By Ray Birch
SAN JUAN, Puerto Rico—In 17 of the rural districts in Puerto Rico there continues to be no bank presence. Instead, the areas are served only by financial cooperatives that one person says are in need of support from their U.S counterparts to help keep this island economy afloat.
Pablo DeFilippi, VP of membership and business development at the Federation of Community Development Credit Unions, said that headlines about problems subsiding in storm-ravaged and financially troubled Puerto Rico are misleading.
“While some news reports indicate that the crisis in Puerto Rico is over, that is far from the truth,” said DeFilippi. “The determination by the U.S. government that there is no more emergency in Puerto Rico is wrong. But as a result, no more food or water is going that way, and yet you have issues with power still affecting a third of the island.”
DeFilippi cited the situation facing one small credit union, the Cooperativa de Ahorro y Credito Saulo D. Rodriguez. The CU serves a very rural area and its employees are grateful for the support they received from the disaster relief efforts led by the Credit Union Association of New York, the Federation of Community Development CUs and the National Credit Union Foundation, DeFilippi said.
“But visit the members this credit union serves and you truly understand the devastation caused by the Hurricane Maria,” said DeFilippi. “You can also get an idea of the magnitude of the rebuilding efforts that will have to take place to bring Puerto Rico to where it was before Maria.”
No Access To Water Or Electricity
The credit union is up and running, but most of its employees still don’t have access to water or electricity in their homes, DeFilippi explained.
“It’s hard to believe that after six months so many people are still affected,” he said.
There are eight federally chartered CUs on the island with aggregate assets of $761 million, and an additional 116 Cooperativas de Ahorro y Credito—financial cooperatives like CUs in the continental U.S. but regulated locally—which serve over a million members with combined assets of more than $8 billion.
DeFilippi acknowledged that the massive exodus of residents leaving after Maria has further damaged an already troubled economy and likely the future of some credit unions here, an issue for the National Credit Union Share Insurance Fund, which provides deposit insurance coverage to the CUs here regulated by NCUA.
NCUA reported that all eight federally insured credit unions in Puerto Rico are still operating. Those eight credit unions have average capital of 7.6% and higher, with most having a net worth above 8.5%.
Most CUs Will Survive
DeFilippi said he expects the majority of credit unions will survive, and that those that remain will become stronger.
“The people of Puerto Rico, and their credit unions, are resilient,” said DeFilippi. “While many people are leaving, they still have very strong ties to the island and their families that are still here.”
DeFilippi said that many Puerto Ricans are quickly finding work in the continental U.S.
“Since they are already U.S., citizens, there are no immigration issues in their way,” he noted.
Those working in the U.S. are sending money back to Puerto Rico, which DeFilippi believes will begin to help the island economy. He pointed to a recent spike in remittances to Puerto Rico.
“On paper, some say the situation is solved, but these credit unions and the people they serve face many challenges,” explained DeFilippi, who said the Federation is spearheading an effort to deliver Community Development Financial Institution (CDFI) funding to CUs in Puerto Rico.
“These institutions have been a lifeline for many rural communities, where they often are the only point of access to the banking system. They had been hit hard by the financial crisis and many suffered untold devastation from Hurricane Maria. Nevertheless, these institutions are resilient and have the potential to become hubs for the rebuilding of local communities,” he said. “We helped the New York Credit Union Association and NCUF send more than a quarter million in relief grants to employees and volunteers of credit unions affected by the natural disaster and now that things a little bit more stable, we’re trying to facilitate access to external resources.”
All of Puerto Rico is considered an Investment Area by the CDFI Fund, which means that almost every credit union that operates on the island is eligible for certification and potentially able to access technical and financial assistance grants, DeFilippi said.
In February, the Federation—in partnership with the Federal Reserve Bank of New York, the CDFI Fund and the Association of Cooperative Executives of Puerto Rico—held a roundtable meeting in New York. More than 140 executives from credit unions in Puerto Rico were present. The Federation is planning another roundtable in San Juan, Puerto Rico, this summer.
“We educated them about the CDFI fund, how to become certified and apply for funding,” said DeFilippi. “Out of that meeting we enabled a handful of institutions to apply for this latest round of funding, which just closed. We won’t know how many will receive awards until September. But this is a big first step to bring more resources to the island. Now we are working with more than 100 Puerto Rico credit unions to get them certified and applying during the next round of funding.”
What also came out of the meeting, emphasized DeFilippi, is recognition of the need for credit unions in the U.S. to partner with CUs in Puerto Rico to assist with recovery.
“We hope to facilitate these partnerships,” said DeFilippi.
He cited credit unions in areas in which there are large concentrations of Puerto Ricans—including Connecticut, New York City and Boston—as strong potential partners. DeFilippi noted that many residents leaving the island are relocating to these areas, and that if credit unions can work with these people to help them get on their feet financially, that will help the economy of Puerto Rico in the long run through wealth reinvested into island.
But where U.S. credit unions can also lend a hand is by mentoring credit unions in Puerto Rico, including in IT, operations, marketing and more, he said.
“They need this kind of help from their counterparts in the continental U.S.,” said DeFilippi. “It is extremely valuable the expertise that can be shared.”
But it’s not a one-way street, said DeFilippi, especially for U.S. credit unions that serve large Latino populations and those looking to serve what has become the fastest-growing demographic in the U.S.
“U.S. credit unions can bring knowledge back about how to correctly and effectively serve this market,” said DeFilippi.
Credit unions interested in partnering with CUs in Puerto Rico should contact DeFilippi at firstname.lastname@example.org