Opinion
Paige Saunders
Paige Saunders

Let’s Build a Credit Union

Northern banks are inefficient, technologically backward and a chore to deal with. It's time to revisit an alternative financial initiative.
This isn’t an original idea: an unused Credit Union Act exists for both Nunavut and the NWT, grandfathered in during the 1999 separation

On EDGE | Opinion

After years of inefficiencies and bad service from Canadian banks in the North, I’ve been getting more and more annoyed and looking for a way to ease the pain. In most countries, bank accounts not only don’t cost you anything, but pay decent interest rates, while transfers between people are easy and free, and cheques (even void ones) are something you wouldn’t have seen used in a decade. And then I wondered: why don’t we have a credit union in the NWT?

Credit unions are basically cooperatively owned banks, owned and used by their members, and are increasingly popular in other parts of Canada — probably in reaction to the woeful national banking situation. Credit unions are no panacea, but they offer lower fees, quality service (Vancity, for example, gives free meeting rooms for the use of business clients) and even a bit of innovation (Canadian credit unions were the first financial institutions in the country to allow remote deposit).

This isn’t an original idea: an unused Credit Union Act exists for both Nunavut and the NWT, grandfathered in during the 1999 separation. The most recent attempt to found a northern credit union was spearheaded by Arctic Co-ops, who wanted to open kiosks in their stores across the North. They got as far as a feasibility study in the 1990s before being unable to secure enough capital. Since then, the initiative appears to have disappeared.

I would love the option to use a credit union up here and think the kiosk model in Arctic Co-ops is a great way to proceed. Beyond the obvious benefits to the consumer — lower fees and more choice — there are even more compelling reasons to pursue it:

Financial literacy

Financial literacy is a major issue in the North. Many people in communities still keep money under the mattress because there’s no local bank. Working with Arctic Co-ops to set up satellite kiosks could plug remote communities into the modern financial system overnight.

Mitigating harm

A credit union doesn’t have to bring the negative consequences of a bank. We can shape the policies to be of maximum benefit to the North, unlike a private corporation. There can be “No Credit Card” policies, and the credit union can heavily promote savings and investments as a founding principle. Students can be given free accounts and encouraged to save by depositing $1 each week.

Transactions

Getting money in and out of communities is immensely time-consuming. Often a cheque is sent to a community from Yellowknife, where it is then mailed back to Yellowknife to be banked. It can take many weeks to pay for things and often enterprising third parties have developed in communities just to bank cheques rapidly for people. Instead of all this expensive time and complication, people could walk into the local co-op and do basic financial transactions.

Natural fit

In a region of Canada where co-ops are such a critical part of life, a co-op for banking is a natural fit; everyone understands the concept already. In the south, more than 40 percent of the population use credit unions. With our numbers at virtually 0, a new credit union can only grow rapidly.

The head-office benefit

The first territory to to found a credit union with Arctic Co-ops would most likely host its headquarters. All those nice finance sector jobs will be located in that territory and all those profits will stay in the North instead of adding to the banks’ numbers on the Fortune 500.

Making it a reality

Ready to do something? Here are some building blocks towards a concrete plan of action:

Find champions

First, we need to find some leaders in government to help us out. If you like the sound of some of this, and you’re an MLA or senior government official, hey, that could be you. It’s an interesting project that will get very wide support.

You’d also need other institutional support. This includes Arctic Co-ops, but unions and large employers are important, too. Almost everyone up here benefits from the increased ease of getting money into small communities, no matter where you sit politically.

Partner with a central credit union

Starting a credit union is a complex thing. It would be much easier to partner up with a central credit union from the south than reinventing the wheel. The most likely candidate is Central 1 Credit Union, who already operate across two provinces (B.C. and Ontario). They also have remote deposit technology, which is critical in our remote location.

There is also an overarching credit union trade organisation, the Credit Union Central of Canada, who said they would be interested in assisting anyone setting up a credit union here when I contacted them.

Get money

Starting a credit union requires a large amount of initial capital to begin, for example, giving people mortgages. It’s money people can expect to see back, but it is a lot of cash to outlay. This is where the government needs to get involved and a political champion becomes really important. Since that last attempt at starting a credit union in the ’90s, the NWT Business Development and Investment Corporation has been founded, showing the territorial government has a serious interest in funding business development and growth.

Solutions in the pipe

One more major point: Financial technology (Fintech) has been getting a lot of buzz in business circles lately and it may make a lot of my points moot anyway. Convenient payment systems, microlending and banks without branches are some of the obvious developments from the sector, but other things coming down  the pipe could deliver Canadian consumers the price and level of service people elsewhere expect as standard. As I sat at a desk the other day, watching my bank manager spend half an hour opening a new chequing account, I consoled myself with the thought of banking being disrupted by technology as badly as music and airlines have been. There was a time when the flight to Edmonton used to be the most expensive part of a trip and not even a Saudi prince had a music collection with 30 million songs.