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No-Interest Credit Union Proposal

Bismillah. No-Interest Credit Union Proposal. Create a Texas Credit Union to provide interest-free loans to our community, InshAllah. How typical Credit Unions work. A CU uses your deposits to make loans

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No-Interest Credit Union Proposal

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  1. Bismillah No-Interest Credit Union Proposal Create a Texas Credit Union to provide interest-free loans to our community, InshAllah

  2. How typical Credit Unions work • A CU uses your deposits to make loans • The CU charges interest for loans to pay for the CU’s expenses and to pay interest to depositors • CUs are non-profits; CU members elect the board of directors • CU’s field of membership defines who can join • CUs generally rely on donations for startup capital

  3. How the No-Interest CU will work • Will not charge interest nor pay interest • Use deposits to make no-interest loans • Rely on member fees to pay for its operating expenses ($3/month) • Rely on voluntary fees to help pay for expenses and build its capital ($7/month) • Rely on voluntary fees to help build capital and for lending ($25-$250/month)

  4. Jafari Interest Free Loans • Started in Ramadhan, 2007 to make interest-free person-to-person loans • Members contribute $50/month; funds are pooled and lent to a member who has an existing loan with the highest interest rate • As Borrower pays back, funds are refunded to the contributing members • Contributions are voluntary and can be stopped or changed at any time

  5. Jafari Interest Free Loans • Has 150 members in 10 states; 120 from Houston • Made 36 loans for $346,000, saving $113,000 in interest • $165,00 has been paid back and refunded to members • 12 loans paid off in full; 3 borrowers are behind; 21 borrowers are on schedule • Members contributing $50 for last 5 years get $32 in monthly refund; net cash effect is $18/month. • Members pay $1/month for JIFL expenses • A recent JIFL loan for a $18,000 7.75% student loan will save $4,800 in interest and be paid off 2 years sooner

  6. Why create a Credit Union • Some people are more comfortable with a regulated entity like a CU than an organization like JIFL • A CU can use deposits to make more loans • A CU can have liens on cars and homes to provide more protection to lenders • A CU provides better governance and continuity

  7. No-Interest Credit Union • Annual expenses $16-19,000/year at startup • Savings account only (no checking) • $3/month fee per member • Voluntary fee $7/month • Another voluntary fee $25-$250/month. This fee should go down the longer a member participates. • Who can join: People in Houston, Dallas and Austin, and any of your family members living anywhere in the US

  8. Current Application Status • Filed application with state in Ramadhan, 2012 • CU Dept wants us to do a survey to prove support within our community for the CU • The more people who support the CU, whether $3/month, $10/month or $50/month, the stronger our application • Visit www.jafari-ifl.org and click Proposed CU for application, by-laws, business plan, 3 yr financial projection, survey • It can take up to three years to get approved

  9. How you can help • Please fill out survey and return to us • Inform family and friends; ask them to fill out survey, whether on paper or via email; send email to notify@jafari-ifl.org • Join JIFL; the more members JIFL has the stronger our application • Let us know if you want help in this effort

  10. Q & A • DISCLAIMER: There are a lot of details not covered in this presentation. Please visit the Texas state web-site http://cud.texas.gov for details, applicable laws, rules, regulations, etc. • We are learning too as we go through the CU application process • Please remember to fill out survey and turn it in

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