Consulting company leads credit unions into underserved markets
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However, the two founders and their first employee have laid the groundwork to double the organization in size and are just starting some progressive projects with local, national and even global organizations.
Last November, Diverse Innovative Solutions agreed to give the Iowa Credit Union League majority ownership in the consulting firm, which this spring was rebranded as Coopera (related to “cooperar,” meaning “to cooperate” in Spanish). The new partnership is an expansion of the economic development work that Max Cardenas and Warren Morrow were already doing, but with a stronger focus on helping Iowa’s credit unions reach emerging and underserved markets.
“They are now at a point where this start-up phase is done,” said Murray Williams, vice president of the ICUL, “and they’re really hitting the ground running.”
Coopera is ICUL’s fourth subsidiary and is part of the league’s efforts to help credit unions with community outreach. This relationship has also given Coopera the resources it needed to increase its staff and provide clients with more products and services, especially new technologies. The company hired Miriam De Dios six months ago as emerging markets director and plans to hire another employee within a month.
Cardenas and Morrow also are looking at partnering with other financial institutions and credit unions across the United States in areas where they see emerging markets, which includes immigrants, minorities, rural communities, small businesses, low-income families and young adults.
“We believe there’s an oversaturation of financial services for the traditional middle-class and upper-class markets,” said Cardenas, president of Coopera. “We see the vast underserved markets that are virtually untapped and thus present opportunities for growth in credit unions and other financial service organizations that have the best strategies in place. That’s where we come in to develop that.”
As financial institutions face pressures from a faltering subprime mortgage market, Coopera’s services give credit unions confidence in entering new markets, Williams said. “Coopera provides education,” he said, “and a comfort level in understanding by partnering those groups together.”
Laying the foundation
Working with credit unions to provide underserved markets more financial resources is important, Cardenas said, because many people in these communities tend to use alternative financial products that are more available or convenient to use than services through traditional institutions.
“Especially predatory lenders, with interest rates of 300 APR (annual percentage rate), they are destructive in household economies and lead people into debt that sometimes they can never get out of,” Cardenas said. “We’re working with credit unions on how to build infrastructure to allow them to serve their members with the same degree of comfort, while at the same time providing greater financial security, and fairer fees and rates.”
Credit unions are an ideal group to work with, Cardenas said, because they are nonprofits, with the revenues they generate going back to their members. Most also have in their core mission a desire to serve emerging markets.
Coopera uses a three-step process in working with its clients. It first lays the groundwork with a needs assessment and demographic market analysis, as well as looking at board training and strategic planning. The next phase, strategy implementation, involves adjustments to personnel, products, processes and promotion/marketing strategies. Then it moves toward adding new services and reaching out to new markets.
“Having the right product in and of itself isn’t what gets you into the market,” Cardenas said. “It’s that you really need to complement it with the right distribution methods, right partnerships and marketing methods and adapt to the communities instead of waiting for communities to adapt to you.”
“Oftentimes [companies] think that they can translate a brochure and Web site and people are going to be stampeding through the door,” De Dios said. “That’s not the case.”
A lot of Coopera’s current work focuses on providing clients with new ways of assessing risk, beyond just looking at a credit report. Many people in these underserved markets, Cardenas said, don’t have an extensive credit history, but would be able to repay a loan.
Coopera also is involved with several new initiatives that could create new products for credit unions.
In partnership with the Iowa Credit Union Foundation, a part of the ICUL, Coopera received a $425,000 grant from an anonymous foundation to establish “The Credit Union Family Partnership,” which will go toward hiring its first executive director and establishing a new individual development account program. The program will require low-income households that qualify to save a set amount of money in a set amount of time. If the family achieves its goal, the credit union will match the amount they saved, which can be used for higher education, buying a house or starting a small business.
“It’s a great way of fighting poverty because you’re not just providing assistance short term, but actually are building a foundation for long-term financial sustainability,” Cardenas said.
Coopera hopes to work with seven credit unions and enroll 186 low-income families in three years, with the ultimate goal of providing a model that all Iowa credit unions will adopt.
The firm has started a project with the World Council of Credit Unions Inc. to market the WCCU’s International Remittance Network. That network gives credit unions a way to provide customers with safe and affordable international and domestic money transfers, a huge market that many financial institutions are just starting to notice. The firm also is working with U.S. Central, which manages the assets invested in all U.S. credit unions, and The Members Group, another ICUL subsidiary, to develop the next stage in remittance products: a reloadable card that people can send to family members in the United States and other countries, giving them access to funds in the account.
The groundwork
The three members of Coopera come from diverse cultural backgrounds, giving them a keen understanding of what it’s like to be in an underserved market.
When Morrow, originally from Mexico City, and Cardenas, born in Peru, attended Grinnell College, they found they were virtually the only minorities on campus. “We started wondering, why didn’t other people have these same privileges?” said Morrow, CEO of Coopera, “And we realized then there was an economic issue.”
They founded the Latino Leadership Project, a nonprofit designed to help minority high school students get into higher education institutions by working on leadership skills. Grinnell gave them $120,000 to get the organization off the ground.
As they worked on helping minority communities, Warren and Cardenas saw more companies also take interest in serving those communities. This realization led to the conception of Diverse Innovative Solutions, a consulting company that would help connect the two parties.
After Morrow worked in the for-profit financial world and Cardenas took on several economic and civic research projects, Cardenas said, “we got to this point where we had this wealth of contacts in the community, this wealth of experience in how to make community development projects work and also had acquired some hard skills in market analytics and deep knowledge of the financial service industry.”
Through Diverse Innovative Solutions, Cardenas and Morrow focused primarily on economic development, working on projects, such as aiding the Neighborhood Development Corp. in the development of the Latino commercial district on East Grand Avenue.
As the company began working with the ICUL, the two groups realized their goals were closely aligned. The ICUL was in the middle of a two-year pilot project designed to help credit unions with community development and outreach initiatives. Williams said the ICUL found that it did not have the staff expertise to adequately reach underserved markets until it partnered with Morrow and Cardenas.
De Dios was born in Jalisco, Mexico, and lived in California before moving to Perry at 13, where her family was one of the first Hispanic families in the community. After graduating from Iowa State University, she worked at State Farm Insurance and then John Deere Credit Union before joining Coopera.
Cardenas and Morrow, who still retain leadership of the consulting company, have high revenue goals with their new initiatives. However, most of the money initially will go into expanding the company, Cardenas said.
“It was an entrepreneurial dream to enter that relationship [with the ICUL],” he said, “and one of the best things that came with it was the ability to grow.”