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					26   ENTERPRISE • JULY 2008
Between 1980 and 2005, the wealthiest 20 percent of
Canadians boosted their median earnings by 16.4 percent
while middle-class incomes flat-lined. What are the
implications for the credit union system?   By Nick Rockel
                              The Downtown Eastside of
                         Vancouver may be Canada’s poorest
                         neighbourhood, but the people who call
                        it home are richer for having their own
                       financial institution. At Pigeon Park
                      Savings on a May afternoon, sunlight
                      spills through the windows of the grand
                     lobby, a former Bank of Nova Scotia
                     branch on East Hastings Street. Among
                    the few members waiting in line today
                   is a wheelchair-bound man in a black
                   cowboy hat. Pigeon Park’s tellers wear
                  jeans and sweatshirts, and its sparse
                 furnishings are secondhand. But if the
                 Downtown Eastside has a reputation
                for chaos and squalor, there’s no sign of
               it here — just some folks quietly doing
              their banking. ¶ A partnership between
               $14.1-billion Vancouver City Savings Credit
               Union and the nonprofit PHS Community
              Services Society, Pigeon Park opened its
              doors in 2004. In the cluttered back office,
             PHS director Kerstin Stuerzbecher says it’s
            the only such credit union project in the
           country geared toward people on social
          assistance. The 4,500 members pay $5
          monthly for an account that entitles them to
         cheque-cashing, bill payments and an ATM
        card. Vancity — which trained PHS staff to
        work at Pigeon Park — takes a loss on the
       branch. ¶ Five bucks is no small outlay for
       Downtown Eastside residents, most of whom
      rent single rooms in fleabag hotels and
     receive less than $200 a month for everything
     but housing. Asked how they survive on such
    a pittance, Stuerzbecher replies that it’s
   impossible. “They live with the indignity of
   standing in food line-ups and shelter line-ups
  and clothing line-ups, and that is how they
 manage.” ¶ The members of Pigeon Park
 Savings are among the millions of ordinary
Canadians who are failing to cash in on their
nation’s protracted economic boom.

                                                                  JULY 2008 • ENTERPRISE   29
Rather than trickling down the income                Yalnizyan, who is also director of research at      banks,” says Buckland, who has since
scale, wealth is flowing upward to the rich.         the Community Social Planning Council of            expanded his research to include Toronto and
Low-income earners face dim prospects                Toronto. “But under these conditions, we’re         Vancouver.
as rising shelter and other living costs far         seeing the next generation of workers thus far          Buckland is no fan of fringe banks, but he
outstrip their purchasing power. Shunned by          not taking their share of the bigger pie they’re    doesn’t view them as villains. Unlike credit
mainstream financial institutions, many of           helping generate.”                                  unions, he says, these businesses exist simply
them pay dearly for credit at pawnshops, payday-         People get into even more trouble when          to turn a profit. “The fact is they’re popular,”
loan outlets and other so-called fringe banks.       they don’t read the fine print about credit cards   Buckland adds. “And so it begs the questions:
    Some might argue that credit unions, which       and investment products. According to David         Where are banks? Where are credit unions?
were founded to serve the underserved, have          Agnew, the federal ombudsman for banking            Especially in low-income neighbourhoods
an obligation to fight this inequality. After all,   services and investments, financial illiteracy is   struggling with a lack of a fuller set of financial
their strong local roots put them in a unique        a big problem in Canada. “It’s not confined by      services.”
position to spearhead community economic             any means to low-income people,” says Agnew,            Like Vancity, Assiniboine Credit Union has
development and provide financial services           a former executive vice-president at Credit         a foothold in such places. After other financial
to low-income Canadians. But despite some            Union Central of Ontario. “But if something         institutions fled Winnipeg’s West Broadway
valiant individual efforts, the system isn’t         goes wrong, their capacity to recover their         area, $2.1-billion Assiniboine opened a small
doing enough, partly because serving the             financial resources — the cushion isn’t there.”     branch there in 2001. Then in 2006, it teamed

poor is expensive, say some CEOs and general                                                             up with the North End Community Renewal
managers.                                                       ne bellwether of growing inequality      Corp to launch the Community Financial
    For a snapshot of how unequal Canada                        is the rise of fringe financial          Services Centre.
