We were recently featured on CUInsight for our article, Non-Traditional Lending Can Lead to a Healthy Member Focus. In the article, Fred Dalit, CEO of the Hawaii-based Honea Federal Credit Union was highlighted for his unique view of member saving and lending. Honea FCU members, in general, save heavily and tend to avoid taking out loans. This created a paradox for the CU: After all, financial institutions were created to lend money, and interest income is typically their main source of revenue. This drove the credit union to seek out participation lending on a national level, and in turn provide member services that are tailored to the makeup of the member base. Dalit is a big proponent of participation lending and has used the program at his credit union to generate income they were otherwise lacking, thus using the funds to focus on his members' savings habits.
“I personally believe in debt-free living and my goal is for our members to achieve this for themselves” Dalit explained. “At a corporate level the credit union needs to generate loan income but on a personal level, I know debt free members are happy members. So the answer to my dilemma is participation lending, where we can increase our loan income through a network of credit unions without increasing the burden of debt on our members.”
Funds generated through the participation lending interest income allow Honea FCU to focus its member service efforts on helping their members save in 3 ways:
1. Tracking Expenses: “Many people don’t know where their money is going. We tell our members, don’t start with the budget, start with your expenses. When you begin keeping track of your expenses you realize there might be areas of frivolous spending that can be cut out or eliminated” said Dalit.
2. Budgeting: Once members clearly understand where their money is spent, it becomes easier to create a budget and help discipline oneself to limited spending in specific areas. Honea FCU has found their members are spending a significant amount of money on cable or satellite TV and discovered a unique solution to lower their bills. “Everybody has cable expenses, so to speak, and when we started talking to members about a TV streaming service called TVision, they were very interested. Members found they could not only save money but the TV streaming service often times provides better channel packages than what they currently have. Overall, what we’ve found is this solution helps members with their budget and bottom line” Dalit shared.
Although in the early stages, the credit union has been able to help roughly 30 members by suggesting TVision as an alternative TV service. They began suggesting the service through their monthly newsletters and will announce it, along with other budgeting tips, at their upcoming annual meeting.
3. Saving for Retirement: Honea FCU largely serves the US Army Corp Engineers who are generally high-income earners with sound retirement options. However, Dalit has found that “Many members realize they wish they had started saving 30 years ago to leverage compounding interest, but reality strikes, people get married and need to pay for college expenses”. With their member’s best interest in mind, the credit union strives to inform members about how to prepare and save for retirement.
“60-70% of our membership are baby boomers and they are preparing to retire. We offer financial workshops for retirement and provide lunch at a restaurant where our members can learn about savings strategies and what to expect in retirement”.
The result: Happy members, traveling the world with no mortgage or auto debt in their retirement years. Additionally, member services focus on providing the knowledge that every dollar earned benefits their lives later on, while educating younger members on this same goal.
Honea FCU clearly lives the credit union mantra of “people helping people”. Fred Dalit and his staff embody the credit union difference by helping their members become better-educated consumers of financial services. Honea FCU enjoys an extremely healthy 11% net worth ratio which goes to show that traditional lending and credit union operations are not the only means to achieving success and win-win member relationships.