CCEC Lends Support - by Jill H. Kelly
from "Sharing Stories - Community Economic Development in British Columbia" - September 1995
When CCEC celebrated its 20th anniversary in 1996, members will be able to cheer the power of their collective commitment to developing their community with their own resources.
CCEC Credit Union received its charter in February 1976 after several years of hard work. The original organizers were active in Vancouver's fledgling self-help movement and they had often lamented the lack of capital available to their enterprises. No financial institution would give them a loan even though their member organizations represented a great deal of money. But once they realized the potential of their collective wealth, the idea of starting a credit union wasn't far behind.
The co-operative structure of a credit union seemed a natural choice since it mirrored the organizational structures of the self-help community it would serve. Members would have the financial security of deposit insurance, and depositors and borrowers alike would be the member/owners of the organization. Unlike banks, credit unions are set up to serve their members/owners, not to generate profits based on shareholdings.
The local focus of the credit union would see the money reinvested within the community it served. Loans would be made to member organizations and individuals who were not well served by existing financial institutions. Women, low-income people, and workers in community organizations were of particular interest. Loans would be available for meeting basic human needs, and for community enterprises and community action.
At first, CCEC did not pay interest on deposits. Instead, loans were available to community groups at below-market rates of interest. Depositors enjoyed lower-cost goods and services from the groups rather than benefitting directly through interest payments. For example, if the food co-op received a loan at rates below market, the savings were passed along to credit union members through lower prices at the food co-op. The founding members of CCEC described the process as "group solutions to individual problems."
All credit unions are required to define their membership, and for many, membership includes any person who lives or works within a certain geographic community. At CCEC , a different kind of community - a community of interest - was contemplated. Organizers identified the community of interest by targeting the self-help organizations which shaped it.
As a result, the core of CCEC's membership is co-operative and non-profit community groups. Groups do not have to be incorporated, but unincorporated groups must have five or more members, be democratically controlled, and have a purpose which reflects a community focus. Individual members of community groups may also join.
The Lower Mainland Community Congress for Economic Change Society was incorporated to organize the credit union. The Society used a federal government employment program to hire staff to do community outreach. Various community groups were contacted by mail and through face-to-face meetings. Volunteers were recruited to work on a steering committee which eventually formed the credit union's first board of Directors. Study sessions on how to run a credit union were held and the steering committee debated how the new credit union would meet its community economic development mandate. Community meetings were held to discuss rules which would govern the new financial institution and the strategies needed for its successful operation.
The charter application was eventually submitted to government regulators and serious negotiations began. The provincial regulators had to be convinced that a credit union for low-income people and community organizations, which paid no interest on deposits, would not drain on the deposit insurance fund. Would-be credit union members responded to this challenge by pledging deposits and contributing membership fees before the credit union received its charter. The regulators were won over by the support of the community and the dedication and knowledge of the organizers.
At the first general meeting, the membership determined loan categories (including food, shelter and land, transportation and recreation, research, culture, education and communications, finance, legal services, debt consolidation, childcare, industry, and health), discussed lending policies, and elected the directors and credit committee.
The newly-chartered credit union opened its doors as CCEC, using the initials of the Society that spawned it (although not the full name!). With the assistance of 11 directors, nine credit committee members, a treasurer/manager, and three tellers, CCEC was in business. For most of the first year, not a single person was paid. The treasurer, along with the tellers, ran the office. The directors made policy and planning decisions for the credit union, and the credit committee interviewed loan applicants and made loan decisions. The volunteer staff and the fact that no interest was paid on deposits likely made the difference between sinking and swimming in the early days.
After ten months of operation, CCEC received a grant from BC Central Credit Union which provided a part-time salary to the treasurer/manager. By the time this grant ran out, CCEC was able to cover the salary. One year later a paid loans officer was added to staff. Tellers remained unpaid volunteers for another year.
CCEC focused on getting deposits so there would be a pool of money from which to make loans. Since many of the people involved didn't have a lot of surplus funds to keep on deposit, the importance of offering chequing accounts was recognized. The credit union needed the cash flow generated by chequing accounts, especially those of the larger groups, to be successful. CCEC decided it needed $250,000 on deposit before it could offer chequing services and 16 months after the doors opened, this milestone was reached.
