By Stacy Augustine, President/CEO, CU Strategic Planning

Accountability is critical when obtaining or maintaining a Community Development Financial Institution (CDFI) certification.  CDFI credit unions serve a Target Market or multiple Target Markets, which comprise low-income and underserved people and communities. To understand and serve your Target Market, you must have people in a governing or advisory capacity who are accountable to that Target Market.

With the newest CDFI certification rules, that accountability standard is more challenging than it has been in the past. You can learn more about that from the recording of our December 14 webinar. Simply put, our work with CDFI credit unions leads us to believe that most must implement an advisory board to meet accountability standards. But there are benefits beyond just accountability.

The CDFI Fund requires an advisory board to:

• Be appointed by the credit union’s board of directors.

• Provide strategic input to the credit union’s board of directors.

• Consist of no less than five persons.

• Meet at least three times a year.

• Contain at least one credit union board member.

• Operate according to a policy that describes the advisory board’s purpose and scope.

The following items need to be addressed in a CDFI credit union’s advisory board policy:

• The purpose of the advisory board and the scope of topics or strategic policy matters on which the advisory board provides input or advice to the credit union’s board of directors.

• How input that the advisory board provides to the credit union’s board of directors is documented

• The process by which individuals are selected and approved as members of the advisory board and

• How the advisory board seeks input from and/or reviews data on the financial needs and opportunities in the Target Market(s) for which it provides accountability.

• These matters can be outlined in a stand-alone document or incorporated into the credit union’s existing policy manual.

An Advisory Board as a Strategic Advantage

The key term to remember is advisory; this is an excellent way to get insight and input from your community, particularly your Target Market. Think of it as an in-house focus group. Bringing an advisory board together for a quarterly discussion about community needs helps highlight issues facing your Target Market, strengthen community partnerships, and set the stage for product and policy development that’s a proper fit for the people you want to serve.

How do you find your advisory board members?

Look at your Target Market. At least 60% of your advisory board must be accountable to your overall Target Market. How do you find them? Start with community partners – if you work with an organization that’s embedded in your community and serves low to moderate-income people, you’ve got great candidates right there. Or community development organizations that aren’t partners – it’s an excellent way to get to know each other. Even Rotary clubs and other local, community-minded groups are great places to find volunteers.

How are advisory board members selected?

Your policy should outline the process of appointing members to your advisory board, along with the term length and other details. Although advisory board members need to be actively engaged in the advisory board, they don’t need to be recruited from your current membership. They can be a good way of attracting community leaders who might be well-suited to serve on the credit union’s board of directors eventually.

What staff member should be responsible for your advisory board?

You have options! You may want your head of member experience to take charge. Or your community engagement director or the head of marketing – all are good choices. Remember that the advisory board doesn’t need to be operated with the same degree of formality as your board of directors.

Grow to Love Your Advisory Board 

Your credit union sought CDFI certification because it’s dedicated to serving the underserved. Regularly listening to your community is more than just a way to check off an accountability box – it’s at the heart of your mission.

Trust the experts at CU Strategic Planning, who’ve earned nearly $1B in financial awards for its credit unions since 2008. Reach out today to learn more.