Credit UnionsAnalysis of credit unions and their impact on members and their communities.
Credit Union Research Projects
The Measuring the Co-operative Difference Research Network presents a number of researchers and projects looking at credit unions and their impacts.
General Information about Credit Unions
Credit unions offer a high-quality mix of services and borrowing rates to their members. Competitive rates and higher service levels are possible because additional revenue acquired by a credit union is invested back into the co-operative and its community.
A credit union’s board of directors is comprised of and democratically elected by its membership, to represent the interests of member customers. This democratic structure has made credit unions leaders in their communities and in their sector.
Credit unions operate locally, with their membership made up of people connected at a community level. This local member base orients credit unions towards local community building activities. The focus on community can be especially strong in small towns, where credit unions are sometimes the only financial service available.
Additionally, credit unions in Canada are early adopters of new technology. As consumers themselves, the board of directors of a credit union promote adopting technology that benefits the members, which differentiates them from banks who strive for shareholder returns and dividends. The credit union system has been an early adopter of innovative financial technology, like Automatic Teller Machines (ATM), mobile banking and deposits using apps. These early adoptions advance the quality and convenience of services in the financial sector and force other financial institutions to improve their service in response.
Canadian Credit Union Quick Facts:
Serve over 10 million members
Are governed by more than 6,000 volunteer directors.
Hold more than $320 billion in assets.
Are the only financial institution operating in 380 Canadian communities.
Employ more than 60,000 Canadians.
Contribute more than $50 million annually to their communities through donations, in-kind services, scholarships, and volunteerism.
The Canadian Credit Union Association unites credit unions and caisses populaires across Canada (excluding Quebec) https://www.ccua.com/
The Desjardins Group represents 335 caisses populaires across Quebec and Ontario. https://www.desjardins.com/ca/
The Global Alliance for Banking on Values is an independent network of banks using finance to deliver sustainable economic, social and environmental development. This alliance has produced a body of work relevant to credit union’s community impacts and had three major Canadian credit unions as its members. http://www.gabv.org/
Measuring the Impact of Credit Unions on Wealth Building in Communities (Hammond Ketilson, Gorden Nembhard, Taras, Hewitt)
The study aimed to discover whether credit unions provid unique measurable benefits to their communities. The researchers identified and tested a set of traditional and nontraditional economic and social indicators that would increase our understanding of the impacts of credit unions on their local economy, including impacts that circulate multiple times.
The research team partnered with Saskatchewan-based Affinity Credit Union to test the proposed indicators.
The study was undertaken in three phases:
- PHASE 1: Conducted extensive interviews and focus groups with senior management, board members and general
members of a middle sized credit union which has now merged with Affinity.
PHASE 2: Worked with management at Affinity Credit Union to develop a pilot survey instrument.
- PHASE 3: Developed indicators relating to the seventh Rochdale principle of Concern for Community (see table below) and tested them against 5 community investment programs at Affinity.
|Type of Community Impact
||Examples of Indicators
|Community Involvement||Social Investment (e.g. donations, sponsorships)|
|Scholarships (particularly for marginalized communities)|
|Policy Advocacy – supporting legislation that benefits the community|
|Community Economic Development||Enterprise Development|
|Financial Services (e.g. affordable mortgages)|
|Community Programs (e.g. programs for urban youth, employment programs)|
|Service Provision||Diversity of clients served|
|High quality of services|
|Only financial institution in the area|
|Skills and Leadership Development||Training Programs (staff and member, member participation at AGM, member participation on Board of Directors)|
|Employment||Competitiveness of salaries|
|Quality of Benefits|
|Progressive Hiring Practices|
|Environmental Sustainability||Green Buildings|
|Recycling / waste diversion|
Preliminary Findings on the Impact of Affinity Credit Union’s Community Investment Programs
The researchers attempted to measure the degree to which Affinity adheres to the principle of ‘Concern for Community’ through their five community investment programs which include a microloan program and an accessible housing program, among others.
A focus group, telephone survey, and in-person interviews were conducted with individuals who benefited personally or as part of an organization as a result of the community investment programs.
The study is ongoing, but preliminary findings show that Affinity demonstrated important or differential impact on most of the indicators. The research team found that programs targeting lower income and/or vulnerable members of communities were helping members to:
- feel more empowered;
- access services they would not obtain from other financial institutions;
- move toward achieving their financial goals.
Interestingly, many (especially higher income) members felt that their credit union should be doing even more to support community well-being.
This phase of the study concludes that Affinity offers a “co-operative advantage,” in the care and concern it demonstrates for the diverse communities it serves.
Read more about the results of this study here.
Tools to Measure Co-operative Performance & Impact: Co-operatives for Sustainable Communities (Gordon Nembhard, Hammond Ketilson)
Co-operatives for Sustainable Communities (the free MCDRN e-book) discusses the opportunities and challenges involved in assessing co-operative performance and impact. Several chapters focus on credit unions and include reviews of research done on impacts of credit unions on their communities. We highlight some of the most interesting findings below.
- Credit unions provide more access to fair and low-cost banking and financing services for marginalized households, including low income and racialized people. (ch. 11)
- Most credit unions provide salaried jobs with benefits, and often with job ladder opportunities. Many credit unions encourage their employees to volunteer in the community. (ch. 11)
- More credit unions in rural areas. The Credit Union Central of Canada estimates there are 380 outlying Canadian communities where credit unions are the only bricks-and-mortar financial services.
