Bigger not always better for co-ops
MEC failure holds lessons for province's credit unions, writes.
What does the collapse of Mountain Equipment Co-op imply for B.C. credit unions? MEC was the largest consumer co-op in Canada, with more than five million members. Credit unions are financial services co-ops, and some in B.C. are among the largest in Canada. One lesson that we may draw from the recent sale of MEC is that ambitious growth, borrowing, and building a national brand do not necessarily lead to “success.”
Last Thursday was International Credit Union Day, celebrated by 291 million members of 86,055 credit unions, in 118 different countries. The two events prompt some reflection on the future of our co-operatively owned financial institutions.
B.C.'S provincial credit union system has grown to be the biggest in English Canada. With $75 billion in assets and more than
1.6 million member-owners, credit unions are active in virtually every municipality in B.C. As consumer co-operatives, credit unions are owned by their depositors and committed to putting those deposits to work as loans in their local communities. B.C. credit unions have been helping many households and businesses through this COVID-19 pandemic, as they have done in the decades that came before.
As member-owned financial co-operatives, credit unions are an exceptional element of the B.C. economy, created to serve British Columbians. By 1960, more than 300 credit unions were chartered under the Credit Unions Act. Some were based at workplaces, such as Vancouver Firefighters Credit Union, and Finning Employees. Others were based on geography, such as Creston and District or Bulkley Valley. Some were rooted in heritage or faith communities, such as Edelweiss, Polish, or St Mary's Parish. Historically, credit unions were community organizations in the self-help tradition, providing basic financial services and giving ordinary people a fair deal on credit, unlike the finance companies and loan sharks of that era.
Several of these small locally based credit unions continue, but their numbers are declining. Mergers have reduced the number of B.C. credit unions to 42 as of this writing, and pending amalgamations likely will drop that number to 35 within a year. No new credit unions have been established in 30 years.
B.C.'S current flagship credit unions are very large “near-banks.” Vancity, with 540,000 members, $24 billion in assets, and 2,500 employees has been Canada's largest credit union for more than 30 years. Others include First West Credit Union, Prospera, Blue Shore, and G&F Financial. These five credit unions comprise more than 67 per cent of the financial assets in B.C.'S credit union system.
Like MEC, big credit unions are enamoured with growth. The growth agenda is driven by a few factors, not least of which is the interests of executive managers. Managers want growth to enhance their status, justify better compensation, and boost future career opportunities. Those interests do not always align nicely with the interests of member owners. MEC grew quickly, adding new product lines, locations, and members. But MEC lost its connection to the outdoor community, and that community lost control of the business.
Through mergers and acquisitions, large B.C. credit unions have also grown quickly over the past decade.
The commitment to a local membership has been diluted. And “at large” elections are biased in favour of incumbents.
Three weeks ago, more than 130,000 members of MEC signed a petition to try to save the co-op. Many petitioners were from the core membership here in B.C. But that effort was too late in the game. Members needed to be critically engaged years earlier.
The challenge to credit union members, and to directors, is to articulate a different vision of success for a community-based financial institution.
Member democratic control is the key difference between co-ops and conventional corporations. Ideally, success in a credit union is demonstrated through robust local control, attention to local needs, and leadership in protecting our personal information rather than mining it.
Members at large credit unions, as at MEC, have tended to take little interest in the enterprises they own. Few members vote in elections or attend meetings. Member-owners have deferred largely to directors and managers. Members need to do more.
Let's hold our elected boards to account and support them to rein in unneeded expansion. Our co-operatively owned B.C. credit unions are a political project worthy of great pride and, also, great care and attention.