Credit Unions Put Banking in Community : Finance: Institutions are part of an effort to improve access to capital in the nation’s underserved areas.

Sporting dreadlocks and possessing a fluency in Nigerian poetry, Mark Winston Griffith doesn’t fit the image of a typical banker.

And the Central Brooklyn Federal Credit Union, a small start-up institution which the 30-year-old Griffith serves as president, certainly doesn’t fit the profile of the usual lender. Aside from a modest home office, its only branch is a card table staffed by volunteers and set up after Sunday services in St. Gregory the Great Church on St. John’s Place.

The new credit union arose in a neighborhood where residents, primarily blacks and Jamaicans, find a dearth of conventional banking services, credit for business loans and mortgages. High-priced check-cashing outlets are twice as numerous as bank branches.

“We’re in desperate shape here,” said Errol T. Louis, the credit union’s treasurer. He noted that two more neighborhood bank branches are set to close.

Griffith and Louis are trying to rebuild banking in their area with an eye toward giving people better access to and a better deal on credit needed to repair houses and start small businesses.

Theirs is the type of initiative the Clinton Administration wants to encourage with its $382-million community banking proposal. And they’re part of a broad network of loan and venture capital funds aimed at reviving the flow of credit into inner cities, rural areas and Indian reservations.

Community groups are responding to recent studies that show a wide gap between the amount of credit available to white neighborhoods and the credit open to predominantly black and minority neighborhoods.

The Boston Federal Reserve Bank concluded last fall that black and Hispanic mortgage applicants in the Boston area were 60 percent more likely to be turned down than whites. The study adjusted for all economic variables, such as income and credit histories.

Similar studies in the last four years have accelerated a drive by neighborhood activists to bring banking services to the inner cities.

The Central Brooklyn Federal Credit Union, which opened for business in April, is one of 300 like-minded institutions throughout the country loosely called community development credit unions, says Ralph S. Swoboda, president of the Credit Union National Association, a trade group in Madison, Wis.

“Low-income communities don’t suffer from a want of money,” Swoboda says. “A lot of people have made lots of money by taking money out of the communities. And what they do lack is a way of recycling the dollars within the communities themselves.”

Community development credit unions generally are very small lenders that act like banks in many respects, taking deposits and making small personal loans and home mortgages to individuals. But there are crucial differences.

A credit union limits its business to a defined group of people, such as members of a labor union or neighborhood residents.

A credit union’s depositors also are its owners, or “shareholders.” In that way, Louis says, the interests of a nonprofit credit union’s customers and its management do not diverge, whereas a bank management’s loyalties are torn between the demands of its shareholders and its customers.

But lending by community development credit unions is hampered by their small size, with the institutions averaging about $1.8 million in assets, according to Washington-based National Credit Union Administration, or NCUA, the industry’s federal regulator. A typical commercial bank has average assets of about $312 million.

For managers, that small size places a premium on creativity.

Griffith and Louis also serve as agents for a separate small business loan fund sponsored by the New York state Urban Development Corp. that writes the larger business loans the credit union cannot make.

To research the character of a small-business man applying for a loan, Louis and Griffith met with the man’s pastor, who offered 40 years of insight about the man’s character and business affairs.

“This . . . is unlike other banking. You can’t sit back and underwrite these loans with a credit scoring sheet,” Louis says.

Many times the small credit unions fill important gaps by financing people who can’t get credit elsewhere. Lillian Bent, director of Union Settlement Credit Union in East Harlem, recalled a $45,000 loan the credit union made to a woman seeking to complete financing for renovation of a small apartment building.

The woman, who had recently lost her husband, couldn’t get the loan elsewhere, primarily due to a property tax problem.

“There is not a bank in the state of New York that would have done anything for this member, but because of our relationship, we did it,” Bent said. As a result, the property was renovated, the loan is being repaid on time and nine people are living in the building, she said.

Although they do business in some of America’s most economically distressed communities, loan quality at these small lenders remains relatively healthy.

Loans charged off as bad debt totaled only 1.6 percent of total loans, according to the NCUA. A comparable figure for major banks was 0.51 percent in the second quarter, according to the research firm Keefe, Bruyette & Woods Inc.

Although the size of the institutions are small and their loans generally range from $1,000 to $5,000, their contribution is significant to the quality of life. One borrower used a small loan to travel to Puerto Rico for a family member’s funeral, Bent noted.

Without community credit unions, consumers would be forced to go to high-cost finance companies, pawn shops or check-cashing outlets for banking services, said Richard Marsico, director of the housing law clinic at New York Law School.

“The niche they fill is an important one and one that banks aren’t going to meet,” he said.