has become, credit unions need only check                       services, which have proliferated in         Priscilla Boucher, Assiniboine’s vice-
the recently released income numbers from            communities abandoned by banks and credit           president, corporate social responsibility and
the 2006 census. Between 1980 and 2005, the          unions alike. The Ottawa-based Canadian             corporate governance, describes this pilot
wealthiest 20 percent of Canadians boosted           Payday Loan Association estimates that almost       project as a gateway to mainstream financial
their median earnings by 16.4 percent. But           two million people a year obtain credit from        services. Winnipeg-based Assiniboine pays the
middle-class incomes flat-lined. In 2005, the        companies such as Money Mart and Rentcash.          $5 membership share to join the CFSC, which
median pretax salary for a full-time worker          Although Ontario and other provinces                offers its 150 members no-hold, no-fee cheque-
was $41,401 — just $53 more than in 1980,            have started cracking down, these largely           cashing, low-cost accounts and financial
adjusted for inflation.                              unregulated services charge annual interest         counselling. The centre also recently began
    During the same 25-year period, the poorest      rates as high as 1,000 percent.                     dispensing loans of up to $100.
20 percent of earners saw their median income            In Winnipeg, Jerry Buckland is professor of         The CFSC is one of several Assiniboine
fall 20.6 percent. Some 3.5 million citizens —       international development studies at Canadian       initiatives for low-income people. Since 2000,
11.4 percent of the population — now live below      Mennonite University’s Menno Simons College.        the credit union’s asset-building programs
the federal government’s low-income cutoff.          In 2003, he and Thibault Martin, a sociology        have matched the savings of 545 participants,
    These trends aren’t news to Armine               professor at the Université du Québec en            allowing them to buy more than $1.2 million
Yalnizyan, senior economist with the Toronto-        Outaouais, conducted a study of fringe banking      in goods and services. And at the end of 2007,
based Canadian Centre for Policy Alternatives’       in the city’s poverty-stricken North End. The pair  Assiniboine had $34.1 million invested in
Inequality Project. In March 2007, Yalnizyan         found that in 1980, the North End had 20 bank       micro-enterprises, cooperatives and nonprofits.
published a report called The Rich and the           and credit-union branches. By 2003, there were          Boucher says credit unions must run a sound
Rest of Us: The Changing Face of Canada’s            just five. Fringe lenders
Growing Gap. Drawing on 30 years of data from        picked up the slack. From          Some might argue that credit unions, which
Statistics Canada, she showed that the lower 80      a single pawnshop in 1980,
percent of families raising children get less of     they grew to at least 19           were founded to serve the underserved,
the national income than a generation ago.           outlets in 2002, including
    In an attempt to keep up, the average            nine pawnshops and four            have an obligation to fight this inequality.
Canadian household with children worked 200          payday lenders.
hours more in 2004 than in 1996. Yalnizyan               Buckland and Martin asked North End            business. But she sees no reason why they can’t
notes that low-income earners accounted for          residents why they used fringe banks. The most safeguard members’ assets and still strive to
the bulk of the increase. Another troubling          common response: inability to keep a bank          deliver affordable services — along with advice
pattern: haves and have-nots are split along         account or get approval for credit. But some       and education. “The rise of payday lenders
generational lines. While a robust economy           survey respondents also said fringe lenders        and fringe financial institutions is a signal
has left workers over age 45 wealthier than any      made them feel welcome and were upfront            that there’s a whole segment of our population
previous generation, 60 percent of Canadians         about fees. “We heard a good number of             whose needs are not currently being met,”
under 45 have no net savings.                        people claim that in the mainstream banks,         Boucher says. “As credit unions, we have to step
    “Frankly, the last 16-year run is unparalleled   they don’t feel the same level of respectful       back and ask ourselves, ‘Have we lost our way?
in terms of job growth in our country,” says         treatment or trust that they do with fringe        Have we forgotten our own roots?’ ”

    George Keter, CEO of Saskatoon-based              he typical CCEC member is a woman in           and corporate social responsibility. She
Affinity Credit Union, laments the fact that          her late 30s to early 40s, earning between     explains that the $1.8-billion organization
there’s no way to break even on a branch              $30,000 and $49,000 a year. But Kelly          sees community involvement as a duty and a
in a poor neighbourhood. Affinity offers       says the credit union has many low-income             competitive advantage. “It’s not just a matter
few products tailored to the disadvantaged.    members who have a hard time feeling                  of doing the right thing,” Ney says. “It’s also
Instead, it gives three percent of its pretax  respected at other financial institutions. CCEC       a matter of distinguishing ourselves in the
income to a host of partnerships that foster   also cashes welfare cheques, extends lines            market as adding value to the communities we
community economic development. For            of credit as small as $50 and holds financial-        serve by doing more than just writing a cheque.
example, $2.1-billion Affinity supports        literacy seminars. “We structure the whole            The big banks can write a bigger cheque than
affordable housing, which Keter says yields    credit union around trying not to discriminate        any credit union in Canada.”
