Themes: Enterprises, Economy, Solidarity, Social Justice, Black Lives Matter
This interview with acclaimed author and professor, Jessica Gordon Nembhard, and brief accompanying article, is about Black-led/focused credit unions in Canada, specifically: the proposed Pan-African Credit Union initiative. It aims to show how financial cooperatives can encourage the development and support of the Black social economy in Canada. First, I provide some background information about credit unions. Second, I delve into systemic and economic barriers to entry. And, third, I look at how the proposed Pan-African Credit Union initiative can help for the post-pandemic rebuilding. I will conclude by stating the importance of this initiative for the economic democracy of Blacks as well as other marginalized communities in Canada.
Credit Unions in Canada and the U.S.
The notion of the social and solidarity economy (SSE) began in France as the economie sociale, and in Latin America it is known as la economía solidaria (Hossein, 2019, p. 212). It has also been referred to as the third sector or the social economy, which is situated somewhere between the private and the public sectors, but overlaps with these sectors as well (Quarter, Mook and Armstrong, 2018, p. 36). As defined by Quarter, Mook, and Armstrong (2018, p. 4), “The social economy bridges the many different types of self-governing organizations that are guided by their social objectives in the goods and services that they offer”. The development of the social economy is not through happenstance, as governments have been withdrawing supports, particularly social welfare funding, that were introduced in the mid-20th century. As a result, the social economy sector has been attempting to fill the growing gaps made by the lack of resources, and the privatization of public services, by partnering with and/or competing with for-profit organizations. In so doing, they have enhanced economic productivity, promoting economic and social development.
The criteria required for the traditional financial institutions made way for this alternative banking option. Credit unions (CUs) in Canada are classified as a type of social economy organization (SEO). Serving English and Francophone Canada, credit unions, or caisses popularies respectively, provide services to their owners, who, like with all cooperatives, are also member-customers. With the first credit unions in Canada emerging in Quebec in the late 19th century (with the emergence of Desjardins Caisse Populaire), initially they were formed through the common needs and mutual interest of their membership base from churches, workplaces, union locals, and ethnic, professional and political associations (Quarter et al., 2018, p. 47). Credit unions are member-owned cooperative financial institutions (Gordon Nembhard, 2013, p. 463). This is different from commercial banks that are private corporations owned by investors and shareholders. Credit unions emerged to help communities survive difficult times by pooling member resources so that loans could be made to member-customers, most of whom were not able to obtain loans from banks. Credit unions also offered products and services at affordable prices and lower fees relative to banks, allowing for more disposable income, and increasing their ability to save (Gordon Nembhard, 2013, p. 108).
In the U.S., there are credit unions and community development credit unions (CDCUs). CDCUs were established with the mandate to do more community work compared to CUs, serving the underserved. For Black communities in particular, CDCUs provide affordable financial services, loans and opportunities for savings and investments and help to their client members. They charge lower rates and provide higher interest rates and dividends, helping clients build their assets (Gordon Nembhard 2013, p. 459).
During my interview with Dr. Jessica Gordon Nembhard on June 18, 2020, we discussed the fact that for the last decade or so Federal regulators have favoured commercial banks. They have not been supportive of CUs for low-income people, or those being controlled by communities of colour. CUs have been losing ground because the federal government has decided they are too precarious and should not be supported (Gordon Nembhard, 2020), The interesting contradiction is there is still a strong community development financial institution (CDFI) movement. The CDCU and CU are all part of this movement, they still have federal backing, but more support is given to commercial banks. Similarly, in Canada, there has been a move to consolidate already existing CUs, reducing the total number.
Some of the differences between the CUs in Canada and the U.S. are that Canadian CUs are for profit, not commercial (banks), but rather co-ops to serve their member-customers. There are also no CDCUs in Canada. In the U.S. CUs or CDCUs are under the law are designated as non-profit corporations. More independent, academic research is needed to show how credit unions are meeting the community's needs and their accomplishments (Gordon Nembhard, 2020; Gordon Nembhard, 2013, p.459).
Systemic or Institutional Barriers
Systemic or institutional barriers have existed for decades oppressing people of colour, and they still affect access to opportunities today, particularly in the Black community. Concerning the financial services industry, in the U.S. there is a disproportionate number of Blacks that have been unbanked or underbanked for years, compared to others in the country. (Unbanked meaning that they do not have an account at a financial institution. Underbanked meaning that they have an account at a financial institution but also obtained financial products or services outside of the banking system (FDIC, n.d.).) Although there is no Canadian data, it is believed that there may be a similar issue with Black communities in Canada, however, the extent of the problem is not known (Christopher, 2020).
In May 2020 George Floyd's death in Minneapolis police custody sparked outrage and conversations, rightfully so, about more than police brutality, but racial injustices; it has also reignited the Black Lives movement as well. Organizations around the world are starting to think about what they can do differently. For instance, in response to better serving the community, the African American Credit Coalition and the World Council of Credit Unions (WCOCU) have committed to a global credit union response to racial turmoil, focusing on how the credit union industry can provide solutions to address racism, and issues related to diversity, equity and inclusion (DEI) (WCOCU, 2020).
In conversation, Dr. Gordon Nembhard agreed that CUs (or CDCUs) can help to address some of the systemic barriers. She explained the financial barriers faced by African Americans and discrimination in banking. Further, she explained there have been informal, and formal socio-economic activities in the Black communities for years, and referenced Dr. Caroline Hossein's research on the topic (Gordon Nembhard, 2020; Hossein, C. 2019, p. 209).
