Credit Unions: the Farmers' Bank

The credit union in Canada owes its beginnings not to the high financiers of the British colonies but to a Jesuit Priest, an earnest group of PEI farmers, and the student-initiated Antigonish Movement of the 1930s.

Susan MacVittie

Rustico, PEI | Photo: Doug Kerr: https://www.flickr.com/photos/dougtone/8093407105

In the early stages of Canada’s financial system, ordinary working people had little access to the commercially-centred banks. Organized locally according to a co-operative model, credit unions provided urgently needed savings and lending services at fair rates.

The credit union in Canada owes its beginnings, not to the high financiers of the British colonies, but to an earnest group of farmers in Prince Edward Island and Jesuit Priest, Reverend George-Antoine Belcourt.

From humble beginnings

In 1859, Father Belcourt arrived in the Acadian coastal community of Rustico, PEI. Even though the Island economy was quite strong, money was scarce and credit expensive. The few Island banks charged high interest rates, so farmers were forced to obtain credit from local merchants for supplies. This meant that they paid high prices and became indebted to the merchants almost all year round.

Father Belcourt became determined to do something to help the Acadian people become more self-sufficient. He believed that farmers needed access to loans for agricultural purposes at reasonable interest rates. The economy was strong and there was a significant lack of currency available for Islanders due to a shortage of banks. He had been corresponding regularly with the French historian, Rameau de Saint-Père, who had been keeping him up-to-date on various economic movements in Western Europe, including people’s banks.

In 1859, the few Island banks charged high interest rates, so farmers were forced to obtain credit from local merchants for supplies. This meant that they paid high prices and became indebted to the merchants almost all year round.

Father Belcourt used his influence to have a bill to incorporate the Farmers’ Bank of Rustico introduced to the legislature of PEI in 1863. Under his guidance, the bank was organized by a group of farmers, and 350 families of the parish of Rustico succeeded in setting aside almost $4,000 (an average of $10 per family) for the bank. The bank operated for 30 years, producing its own bank notes and providing loans. It is now a National Historic site.

It was the first people’s bank in Canada and the precursor to the credit union movement, says Scott MacDonald, author of From Humble Beginnings, a history of credit unions in PEI. “It was a credit union in every aspect, but the word credit union wasn’t around back then.”

Caisse Populaire

MacDonald explains that the Farmers’ Bank inspired Alphonse Desjardins to create the first credit union, (caisse populaire), in Québec in 1900. Desjardins was editor of the Gazette Royale when questions on the Farmers’ Bank were debated in the House of Commons. He championed the idea of cooperation to curb usury, improve conditions for the working class, and contribute to the economic development of French Canadians.

Today Desjardins Group is the largest association of credit unions in Canada with the largest regional presence in Quebec, and is well established in Ontario.

The Antigonish movement

Attempts in the 1920s to establish credit unions in English-speaking areas in Ontario and the West did not succeed.

In the 1930s, the Great Depression brought hard times to North America, including the Maritime provinces. Men were out of work and hungry, crops could not find a market, and rural communities were declining.

The most outstanding characteristic of the Antigonish movement was perhaps its decentralized nature – everyone learned to cooperate in groups to help each other and themselves at the same time.

During these years, a movement started at St. Francis Xavier University in Antigonish, Nova Scotia and spread over the maritime provinces. Small groups of people organized study groups and learned to use the techniques of economic cooperation, which led to the formation of a credit union, a factory, and a cooperative store.

The most outstanding characteristic of the Antigonish movement was perhaps its decentralized nature – everyone learned to cooperate in groups to help each other and themselves at the same time.

In the 1930s, organizers associated themselves with the (American) Credit Union National Association and in 1932 established a credit union in Broad Cove, Nova Scotia.

Credit unions grew rapidly in Atlantic Canada in the 1930s and representatives from the Antigonish movement, Moses Coady and A.B. MacDonald, travelled beyond the Maritimes to Ontario, Saskatchewan and British Colombia where their speeches and ideas helped ignite local credit union movements. By 1939, every province in Canada had a credit union movement and a legal framework to guide it. By the early 1940s, they were being established across English Canada.

They’re not banks

Credit unions are financial cooperatives. Their products, services and operations – and even their physical appearance – may resemble those of banks, but there are some major differences. The biggest ones are that they’re locally owned, and invest their profits in the communities where they operate – where their members live and work. Retail customers are considered members and owners. They are democratically governed on the cooperative principle of “one member, one vote,” regardless of the amount that a member has on deposit or invested in the shares of the credit union. Subject to rules adopted by members, every member has the opportunity to stand for election to the board of directors and vote for candidates who are looking to become volunteer directors tasked with establishing the long-term vision of their credit union – they’re also the bosses of the CEOs.

Banks are for-profit corporations, with declared earnings paid to stockholders only. Unlike banks, credit unions are autonomous. Each one has its own brand identity, management, and board of directors, but they’re united through provincial centrals. These provide financial, technological, and trade services to their member credit unions.

Today

According to the Canadian Credit Union Association (CCUA), the national trade association for the Canadian credit union system, Canada has the highest per-capita membership in credit unions in North America. There are 623 credit unions and caisses populaires in Canada, with almost 3,000 branches. More than a third of the population is a member of at least one credit union.

For the 13th consecutive year, Canada’s credit unions were awarded the Ipsos Best Banking Awards for Customer Service Excellence and Branch Service Excellence (2017). Locally-elected boards of directors help credit unions better understand what’s important to their members and provide service that meets the need of the community. As part of their mandate to put people before profits, the money left over at the end of the year is returned to members in the form of dividends, and donated to communities in the form of donations, scholarships and other initiatives. And when you are the largest credit union in Canada – like VanCity in Vancouver, British Columbia – which shared 30 per cent of their 2016 net profits ($18.5 million) with members and communities – using assets to help develop healthy communities can really make a difference.

In July, the federal Office of the Superintendent of Financial Institutions  said credit unions can no longer refer to their services as “banking.” Non-banks will have until 2019 to remove the words “bank,” “banker,” and “banking” on their signage or incur a fine.

One of VanCity’s innovations is the Shared Success program that sponsors and partners with local non-profits, social enterprises, First Nations, labour groups, and cooperatives that align with their values of social justice, financial inclusion and environmental sustainability. They also have an enviroFund™ grant program that in 2017 distributed $250,000 for sustainable local food system projects and initiatives.

Besides supporting projects in their local communities, credit unions are also involved in lending a helping hand internationally. The Co-operative Development Foundation of Canada (CDF), which nurtures credit union growth around the world, celebrated its 70th anniversary this year and officially amalgamated with its long-time partner, The Canadian Co-operative Association. The Women’s Mentorship Program, now in its 16th year, brings women leaders from foreign credit unions to Ottawa, Ontario for a week of classroom training and then job-shadow managers at credit unions across Canada. Canadian credit unions donate 44 per cent of the money CDF raises annually.

Some of Canada’s largest credit unions, including BC-based Coast Capital Savings and Ontario’s Meridian are making big plans for national expansion with an emphasis on digital and mobile banking services. Future challenges may include increased regulatory measures, such as the advisory from the federal Office of the Superintendent of Financial Institutions in July which said credit unions cannot refer to their services as “banking.” Non-banks will have until 2019 to remove the words “bank,” “banker,” and “banking” on their signage, and earlier for websites and printed material, or incur a fine. The cost across the country to make the changes is estimated to be about $80 million.


Credit Union Innovations Timeline | Credit Unions: the Farmers' Bank | Watershed Sentinel



Susan MacVittie, former managing editor of the Watershed Sentinel, is now WS’s east coast correspondent based in Prince Edward Island.

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