Even an entrepreneurial visionary like Alphonse Desjardins would be impressed by the remarkable growth of the financial cooperative he and his wife Dorimène founded in their Lévis, Quebec home in 1900. What started as a handful of citizens wanting to help struggling working class folk has mushroomed into Canada’s largest network of credit unions (“caisses populaires”), and now ranked eighth globally.
Reflecting its democratic structure, the Desjardins Group is called the “Movement” in French, and today has assets of $194 billion serving 5.6 million members. Like the Movement, many of its members have gone far beyond their rural roots to implanting their businesses globally.
To maintain this momentum, the Group is focused on developing a pan-Canadian and international presence through innovation, strategic partnerships and expansion within larger industry sectors, says Stéphane Achard, senior vice-president and general manager of Business and Institutional Services.
Growth, he recognizes, will also require greater public understanding of financial cooperatives, which group together people with a shared interest in managing and growing their resources. The United Nations designation of 2012 as the International Year of Cooperatives (including financial, agricultural and housing co-ops), and worldwide events on their vital economic and social role, are helping build this profile. These activities culminated in the first-ever International Summit of Cooperatives (October 8-11) in Quebec City and neighbouring Lévis – where it all began for Desjardins.
What, in your view, has largely accounted for the Group’s growth and success?
The most important factor is our democratic base. We’re continually working with involved members all over the country who participate in a gradual, prudent, solid evolution – contrary to what has been experienced by some other financial institutions. For instance, we haven’t gone into any sectors only to be forced to withdraw after three or four years; we’ve made steady advances in businesses over 50 to 60 years.
What are the key challenges to further growth and how are you tackling them?
An ongoing challenge is that cooperatives can’t raise capital on the financial markets like other institutions; our capital stems from our membership base. This is why we need to grow our membership by expanding outside Quebec and Ontario and we constantly need to innovate. For example, we were the first Canadian financial institution to borrow funds in the U.S. through a covered bond issue. We also recently completed the first issue of a venture capital sale to our members of just over $1 billion. And we still have the strongest capital reserves of any Canadian financial institution.
How has the Group fared in the recession and the global economic crisis?
We had much smaller exposure to European and U.S. markets than many other institutions. We stuck to our core business, which is financing small to medium-sized businesses and exporters, and we actually increased our market share as many banks reduced their lending. Our administration is made up of business people from the community who want to maintain our mandate of supporting local enterprise. We were also protected in part by the fact that Quebec is slightly economically decoupled from the rest of Canada.
What are Desjardins’ goals for the next five years, starting with its role in Canada?
A priority is continued development in Western Canada. In addition to Vancouver, we opened an office in Calgary to participate in the expanding energy and mining industries. We forged an agreement with Coast Capital Savings and in 2011 we acquired Western Financial Group and MGI Financial. We can also do a lot more, notably in Ontario, where we’re gaining momentum in the agricultural and medium-sized business sectors. But it’s not necessary to always plant the Desjardins flag, to get one’s name or product known. It is also possible to boost revenues through an existing partnership, such as by offering financing to other credit unions. That could mean we’ll create the product and our partner will sell it under its name.
What about the Group’s strategy for growing outside Canada?
On January 30th, we opened an office in Paris that is part of a cooperation agreement with Crédit Mutuel de France and serves as a gateway to Europe. The co-op world is extremely well established there and the credit unions, with which we have long-standing relationships, are the most solid financial institutions in places like France, the Netherlands and Belgium. So our strategy is to work with those relationships and access the domestic expertise they offer to best serve our clients doing business abroad. To my mind, that’s a better recipe than, for example, a bank setting up shop in a foreign country with 15 people and trying to be everything to its customers.
Talking about partnerships, which of EDC’s services or products are most useful in helping your business clients expand internationally?
EDC’s programs such as Accounts Receivable Insurance are extremely useful in allowing Desjardins to mobilize more credit to help companies grow their foreign market share. EDC also offers strong intelligence on the risks and opportunities of doing business abroad, especially in high-growth emerging markets. Where clients expect to form partnerships or deliver services in foreign countries, EDC offers valued expertise in structuring complex contracts and transactions, and in helping us support our clients through its Export Guarantee Program. This security allows us to lend our clients more.
What trends or issues are you seeing among your clients who export their products or services?
Exports could be more substantial in Quebec alone, where we finance 400,000 businesses. A large number export but we believe more could use EDC’s services. Sometimes our clients say they’re ‘just going to do business in France or the U.S.’ i.e. supposedly ‘familiar’ markets and they don’t necessarily need EDC’s support. They end up doing a transaction or two but ultimately could have done far more – and with far less risk – if they had secured the services of EDC. That’s an area where we have to make more effort showing our clients, together with EDC, the benefits of working with them. (For example, EDC and Desjardins jointly train new account managers about the benefits of this collaboration for their clients).
Overall, what would you say distinguishes a financial co-op, such as Desjardins, from a traditional bank?
The co-op belongs to all of us. People can get involved and attain the highest management level to influence decisions. This is extremely important. Secondly, our members all share in the profits. When we don’t restore the profits, we either retain them to develop services and products that will benefit our members or we return them through community involvement. So I always say that doing business with Desjardins is investing in Canada.
Pioneer in Global Microfinance
Image Some of the world’s most disadvantaged communities benefit from the 100-plus years of experience of the Desjardins Group, through its member Développement International Stratégie (DID) – a global leader in the microfinance sector. Founded in 1970 to share the Group’s expertise with developing countries, DID helps create and develop sustainable financial institutions linked to their communities. Today, their assets serve some 8.5 million families and entrepreneurs in more than 25 countries. EDC helps DID operate more securely in all these emerging countries by providing political risk insurance.
Meet Stéphane Achard
Desjardins’ Senior Vice-President and General Manager, Business and Institutional Services, has worked at the company since 2003 and, in his current role, supports the “caisses” in their business development strategies. He has overall responsibility for all business services, including capital markets, venture capital, financing and international business. He earned his MBA at Concordia University in Montreal.