A new credit union is hoping to fill a funding gap in Maine for small scale, sustainable farming and food production.
Called Maine Harvest, the credit union is in a final fundraising push to reach a $2.4 million capitalization, at which point it can apply for a charter. It is expected to open in early 2019.
The arrival of a new credit union may seem a bit of an anomaly amid a long-term decline in credit unions and community banks. “It’s like a Shaker having a baby,” says Scott Budde, one of the founders of Maine Harvest Credit Union, referring to the celibate Christian sect.
Budde and his partner, Sam May, both seasoned financial professionals, see a local financing opportunity they believe a credit union is uniquely suited to address.
Funding the Local Food Economy
The local food economy in Maine is growing, with small producers churning out cheese, cider, craft beer and organic produce to meet local demand. Like small farmers and producers everywhere, however, their biggest challenge is cobbling together funding.
Groups like No Small Potatoes, a local citizen-led investor group and Slow Money offshoot, provide small loans to local producers of up to $50,000. The state is also home to one of the nation’s top CDFIs, Coastal Enterprises, Inc., which makes a variety of loans and investments. And bank or government financing is often available for large-scale projects that fit established models, like industrial scale farms.
But research suggests that plenty of food producers are falling through the cracks. Small famers have a difficult time securing land, and many small producers complain that conventional lenders don’t understand the nuances of their business. The organizers behind Maine Harvest have identified $460 million in potential loan demand among Maine farmers and producers.
Maine Harvest will focus on land-backed mortgages of up to $400,000, small-business loans of $60,000 to $125,000 and equipment loans of $20,000 to $40,000.
That could help farmers like Jesse Dowling, the owner of cheese maker Fuzzy Udder Creamery. “Farmers like me end up in a situation here we have a hard time finding credit for the projects we’re doing,” Dowling told a local radio program. Main Harvest, she hopes, could help.
Budde, who developed social impact funds for pension manager TIAA-CREF for most of his career, moved to Maine in 2013 to research local food funding. He quickly came to the conclusion that a credit union was needed. He teamed up with May, a local entrepreneur who also had a career in international investment banking. Working with with a group from Slow Money Maine, May had been pursuing a similar goal.
The organizing group behind the credit union also includes Anna Eleanor Roosevelt, CEO of Goodwill Industries of Northern New England and granddaughter of Franklin Delano Roosevelt, who helped create the modern credit union system with the Federal Credit Union Act of 1934.
Specialty Lenders Needed
Credit unions are nonprofit cooperatives that exist to serve their members. Like community banks, credit unions have seen their numbers diminish.
As of early 2018, there were an estimated 5,758 credit unions nationwide, according to the Credit Union National Association. That number is 248 less than a year ago. (Despite the decline, credit union membership grew by more than 5% in 2017).
At the same time, the largest 100 banks have increased their market share from 41% in 1992 to 75% in 2016.
Some see an opportunity for credit unions that understand the nuances of specialty markets and community scale funding. For example, a credit union specializing in renewable energy lending opened in Colorado late last year.
Maine Harvest will become the state’s 59th credit union, and its first new one in 25 years. It will be one of the few specialty credit unions focused on small business lending and sustainable food production.
Conceived as a streamlined credit union, it will offer only savings accounts, partnering with other local credit unions for checking, home loans and other services.
Credit unions are required to raise initial funding through grants, not equity or debt. Maine Harvest’s funding to date has come mostly from foundations and wealthy local individuals. Grants to Maine Harvest flow through two nonprofit organizations, the Maine Organic Farmers and Gardeners Association (MOFGA) and Maine Farmland Trust, so they are tax-deductible. The two nonprofits will hold funds until the credit union gets its charter.
It’s become harder to start a credit union in recent decades, but it is still considerably less than needed to start a new bank, which requires roughly $25 to $30 million, according to Budde.
Once chartered, Maine Harvest Credit Union will take retail deposits to fund its loans. As a measure of its potential, Maine residents have $35 billion in “retail” bank deposits, including $6 billion in credit unions. Budde says Maine Harvest hopes to build up $10 million to $12 million in assets over the next several years.