My daughter came home the other day from school with a request for $22 to pay for a class field trip. I was thrilled to know that she is excited about a snowshoeing excursion on the local mountains; with so many sedentary kids in Canada, an outing that promotes physical activity is to be celebrated.
But as positive as the field trip is, a $22 price tag is a steep one for a lot of families. (Multiply that across three kids at school and a working family can easily see additional school fees of $100 per month.) Yes, families can request to pay a subsidized rate, but not everyone feels good about having to ask.
Ever since the banks were established in the third millennium BC, money has been an emotional, personal topic. It has been revered—protected in temples, vaults, palaces and, yes, mattresses. And money has long been a source of power and privilege. It stratifies society to this day.
So, it’s no wonder that people figured out how to create a financial institution designed for the needs of the average family. You know them as credit unions. In reality, they are financial co-operatives.
While banking has been around for millennia, the credit union model goes back to 1844, with a group of weavers in Rochdale, England, who established the Rochdale Society of Equitable Pioneers. They sold shares to members to raise the capital necessary to buy goods at lower than retail prices, and then sold the goods at a savings to members. In doing so, they became the first credit union.
It took half a century before North America saw its first credit union—the Caisse populaire de Lévis in Quebec. Founded by Alphonse Desjardins and his wife, it began operations on January 23, 1901 with a modest ten-cent deposit. Soon, Desjardins founded additional credit unions, including the first one in the US in 1908. (This was an era when people were poor and interest rates were crippling; the credit union offered a way for people to advance their financial situation).
From those humble beginnings a century ago, Canada has matured to have the highest per capita credit union membership in North America—more than one-third of the population. According to Credit Union Central of Canada, there are approximately 11 million retail members controlling $200 billion in assets across the country. That’s around 10 per cent of the domestic assets of Canada’s deposit-taking financial institutions.
But, really, shouldn’t a financial institution “by the people, for the people” be a bigger force? After all, credit unions exist for the sole purpose of providing a safe, convenient place for members to save money and receive loans at reasonable rates. And, over the years, they’ve continued to innovate in a number of ways that have “infected” the traditional banks.
Credit unions are amongst the most transparent business organizations in Canada. Many have been at the forefront of sustainability practices. More importantly, they have been willing to share their challenges publicly in corporate social responsibility (CSR) reports. For example, Vancity, Canada’s largest credit union, has long been a leader in CSR reporting. Now all major banks provide these reports. In fact, they are now required by law to issue Public Accountability Statements for clients and other interested stakeholders.
Credit unions were also amongst the first financial institutions to offer daily interest savings accounts, mortgages to women, and automatic tellers. As a credit union member, you're also an owner. Credit unions are governed through a Board of Directors, democratically elected by the credit union membership. There are no outside shareholders. Each member gets one vote, regardless of how much that person has on deposit.
Most credit unions return a portion of their profits back to their members each year. The amount you get back depends on the amount of business you do with the credit union. Simply put, the more business you do with them, the greater your share of the profits. In addition, being rooted in community means credit unions have always been great supporters of local groups and causes, delivering even more local benefits.
Finally, credit unions return all profits back to the member (after reserves and expenses) in the form of better rates, better service and lower fees. Can you say that about where you bank?
Perhaps one of the most palpable ways that credit unions in Canada have made a positive contribution is through the creation of socially responsible mutual funds. Credit union members were among the first consumers to demand financial products compatible with their values.
When they first emerged in the late 1980s, these funds focused on giving investors a place to put their money that did not support companies involved in tobacco, nuclear arms or the apartheid regime in South Africa.
Fast forward to 1992, when the Canadian credit union system founded Ethical Funds®, giving the entire fund family the mandate of providing socially responsible investing (SRI) to credit union members across Canada. This means they screen the companies included in their portfolios, use shareholder voices to change a company's sustainable business practices, provide capital for community economic development and take ownership positions in companies that operate more sustainably. (For more info on SRI investing, visit http://www.socialinvestment.ca/.)
SRI is serious business. Today, one out of every nine dollars (or more than $2 trillion dollars of funds) in North America is being managed in socially screened portfolios. That’s impressive growth from humble beginnings just a couple of decades ago.
Each day, we all make decisions that involve how we earn, spend, save and invest our hard-earned money. The next time you look at your bank or investment statement, ask yourself not just how your money works for you, but how you can use it as a force for positive change. Credit unions and socially responsible investment funds might just provide part of the answer.