- Nationally, credit unions affiliated with Credit Union Central of Canada are responsible for more than 11% of commercial loans with SMEs. In Saskatchewan and Manitoba, credit unions are the leading provider of loans to SMEs (Ch.13)
- In 2010 credit unions donated $37.6 million to support communities across Canada, an amount equal to 4% of their net income.In 2013, the Credit Union Central of Canada-affiliated credit unions and the Desjardins Financial Group gave $130 million to the community through sponsorships, donations, and bursaries. (Ch.13)
- Most of the money in credit union accounts is re-invested in the region. At the close of 2013, Affinity Credit Union’s member deposits totaled $3.59 billion, with 90 percent of these deposits invested in over 49,000 loans. An average of 75 percent of those loans stay in the same region, supporting local residents, businesses, and organizations. This includes over $50 million in loans to individuals and organizations that face challenges in accessing credit. (Ch.13)
- Credit unions can be relied on as a more stable banking option in times of economic crisis. In the year following the economic crisis of 2008, credit unions and co-operative banks all over the world reported that they were still financially sound. They had experienced improvements in almost every facet of their business, including membership growth, an increase in assets and deposits, an increased volume of lending, a better rate of interest, and greater stability. (Ch.13)
In Hammond Ketilson and Gordon Nembhard’s pilot study, respondents identified a number of benefits of having a credit union in their community, including:
- Having a physical presence in the community (particularly small communities) and providing a wide range of quality services to all members;
- Providing financial services that are sensitive to each stage of life, and providing personalized information to members;
- Providing competitively priced financial services;
- Making regular donations to the community;
- Providing financial literacy programs and access to credit, especially for the low-income and under-served. (ch.12)
Other Research in Canada
In 2015, Credit Union Central of Canada produced a report highlighting the impacts of the credit union system 5. Its sections – Strengthening Canada’s Economy, Keeping Money in the Pockets of more than 5 million Canadians, Helping Main Street and rural communities Prosper, Putting People before Profits, and Partnering for Public Policy Solutions provide insight and data into the credit union’s impacts on the community.
Here are some key findings from each section:
Credit Union Innovation: Vancity Credit Union has created a purpose-built alternative to predatory payday lending, called “Fair and Fast” loans. In 2014-15, members saved more than one million dollars in interest and fees they would otherwise have spent on payday loans, helping to break the cycle of debt created by payday lending firms.
Strengthening Canada’s Economy: ” Dollar for dollar, credit unions create almost twice as many jobs as Canada’s top tier banks by focusing lending to local small and medium sized enterprises. For every million dollars of lending, credit unions create a total of 14.5 jobs in Canada, compared with eight jobs created by the banks”
Keeping Money in the Pockets of More than 5 Million Canadians: “In 2014, credit unions returned $162 million of their profits to members, on top of making community investments. That works out to an average of $29 in cash or shares for each of the 5.3 million credit union members.”
Helping Main Street and Rural Communities Prosper: “Credit unions outperform all banks in serving small and medium sized enterprises. Small business owners have rated credit unions highest overall for customer satisfaction in four of the last five Canadian Federation for Independent Business (CFIB) surveys. Credit unions also received the highest overall score with top marks in three categories (financing, fees, and account manager).”
Putting People before Profits: “In 2014, 79% of credit union employees use their free time to represent the credit union in community activities or organizations. 70% of credit union employees participated in voluntary activities as part of paid work.”
Partnering for Public Policy Solutions: In 2014, Canadian credit unions worked with governments to tackle pressing public policy problems, such as:
- Providing loans to help new Canadians update their qualifications through the federal Foreign Credential Recognition Program
- Helping farmers make investments and set aside rainy day funds through the federal AgriInvest program
- Supporting the National Strategy for Financial Literacy by educating frontline staff to prevent financial abuse and fraud targeted at older members
A Road Map for Worldwide Financial Services Innovation
George Hofheimer, Andrew Downin, Linda oung
This report highlights some of the historical innovations of Canada’s credit unions, including:
1961 – VanCity is the first financial institution to offer loans to women in their names.
1976 – CS Co-op is the first to offer personal lines of credit.
Global Alliance for Banking on Values – 2015 Report – The Power of Sustainability-focused Banking
The global alliance for Banking on Values (GABV) is a foundation made up of the world’s leading sustainable banks and banking co-operatives. Members have a shared commitment to use finance to deliver sustainable economic, social and environmental development – and to promote positive, viable alternatives to the current financial system.
GABV’s 2012 landmark study and its follow-up 2015 study examine the performance of large financial institutions before, during, and after the financial crisis. Their research shows that globally, dominant big banks lend less, attract less deposits and have a weaker capital base than sustainable banks and banking co-operatives. The study also reveals that sustainable banks are both investing more in a greener and fairer society, and that their business model is more robust and resilient. .
Highlights from the report’s conclusions:
- Sustainable banks provide resilient financial returns with lower levels of volatility.
- Sustainable banks show a much more consistent growth pattern over the full period reviewed.
Growing and supporting sustainable banking will allow for:
- Greater focus on the real economy
- More resiliency in the banking system
- More profitable and less risky financial returns
- Sustainable growth for banks
Although the report analyzes aggregate global data, GABV released its 2012 Canadian numbers to the Co-operative Difference Research Network. This data, comparing the “Big Five” Canadian banks with three of Canada’s largest credit unions, shows that Canadian credit unions outperformed Canadian banks in all the above-mentioned areas.
A more recent report, completed in 2015, shows that these study results still hold true globally, and GABV has informed us that they still hold true for Canadian institutions as well.
Jessica Gordon Nembhard
Professor of Community Justice and Social Economic Development
Lou Hammond Ketilson
Fellow in Co-operative Management, University of Saskatchewan
Ph.D Candidate, University of Saskatchewan
Executive Vice President, Marketing and Community, Affinity Credit Union