Checks can be made out to our fiscal sponsor: “Mandela Marketplace, Proposed Worker Cooperative FCU“, and sent to Mandela MarketPlace, 1364 7th Street, Oakland, CA 94607.
Credit Unions are consumer cooperatives that provide financial service. As a cooperative, credit unions cannot sell equity to outside investors to raise money. Thus we are required to raise startup funds from grants and donations. These contributions are gifts, they are not deposits nor investments and have zero financial return.
Raising significant capital is not normally required to get a credit union chartered. However, we will need raise a higher level of startup capital for several reasons.
- To start well capitalized instead of with zero net worth. Business lending approval requires a credit union to be well capitalized (7% net worth ratio). The net worth ratio is defined as the equity divided by the total assets. If no money is raised before hand we would start with zero equity, and would then have to build up equity before business lending could begin. Since credit union equity is generated through retained earnings which arise from the narrow spread in interest on deposits and loans, this is a slow process. This narrow spread must cover operating expenses as well as building equity.
- To cover startup costs. We will be serving a geographically diverse member base. This requires us to join a shared branch network, ATM network, and have a robust online presence and data processor. NCUA regulations require us to have an ownership stake in a shared branch network. These items result in additional upfront costs that are not typical of many credit unions. Business lending approval (which is also not common for credit unions) requires a more experienced staff that also increases costs.
- To cover operating expenses during the startup period. New credit unions lose money for a period of time before they become profitable. During this time there are fixed operating expenses for staff, services, and facilities. Membership must grow before there is sufficient revenue to cover costs. Donations must be raised to cover operating losses during the startup period and remaining well capitalized, or risk losing the ability to do business lending.
Simply put, we won’t have business lending approval for a long time without raising money before hand. Based on aggregate membership numbers from the USFWC, NoBAWC, and NASCO, data from existing credit unions, and vendor quotes, we will have to raise roughly $1M in grants and donations.
While donation driven enterprises are not the most sustainable solution for social change, in this case we have little choice about how to raise startup funds. That being said we do expect to become self-sustainable, so baring some unforeseen circumstances this fundraising should be a one time event. Credit union are designed to be independent entities once chartered, and not reliant on their supporting organizations for repeated cash infusions.
Mandela MarketPlace is a 501(c)3 charitable non-profit that has agreed to act as a fiscal sponsor for the proposed “Worker Cooperative Federal Credit Union”. By acting as a fiscal sponsor, donations become tax deductible to the donor in certain cases. Fiscal sponsors typically take a cut of about 10% of donations for their services. Mandela MarketPlace has agreed to a fee of only 1% of donations to cover administrative expenses.
This is part of our commitment to see that your donations are efficiently utilized for their intended purpose. The 1% fee also helps Mandela Marketplace fulfill their mission of starting worker cooperative grocery stores such as Mandela Foods Cooperative. This is well aligned with our mission of supporting the cooperative community.
Donated funds will be held at People’s Federal Credit Union, a division of Self-Help Federal Credit Union and one of the leading low income lenders in the nation. Their research arm the Center for Responsible Lending has consistently provided quality financial education and advocacy for fair financial practices.
Checks can be addressed to “Mandela MarketPlace, Proposed Worker Cooperative FCU” and sent to:
Mandela MarketPlace
1364 7th Street
Oakland, CA 94607
For those who find credit card donations more convenient we have a PayPal donation option too. PayPal charges a fee of 2.2% of the donated amount plus $0.30 per transactions. Their cut funds multimillion dollar compensation packages for top eBay executives and enhanced shareholder returns. Checks are preferred.