Credit Unions Put Your Money to Work—Right Where You Live
What if your bank’s first priority was to do good? Vancouver’s Vancity leads the way in putting dollars back into the community.
Ken Vallee welcomes customers to his booth at the Vancouver farmers market with a wide grin, gently urging them to come a little closer and check out the fresh kale and radishes. He is the proud “poster boy,” he says, of Vancouver City Savings Credit Union (Vancity) ads plastered on ATMs and bus shelters throughout the city.
After suffering a severe neck injury, Vallee had a hard time finding a job that would accommodate his need for shorter shifts and time off for doctors’ appointments. He now works for Sole Food Street Farms, the largest urban agriculture operation in Vancouver. It was launched in 2009 on a half-acre lot and has grown to include four more sites across the city thanks in part to loans and grants from Vancity.
Now, the not-for-profit social enterprise produces tens of thousands of pounds of organic fruits and vegetables each year, while providing meaningful work for people like Vallee who, for various reasons, face barriers to employment.
Vancity’s model has always been grounded in the local economy. But in the past five years, under the leadership of President and CEO Tamara Vrooman (who served as British Columbia’s deputy finance minister before taking her post at Vancity), it has taken a more targeted approach to community development. The credit union has always directed a portion of its earnings to charitable giving. But it has recently dedicated increasing funds to building up the burgeoning social economy. It now offers loans and financing specifically tailored to organizations like Sole Food that offer social and environmental—as well as economic—returns.
The first credit union in North America was established in 1901.
The fundamental difference between credit unions and banks is that credit unions are cooperatives, owned and controlled by members—their account holders. They exist to serve the needs of their membership, and because credit union members are eligible to vote—or run—for the board of directors, they have a direct role in shaping how the organization operates. Unlike banks and other financial institutions, credit unions are not-for-profits, exempt from certain taxes, and required to use excess earnings to benefit members.
The first credit union in North America was established in 1901 in Quebec, by Alphonse Desjardin, a reporter who founded the Caisse Populaire after learning of a Montrealer who was ordered to pay nearly $5,000 interest on a $150 loan. Immigrants from Quebec to New Hampshire brought the model to the States when they founded La Caisse Populaire, Ste-Marie (now St. Mary’s Bank) in 1908. Both of these early credit unions had strong ties to Catholic parishes—indeed, most early credit unions were formed around specific groups associated with a workplace, trade, or faith.
One hundred years later, credit unions are experiencing a surge in popularity
One hundred years later, credit unions are experiencing a surge in popularity, as people resist paying exorbitant fees to the very megabanks that were at the center of the 2008 economic meltdown. According to the National Credit Union Administration, credit unions in the United States added nearly 2.1 million new members in 2012, bringing total membership to a record 93.9 million.
Vancity is the largest credit union in Canada, with close to half a million members and 57 branches in Metro Vancouver, the Fraser Valley, Victoria, and Squamish.
The cooperative was established in 1946 by 14 Vancouverites who wanted to build an inclusive, community-based credit union that any resident of the city could join.
Recently, Vancity has adopted a triple bottom line “people-planet-profit” approach to success. In 2010 it became the first North American credit union to reach carbon neutrality. In 2011 it became the largest organization in Canada to guarantee a living wage for employees. That same year, net earnings from operations reached an all-time high of $90.7 million.
In the spring of 2012, the environmental group Forest Ethics publicized the fact that Vancity had included Enbridge stocks in mutual funds labeled as socially responsible, and pressured the credit union to divest amid growing public opposition to the company’s proposed Northern Gateway pipeline project. At the time, Vancity issued a statement indicating that if the project went ahead, it would re-evalute the investment. Four months later, Vancity announced it had divested its Enbridge holdings, citing a scathing report from the U.S. National Transportation Safety Board on Enbridge’s handling of a 2010 oil leak in Michigan as the disqualifier for its socially responsible criteria.
Vancity’s mandate is to distribute 30 percent of its net earnings from operations to its members, in the form of dividends, and to the community at large, through grants and charitable donations. Since 1994, those dividends, grants, and donations have added up to $221 million.
In 2011, the credit union dedicated a record amount—$213 million—to what it calls impact lending. These loans are focused on five key areas: affordable housing, aboriginal communities, energy and the environment, local food, and social purpose real estate.
Its Small Growers Loan, for example, offers loans of up to $75,000 to help small-farm businesses get off the ground. The Circle Lending Loan offers microfinancing along with support groups, networking, and marketing events for people starting home-based businesses. All of the loans are focused on social enterprises.
Peter Hall, an associate professor in the urban studies program at Simon Fraser University, defines social enterprise as business with a mission—such as local food or job training—that earns revenue from goods and services (as well as through grants and donations) to serve that mission.
In 2009, Hall conducted a survey of social enterprises in British Columbia, Alberta, Nova Scotia, and Ontario. He says that most of the social enterprises have stuck to traditional models like cooperatives. In British Columbia, he notes, a “new generation” of social enterprise has taken root. These are particularly focused on employment, business, and training, Hall says. “I think a lot of the credit for that needs to go to Vancity and ENP.”
ENP stands for Enterprising Non-Profits. The Vancity Community Foundation, which operates separately from the credit union, serves as the central hub for this program, which pools resources from nine different funders to provide grants for organizations in the very early stages of development.
Derek Gent, executive director of Vancity Community Foundation, calls the ENP program a “first intake point” for enterprising nonprofits. Most of the grants are small and go toward feasibility studies to determine if the organization should start up at all.
Gent believes that it’s a mistake to measure success purely by how many businesses start up. “We think when a group comes to the realization that they aren’t a good fit for the community, that’s a positive outcome as well,” he says.
Gent admits that Vancity had a “naive sense” that if groups were given money at the outset to plan, they would borrow money conventionally later when they were established. “We found there needed to be additional steps along the way,” he says, in the form of nontraditional loans.
Vancity’s relationship with Sole Food is a perfect example of this trajectory. In 2009 and 2010, it received $104,000 through various Vancity Community Foundation grants to get on its feet. In 2012, when the farm proved its business model and reached a point where it was ready to expand, it was able to secure a $175,000 loan from Vancity that allowed it to open four new sites.
The loan came from Vancity’s Resilient Capital Program, launched in 2011. The program provides capital for social enterprises and social-purpose businesses that aren’t ready for traditional loans, but which the credit union deems worthwhile investments, adding to the social, environmental, and economic well-being of their communities. By the end of 2012, the program had raised more than $12.8 million through deposits from individuals, foundations, unions, not-for-profits, and other organizations.
“The endgame for this is to be able to allocate more of the investment dollars into this kind of activity, as opposed to charitable dollars,” explains Gent. “There are more things happening out there, particularly amongst younger entrepreneurs who want to drive impact. The whole environment is just getting way more supportive.”