many other benefits.                           against people who don’t have much money,”                John Anderson, director of government
    Keter doesn’t see any conflict between     Kelly says. “Which is kind of difficult in this       affairs with the Ottawa-based Canadian
doing community economic development           industry, because it’s built on rewarding             Co-operative Association, calls on credit
and pursuing business opportunities            people with more money.”                              unions to develop their own national
like wealth management. But he says                Because of tight margins, Kelly says, credit      antipoverty strategy. In an era of responsible
most credit unions don’t take the former       unions are always trying to trim their operating      consumerism, he says, doing good is good for
seriously. “I don’t think there’s any magic    budgets. The easiest fix is to weed out the           business. “That is going to be an added plus in
to the requirement,” Keter argues. “You        costly accounts. Experts will “talk to you about      terms of consumers making a decision about
simply say, ‘A small but predictable portion   capturing the data and figuring out who your          what financial institution they should go with.”
of our income will be devoted to community     good members are and catering to them,” Kelly             According to the CCPA’s Yalnizyan, the sector
economic development — something we can        says. “We never want to go that route.”               has another opportunity to raise its profile by
afford.’ And you then start to use that money      On the west coast of Newfoundland, Cory           capturing market share from the fringe lenders.
to do things in the community that are         Munden feels the same way. The general                With banks focusing on retail, she says, credit
helpful.”                                      manager of Doyles-based Codroy Valley                 unions could start giving real service to a highly
    Although Keter often gets invited to       Credit Union says members have dramatically           leveraged younger generation. “It would be
conferences to speak about Affinity’s          boosted their wages by migrating to work in           a very cool model to speak to people who are
work, he says his talks tend to be the very    Alberta and British Columbia. Correspondingly,        having difficulty saving about their financial
last breakout session. “The whole topic of     small-town Codroy Valley’s assets have tripled        needs as more than just easy credit.”
credit unions being involved in community      in the past six years, to $32 million.                    Along these lines, Yalnizyan suggests the
economic development is very little                As welcome as this reversal may be, there’s       creation of mortgage pools. If older investors
discussed.”                                    still a large contingent of low-income members,       in such a pool settled for slightly lower returns,
                                                                      mostly senior citizens on      younger participants could finance their
 We structure the whole credit union                                  $12,000 pensions. When         homes at a discount. “A sector like the credit
                                                                      they apply for credit,         unions, which were founded on the notion
 around trying not to discriminate against Codroy Valley practises                                   of collective risk-pooling, can actually invest
                                                                      character-based lending.       in the next generation in a meaningful way,”
 people who don’t have much money.                                   “We use income as a             Yalnizyan says. “And [you] still get a return on
           -Jill Kelly, CCEC Credit Union                             qualifier, but we take their   your investment.”
                                                                      personal characteristics           But if they’re going to help make the
    Keter says part of the explanation is that into account as well,” Munden says. “This is          poor a little richer, credit unions must first
 there’s still too much emphasis on charitable one way that credit unions can look back to           decide what they want to be. Elisabeth Geller,
 fundraisers. “Raising money for a piece of    the cooperative principles, which make little         Vancity’s manager of community leadership,
 hospital equipment is praiseworthy,” he       distinction between whether members are               says too many of them see themselves as small
 admits. “But it doesn’t help people who are   wealthy or poor.”                                     banks. “I would welcome a national initiative
 poor break out of the cycle of poverty.”          There’s also a business case for taking           that says the role of the credit union in the
    Small credit unions can do that just as    an ethical stand. Through its Community               community is different from the banks’ and
 well as a Vancity or an Affinity. Since 1976, Micro Loan Program, Ottawa- and Toronto-              has a unique role to play in the economic
 Vancouver’s $27-million CCEC Credit Union     based Alterna Savings Credit Union helps              security and development of that community.”
 has stayed true to its mission of providing   entrepreneurs who couldn’t otherwise get                  For Pigeon Park Savings and the penniless
 credit and other financial services to local  credit borrow up to $15,000 in start-up               residents of the Downtown Eastside, it all starts
 cooperative and non-profit groups. “We’re     capital. In a joint venture with the Ottawa           with opening an account. The PHS Community
 not necessarily trying to initiate new        Community Loan Fund, Alterna also lends               Services Society’s Stuerzbecher says this simple
 projects,” says general manager Jill Kelly at money to for-profit organizations that assist         act can bring some measure of comfort. “The
 CCEC’s modest Commercial Drive office.        low-income people.                                    one thing it definitely does is give respect and
“We’re supporting the organizations that are       Kimberley Ney is Alterna’s senior vice-           the dignity to have access to a basic service that
 out there doing it.”                          president, marketing, communications                  most of us take for granted.”


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