More challenges to meet
Those first years were not all smooth sailing. But the board of directors was experienced and had already met the challenge of obtaining a charter. Another obstacle was presented when the Credit Union Reserve Board (CURB) disallowed a loan application from a daycare centre. (By legislation CURB was required to approve all business loans made by credit unions.) The fight was on! The Mount Pleasant Child Care Society was operating on land leased from the City of Vancouver. However, to purchase their portable building, they had borrowed $18,000 at 17 percent from a private mortgage company. After 28 months, the Society had paid the mortgage company close to $8,400, but only managed to reduce the mortgage by $100! The new 8 percent mortgage CCEC wanted to make available to the Society would save the daycare $105 every month.
At CCEC's insistence, the Credit Union Reserve Board reconsidered its original decision and gave the go-ahead for the loan. At the same time, the Board granted CCEC their first "continuing exemption" which meant the credit union could now approve loans up to $2,000. In the early '80s, some CCEC members began to question the policy of paying no interest on deposits. At the time, interest rates were high, with Canada Savings Bonds paying more than 19 percent. The debate raged for four and some half years. Special membership meetings were held to gain as much input as possible. Numerous articles appeared in Common Interest, CCEC's newsletter, with two issues devoted entirely to the discussion. The directors also surveyed the membership and assessed the financial implications of the options.
To alter the policy, the rules needed to be changed by resolution at a general meeting. The first time the resolution to pay interest on deposits was proposed, it was tabled for more research. When it came up again a year later, it received a simple majority but failed to receive the required two-thirds majority.
Further pressure came from outside the credit union. Canada Mortgage and Housing began to require housing co-ops, many of whom were CCEC members, to keep their funds in interest-bearing accounts. CCEC worried this requirement could pose a serious threat to the continued viability of the credit union. Finally, in June 1985, members passed the resolution allowing the credit union to pay interest on deposits.
CCEC has learned to create unique solutions to support community economic development, developing loan/service packages with member input. The credit union provides operating loans, term loans for equipment purchase, and interim financing to non-profit organizations when the loan is secured by a funder's letter. And since the success of a loan proposal depends, at least in part, on the commitment and sweat equity of the people involved, the credit union always requires personal guarantees from board members or community enterprise owners.
CCEC's lending has helped set up several long-standing, successful operations. The credit union provided some start-up funds for Isadora's, a co-op restaurant organized by members of Community Alternatives, a housing co-operative. When a graphic design company was closing, CCEC helped the workers buy the business and form Baseline, workers' co-op. CCEC has also helped finance two workers' co-ops operated by women - a print shop/publisher and an organic produce distributor. Glorious Garnish and Seasonal Salad, a group which grows salad greens to supply restaurants with local, organic products is also a CCEC member and borrower. CCEC provided the mortgage to develop a collective ownership model for a piece of property on the Gulf Islands. A housing co-op got financing to install a solar domestic hot water system. Tree planters, environmental organizations, cultural and arts groups have all worked with CCEC to meet their financial needs.
Creative use of guarantee funds
CCEC often uses loan guarantee funds to reduce a member's cost of borrowing or to enable a loan which would not otherwise qualify. A loan guarantee fund is money on deposit at the credit union which can be used to secure a loan. When funds are pledged to secure the loan, the credit union doesn't have to apply the same criteria as it would for unsecured loans. This means marginalized groups and individuals have the opportunity to improve their circumstances or carry on their work during lean times. These loans are fully secured by either the guarantee fund, or the credit union assumes some portion of the risk.
CCEC uses several kinds of guarantee funds. Simon Fraser Teaching Support Staff Union (TSSU) guarantees emergency loans to its members. Loans assisted by the fund have covered tuition shortfalls and trips back home (sometimes out of the country) for family emergencies. TSSU guarantees 100 percent of loans for members. Sometimes the credit union establishes a loan package where individuals guarantee loans for an organization. A few years ago, when a new women's health clinic was starting up, members used their personal term deposits as security for the clinic's loan. When the Co-op Housing Federation wanted to upgrade its photocopier recently, ten housing co-ops each assigned $1000, at no interest, to secure the loan. This loan was given at a special low rate of 4 percent because it was a fully-secured group loan.
CCEC has also helped groups to set up formal guarantee funds for specific purposes. The WomenFutures Loan Guarantee Fund accepts investments and donations which are used to back loans to individual and group enterprises run by women. WomenFutures has worked closely with CCEC to develop the mechanics of the fund and to implement it.
