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ImpactPHL Perspectives is a multi-part content series that explores the many facets of the impact economy in Greater Philadelphia from the perspectives of its doers, movers, shakers, and agents of change. Each volume is written directly by a leader in this space to discuss best practices and share lessons learned while challenging our assumptions about financial and impact returns. For more thought leadership like this, check out the full catalog of ImpactPHL Perspectives.

Daniel Betancourt, President and CEO of Finanta

The Cost of Being Poor

Mary cleans rooms in a Philadelphia hotel and earns a weekly paycheck of $464. But the money doesn’t go to a bank or credit union.

She pays $4 to cash her paycheck at a local grocery store. She buys money orders at $1 apiece to pay bills that are coming due and by the time she’s done, she has $25 left in her pocket.

But Mary would rather pay the fees than open a checking account that could save her several hundred dollars a year.

A few years ago, she lost hundreds of dollars to overdraft fees because she had trouble maintaining the required minimum balance at a bank. By the time she realized what was happening, she had bounced four checks. She closed her account and remains leery of bank accounts with all their rules and fees.

There are 250,000 people in Philadelphia like Mary. They mistrust banks and struggle to maintain minimum balances, so they turn to check-cashing services, money orders, and other alternative financial services.

The true costs add up to more than the fees that Mary and her neighbors pay every week. Because they lack savings and credit histories, they are financially invisible, limiting their access to high-quality loans. So, when they face emergency expenses – as all of us inevitably do – they must resort to high-interest credit cards and high-cost, short-term payday loans. As they struggle to make payments, the underbanked fall deeper and deeper into debt.

“Finanta is a Philadelphia lender with a 30-year history of improving access to credit for low-income business owners. Our loans have helped people on the economic margins become entrepreneurs, create jobs, and revitalize vibrant neighborhoods”.

Creating Opportunities for the Underbanked

Finanta is a Philadelphia lender with a 30-year history of improving access to credit for low-income business owners. Our loans have helped people on the economic margins become entrepreneurs, create jobs, and revitalize vibrant neighborhoods. However, we also recognize that our business borrowers have families with distinct financial needs. So, we are taking steps to help them – to help hardworking Philadelphians, like Mary, become financially visible.

The first step came in 2022 when we launched Finanta Credit Union, which focuses on creating pathways for the underbanked to enter the financial mainstream.

There is a significant need for a credit union like ours in Philadelphia’s distressed neighborhoods, but we knew we had to be prepared. So, we first launched a pilot branch in Lancaster, where we have been developing products and services with people like Mary in mind. Now, with more than 1,000 members – 75% of whom were underbanked – we are ready to open in North Philadelphia with a full suite of established and tested products.

A Trusted Neighbor

Our financial centers in Philadelphia will blend the services of our nonprofit loan fund with our consumer-focused credit union, creating a continuum of financial services and access to capital for every need.

In these financial centers, our staff members don’t just underwrite loans and hand out checks; they live in our neighborhoods among our loan fund clients and credit union members – walking with them along their financial journeys. 

If a ‘would-be entrepreneur’ comes to us with a great business idea but falls short of the requirements for a loan, we offer coaching and business counseling to help them get there. Once a loan is approved, we check in to see how things are going and, if there are challenges, we connect them to resources. 

The same is true of our credit union. Our member service representatives aren’t focused on selling products. They are focused on coaching members to achieve financial stability. They help members overcome the financial barriers associated with a lack of credit, a troubled financial history, or being new to the financial system. Given that our prospective customers have a mistrust of conventional financial institutions, we see our greatest success stories in those who bring family and friends to our credit union, encouraging them to open accounts.

“Our financial centers in Philadelphia will blend the services of our nonprofit loan fund with our consumer-focused credit union, creating a continuum of financial services and access to capital for every need”.

The Finanta Difference

While trust is critical to our success, so are products designed around the needs of our members. We have taken many steps to ensure that our credit union is accessible to the underbanked. Members pay $5 for a lifetime membership in the credit union, and for most savings and checking accounts, there are no minimum balances to maintain. Families have access to every penny in their accounts and do not need to worry about maintaining funds to avoid fees.

In addition to our worry-free accounts, we have developed underwriting policies that address the institutional barriers our members face when approaching other financial institutions. We look beyond credit scores and help members establish or rebuild credit with small, credit-building products called step loans, which are paired with financial education and individualized coaching. Our goal is to give everyone an opportunity to work toward financial stability. 

We also offer a pathway for members who, because of their pasts, have been denied checking accounts at other institutions. They can open an account and receive specialized coaching to help them become bankable again.

Long-Term Benefits

Research shows those in poverty are much less likely than others to rely on bank accounts. Yet without stable banking relationships, people may struggle to improve their finances. They have trouble buying reliable vehicles or borrowing money for home improvements. In Philadelphia, for example, the denial rate for home-improvement loans among low- to moderate-income applicants is historically 12% higher than the overall rate. Loans from used-car dealerships often carry double the interest rates of banks, costing borrowers thousands of dollars over the life of the loan.

Our work does more than give the unbanked a trusted place to put their money. When a family has a bank account, it can receive direct deposits and pay bills without forking over fees for check cashing and money orders. Credit union members can take out loans to establish or improve their credit scores, cover emergency expenses, make home repairs, or buy a car. Small loans can be used as stepping stones toward larger loans. As savings and financial knowledge grow, members may buy a home or start or expand a business – assets that can help them accumulate wealth. This creates economic mobility that transforms generational poverty into generational wealth.

Investing in the Community

Finanta Credit Union is poised to launch in Philadelphia with $25 million in assets and a strong balance sheet. However, community support will help us deepen our impact and increase the resources we can make available to distressed neighborhoods. 

Community-minded donors and organizations can join the credit union and make deposits that help support vibrant communities. Philanthropic investors can open savings accounts which increases the funds we have available to invest in the local community. 

Contact us to learn about how you can partner with us to create upward economic mobility for Philadelphia’s low-income families.

Daniel Betancourt became President and CEO of Community First Fund in 1999 and led the organization’s merger with Philadelphia-based FINANTA in 2020. In 2022 the loan fund launched Community First Fund Credit Union to provide consumer financial services. In 2024 the merged organization returned to its roots and began doing business as Finanta and Finanta Credit Union. Today, the combined balance sheet for both organizations has more than $250 million in capital under management.

With more than 30 years of experience in small business and economic development lending, Betancourt’s leadership extends beyond Finanta. He is a member of the Federal Reserve Bank of Philadelphia’s President’s Council. He serves on the boards of directors for the Expanding Black Business Credit Initiative, Greater Philadelphia Hispanic Chamber of Commerce and Impact Services of Philadelphia. As Chair of the Pennsylvania CDFI Network, Betancourt’s leadership was instrumental in the development of the COVID-19 Relief Pennsylvania Statewide Small Business Assistance program.