Credit Unions: Opening Doors to Growth

Most of these cooperatives are full service financial institutions providing services similar to a commercial bank to their member-owners – and this in turn is helping their business members grow and export too.

Credit unions across Canada are seizing on this year’s International Year of Cooperatives to spread the message: membership in a growing number of credit unions is open to everyone – not just to people in certain occupations or nationality groups.

Awareness is definitely an issue for our cooperatives so this is an important year for us,” says Rob Martin, senior policy advisor at Credit Union Central of Canada (CUCC), the association representing credit unions outside Quebec. “We’re engaging in activities around the International Year, advertising at national and local levels to attract new members and diversify our membership base.”

In 380 communities across Canada, credit unions are the only financial institutions providing local services to those populations.

There is much to laud, including the top-ranking spot for seven years in a row (to 2011) in overall customer service excellence among all Canadian financial institutions in retail banking, according to market research firm Synovate.

The democratic ownership structure can also provide more stability than commercial banks, suggests a 2007 International Monetary Fund study. All account holders pay a nominal fee to become members, which earns them one vote and the right to participate in decision-making, even to climb the cooperative ranks if they choose.

Merger activity since 1990 has resulted in a dramatic 70 per cent contraction in the number of credit unions to 363 outside Quebec, although the number of branch locations has remained stable. Mergers shouldn’t undermine their local community orientation, says Martin, noting that fewer but larger institutions can now offer a fuller product suite out of branches that still enjoy considerable local autonomy.

These service enhancements and community connections have helped build the book of loans to small and medium-sized business owners, notably in the agricultural sector. Growth in lending has also spawned an expanding relationship with EDC, especially as many exporting clients have had to look beyond the faltering U.S. economy to grow revenues.

“EDC can give them insights into political risk, business practices, the shape of the market; they also offer products that give the credit union comfort (in the form of financial guarantees) going into the deal,” says Martin.

The larger credit unions in Atlantic Canada that lend to exporters are keen to learn more about EDC’s Export Guarantee and Accounts Receivable Insurance programs. With 60 institutions scattered in the region, CUCC’s Atlantic arm is facilitating the relationship by launching educational webinars and other promotional initiatives jointly with EDC. More critically, Atlantic Central vets member transactions using EDC services to ensure they meet EDC’s lending partner criteria.

Mark Horne, director of Operations at Atlantic Central, says it’s too early to judge the success of the promotional campaign, but he’s confident it will yield more exports of popular local products, such as Christmas trees and seafood.

Partnership in Action

What’s particularly compelling is EDC’s mandate to complement the services of another financial institution rather than compete, says CUCC’s Martin. “Here’s EDC helping us serve our (Atlantic) members. We retain ownership of the relationship with our members, but now we can provide services that an individual credit union would not be able to. So that works for us, it works for EDC and it works for our members.”

Categories Agri-food, Services, Small Business Insights

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