CCEC also offers a slight variation on the loan guarantee fund to individuals who need capital to invest in their co-ops. CCEC works with housing co-ops to assist low-income residents who need to borrow money for an initial share purchase in their co-op. Members of workers' co-ops may also borrow for their required share capital investment. In both of these situations, the co-op agrees to repay the credit union from their member's shares if the borrowing member leaves the co-op before the loan is repaid.
Although its primary CED activity is making loans, the credit union also plays a role in educating its members, providing networking opportunities, offering financial consulting services, and sponsoring youth programs. Educating staff and members in co-op business principles and in alternative economics has always been a priority for CCEC. Since the credit union opened its doors, every issue of Common Interest has highlighted these activities.
In the late '70s, CCEC organized an economic planning conference called Our Money, Ourselves. Following that conference, CCEC's directors firmed up the credit union's focus. CCEC would support financially-sound economic activity which provides for people's needs, benefits the community, and is ecologically responsible.
In the early '80s, CCEC supported this focus by offering three Community Business Training seminars. These well-attended conferences included sessions on democratic management, planning for co-ops, and financial management for co-ops. Unfortunately, such business training seminars are not often put on. Services which are not a direct activity of the credit union require a tremendous amount of staff and volunteer time and resources.
Keeping members in touch with one another has always been important to CCEC. A Member Fair in 1989 was among the more ambitious undertakings. To encourage mutual support of community enterprise, member groups and businesses were invited to "show their wares." As part of the same event, a discount card to be used at participating co-ops was made available to credit union members. As well, a Member Directory listing all member groups and businesses was first published in 1983, and again in 1993.
Youth have been targeted through two initiatives. Since 1983, yearly scholarships have been offered so that youth aged 14 to 16 can attend the co-op youth leadership training camp. At Camp Rainbow, youth are provided with an incredible opportunity for personal growth and a chance to learn more about co-op principles.
CCEC's support for Camp Rainbow has expanded over the years. Financial support for the scholarship fund is widely solicited. Because individuals also contribute to the fund, the credit union is now able to offer a 75 percent scholarship. Youth who have attended Camp Rainbow contribute to the credit union, too. For a small honorarium, they now do the newsletter mailings.
For two summers, CCEC sponsored TeenWorks, a program designed to give youth an opportunity to learn about co-ops and some experience in running a business. The program was discontinued after the federal government employment grant which helped finance TeenWorks left unincorporated groups ineligible for funding.
The credit union also offers technical expertise to its members. At one point, the business loan's officer provided consulting services for a small fee. Although the service was clearly useful, a conflict of interest arose when the consultant subsequently analyzed the loan application. Now the technical assistance offered is of a more general nature, included as part of the whole lending process. CCEC takes an educational approach by helping members put together effective business plans.
Creative options for depositors
CCEC has also worked hard to develop creative options for depositors. The credit union has worked with housing co-ops to develop the Co-op Housing Investment Pool (CHIP). Under CHIP, housing co-ops receive a special higher interest rate which increases as the entire CHIP fund grows. In addition, a portion of the interest generated by the fund goes to the Co-op Housing Federation, the umbrella organization for BC housing co-operatives. Co-ops benefit from working together to increase the size of the fund.
Today CCEC is a full-service credit union, enjoying steady growth in membership services and assets. In addition to chequing account, RRSPs and term deposits are offered. Members can access their money through the ATM machines, pay their bills at the credit union, and have their pay cheques electronically deposited to their accounts. The credit union also sells bus passes, travellers cheques, and money orders in both Canadian and U.S. funds.
In contrast to its early days, when regulators had to be convinced that the new credit union would be viable, CCEC now takes a leadership role on numerous credit union and co-op sector committees, including BC Central's board of directors. Credit union directors and management have also participated in exchanges with novice credit unions in other countries. In South Africa and China, where credit union organizers are very much in touch with their communities, CCEC's grassroots structure is of special interest and value.
But some things haven't changed. CCEC ensures community input into the lending process by maintaining a credit committee which is elected from the membership. The credit committee still meets weekly to consider loan applications, a rare practice in the credit union sector. The credit committee and board of directors continue to meet jointly to consider changes to lending policy and practice. Many directors, credit committee members, and staff are active in community groups that make up the credit union's membership.
General meetings are held twice a year. While the Annual General Meeting is mostly taken up with reports, the Semi-Annual General Meeting provides a forum for in-depth discussion of issues facing the credit union and the community.
