Fred agreed to talk with Claudia Viek, our CEO, about his new job. He was also willing to share his perspective on opportunities confronting CDFIs doing small business lending to LMI borrowers and why he thinks they should take more risk in this market.
Claudia Viek: Now that Union Bank has expanded into not only a national, but global arena, tell us what your role entails in promoting corporate social responsibility [CSR].
Fred Mendez: Right now I am managing all the outreach staff for the Foundation as well as the Corporate Communication and Government Affairs staff. I see my role as a bridge between everything a global bank has to offer in terms of products and services, and the needs of the communities where we have a presence – from Canada to Argentina. I hope to define what CSR can mean in the whole of the bank, but always keeping in mind the importance of supporting and strengthening processes in the U.S., of course. For example, we would like to explore how to open more TRAC [Technical Resource and Assistance Center] centers, such as we did in Fresno. And we are really excited about the branches we have opened in three high schools where we also offer financial capability training.
CV: What is your take on current opportunities for nonprofit CDFIs that do microlending?
FM: Speaking pragmatically, borrowers are engaging in the disruptive, online lending, so CDFIs need to connect more with these disruptors, these platforms. While banks will continue to provide capital funding to CDFIs, banks are limited in how innovative they can be, and can’t easily reach the micro borrower. CDFIs need to look beyond banks and towards virtual and customized products and find a way to provide financial education and credit technical assistance as their value added.
CV: Can you suggest ways CDFIs can better reach Low-Mod Income borrowers?
FM: Boy, I’d love to see the State Loan Guarantee Program, the FDCs, cover the total capital investment, the EQ2s, rather than just individual loans to borrowers. It would increase efficiency and allow CDFIs to take more risk. Let’s remember that CDFIs are chartered to take more risk and more losses than conventional lenders. Also, banks could be serving more high-risk markets, served by the FDCs, because these loans have performed extremely well.