union has received support in having those ‘bankable’ individuals open certificates of deposit to support the credit union. Smith said they plan to increase the maximum amount of loans from $15,000 to $35,000 in the near future.