The principles that guided the formation of CCEC almost two decades ago have served the organization well. CCEC remains a great example of what can be accomplished when people collectively pool resources.
Cash with a Conscience - by Eric Eggertson
Reprinted from the magazine, Credit Union Way - December/January 1994
Pooling community funds and commitment isn't that radical after all.
Radical socialist Emma Goldman said it best when she declared "If I can't dance, I don't want your revolution."
There's no point being an activist if you can't have fun doing it. Contrary to popular opinion, leftists were the original critics of humourless political correctness. When you pick up the newsletter for left-leaning (or should we say socially progressive?) CCEC Credit Union, you'll need a magnifying glass to find the stereotypical holier-than-thou moral ranting that lefties are supposedly guilty of.
There's a blurb about a scholarship fund for subsidizing young people to the Camp Rainbow co-operative camp. There's a description of a peer group lending program by the Sliammon Indian Band's economic development program. There's a profile of credit union member Persimmon Blackbridge, described as a "well-known learning disabled lesbian cleaning lady artist." There's an update on Chinese co-operatives. And there's an article about getting a car loan through CCEC.
A car loan? From the credit union that when it opened didn't pay interest on its deposit accounts? What's a car loan got to do with saving the rainforest?
As it turns out, activists buy cars too. And they use payment cards, start small businesses, need mortgages and personal loans, and buy travellers cheques for overseas holidays.
CCEC Credit Union has matured along with its social activist members, and now meets their more sophisticated financial needs.
In 1974, people involved in daycare, consumer and housing co-operatives decided to join forces to raise capital that could be used for community economic development. They called their group the Community Congress for Economic Change Society, and CCEC Credit Union was chartered two years later. Established with a Company of Young Canadians grant staffed mostly by volunteers during its early years, CCEC has emerged from the fringe of the financial industry to take a more active role in the B.C. credit union system. Originally open three days a week and offering few services, the credit union's offices in the granola belt of East Vancouver's Commercial Drive is now open six days a week, with a wide range of services.
At one time, giving workers a stake in running the business, saving the environment and promoting community development had a flaky reputation - not something a financial institution would associate itself with. But times change, and public opinion have embraced these concepts with differing degrees of acceptance.
At the Canadian Co-operative Association national congress held in Calgary three years ago, CCEC president Melanie Conn expected to feel she was on the fringe of a co-operative movement that in many sectors has embraced a corporate culture and is far from its early roots. She was pleasantly surprised to find herself in discussion about many of CCEC's central issues - community economic development, sustainable development, workplace equity, social justice - with the highly paid executives who run some of Canada's biggest co-operatives.
Many of the issues CCEC has been dealing with at the grassroots level for years are now top priorities for credit unions and co-operatives across the country. CCEC's mandate is to promote local economic development, and serve groups that have been excluded from the economic mainstream because they don't fit a banker's idea of a good credit risk. That includes arts groups, immigrant organizations, housing co-operatives, and similar organizations.
The $12.5 million, 2700-member credit union has a closed bond, serving staff of co-operatives, non-profit groups, community-based businesses, and their members.
Often a CCEC member needs a loan to meet the membership requirement in a housing co-op. The member may only have $500, but needs to borrow up to $4,500 to make the full share payment. The housing co-op guarantees the loan, and keeps the funds on deposit until the loan is paid off. In another case, non-profit groups sometimes find themselves between government grants, relying on a line of credit with CCEC to keep their doors open.
In keeping with the organization's social action philosophy, when it began CCEC paid no interest on deposits. It was a way to let those who had money help those who didn't have money. While the financial margin was amazingly high, the policy did scare away some members who wanted more services and a return on their investments. The credit union has a range of interest-bearing savings vehicles, but there's still a policy to keep interest rates on small loans in line with those of bigger loans. The smaller loans often have the same administrative costs for less return to the financial institution, so many organizations charge higher rates or don't offer loans below a certain level. CCEC still loses some business to competitors when members with large accounts go shopping for slightly better interest rates.
In her cubby-hole office next to the member service area, manager Jill Kelly shows off a recently published member services directory. She's proud of the 20-page listing of products and services offered by member organizations and individual members who run their own businesses. From bike shops to bake shops, family counsellors to astrological advisers, the listings are as diverse as the membership. And the directory helps them promote their services to other community-orientated people.
It's another way to support local organizations and businesses. And that's what CCEC Credit Union is all about.