The Proposed Pan-African Credit Union Initiative: Post Pandemic
As mentioned, in recent years there has been a pattern to consolidate financial cooperatives into larger organizations In doing this credit unions have departed "from the tradition that credit unions were founded…(which was to serve) low-income communities and those who were unable to obtain credit from banks"(MacPherson, 1999 in Quarter et al, 2018, p.48) forcing many, without credit to turn to payday lenders charging high-interest rates. A credit union, like the PACU Initiative, or another targeting the underserved, unbanked and underbanked, can assist with providing access to affordable financial services and products and financial literacy. In addition to supporting small to medium-sized businesses in these communities.
The proposed Pan-African Credit Union (PACU) Initiative is a Black-led/focused co-op that is currently in the nascent stage. Assuming all remaining and necessary milestones are achieved over the next year to satisfy the provincial regulators (Deposit Insurance Corporation of Ontario) plans are to launch in Summer 2021 in the Greater Toronto Area (GTA) and eventually expand across Canada in the future. The PACU initiative is a collaboration of three non-profit organizations based in the Toronto area, namely the Jamaican Canadian Association, The Lions Circle Afrikan Men's Association, and the Canadian Black Chamber of Commerce (PACU, 2020). It will be modeled after similar credit unions with a community focus (i.e. IC Savings). Although it will be Black-led and membership will be focused on the Black community, membership will not be exclusive, anyone will be welcome to join as a member. The PACU Initiative's products and services, however, will be geared towards the Black community (Christopher, 2020).
This credit union is expected to be distinct and more stringent than its predecessor, the Caribbean Cultural African (Ontario) Credit Union (CCAU) that operated in 1963-1995, or to any other CU that served Black communities in Canada. The PACU initiative group has learned from other successful and unsuccessful CUs, and past mistakes, and strives to operate differently, starting with less reliance on political support and funding, open membership. It also plans to focus on supporting small-medium sized Black-owned businesses and offering financial education programs on topics like budgeting to wealth building (Christopher, 2020).
Post-Pandemic and Beyond
The global financial crisis of 2008 impacted credit unions around the world in different ways. They fared well compared to other financial institutions. In Canada, the impact was relatively mild as Canadian CUs were able to manage and continue to lend. There was loan growth in the same year (7.3%) There were some stresses noticed in the mortgage and consumer credit areas. The federal government offered some CUs, similar to financial institutions, a guarantee of inter-bank lending if necessary. CU deposits remained insured at the provincial level (Crear, 2009, p.3). Relatively to banks CUs were more resilient, and allocated more mortgages, and loans (Gordon Nembhard, 2013, p. 466). This performance is attributed to their operations and regulatory practices and policies, commitment to member service and reasonable compensation levels that do not encourage "risk-taking" like commercial banks (Crear, 2009, p. 10).
As for how CUs will manage post-pandemic, without knowing how the economy will be, it is difficult to ascertain what will be required for recovery. It depends on what kinds of issues are associated with the pandemic, and how they encroach on a person's economic status (Coke, 2020). If history is any indicator, CUs are likely to respond as well as they have in the past. The Black community and other marginalized groups will likely need adequate supports. In the U.S. the 2008 housing crisis and recession exacerbated the income gap (Gordon Nembhard 2013, p. 461).
The proposed PACU initiative will need to pivot very quickly post-pandemic to respond to the needs of its member-customers. A strong financial presence will be very important to have a broad reach and meet our clients where they are, and by offering innovative products and services. For example, assistance to help the small-medium sized Black-owned business build or re-build (Christopher, 2020).
Regarding the PACU initiative or any other CU that is being considered post-pandemic, some of the critical things Dr. Jessica Gordon Nembhard suggests they consider, applies to other coops as well. "There must be a sense of camaraderie, even if it is a stated sanctioned institution. Trust and solidarity is really important. People need to understand what a coop is and how it will work. How do you make abundant resources out of scarce resources? Education about how to do that. Why did we choose a credit union because of mutual respect? Returns to use… They need an understanding of the industry. People have to understand finance. There (must be) some collective understanding of finance. People need transparency and need to read the income statement. Solidarity and education" (Gordon-Nembhard, 2020). She also shared a similar message in her book Collective Courage, such as: "Lessons learned from the African American-owned businesses that were formal cooperative ventures include the need for education and training of members, leaders, and managers; stable and adequate capitalization and clientele; the building of trust and solidarity among members; and support from the community" (Gordon-Nembhard, 2014, p. 30).
Concluding Thoughts
To conclude, historical and background context matters, and it is very important to understand the need for dedicated a CU dedicated to a particular group. Understanding that the SSE is not only a place for racially excluded people to meet livelihood needs; it has also provided a space for people to congregate and socialize when they are shut out by mainstream business and society The SSE is generally about sharing goods and helping each other (Hossein, 2019, p. 212), Credit unions, are a type of social economy organization that was conceived with a function of economic democracy.
Systemic or institutional barriers should no longer be ignored; policy change is necessary. Blacks, one of the most disadvantaged groups have turned to the social economy because it is deemed to be a "safe space" even though it is not reflective of Black and racialized people (Hossein, 2019, p.214). One of the ways to combat systemic racism is to establish systems that are for the Black community and/or are led or owned by Blacks. At present there are no known associations or organizations in the Greater Toronto Area (GTA) that invest in communities and businesses that are Black-controlled.
Recognizing that the pandemic, and the current political and socio-economic times are unprecedented, supports will be required for the Black community and the economy; the extent of the support required has yet to be seen. One thing is certain, post-pandemic there will be a role for credit unions just as there are roles of other sectors of the social economy in playing an integral part in re-building the Black community. This would start to address the lack of financial services, and by giving people access to participate in economic activity (Gordon Nembhard, 2013, p.463). Led by the Black community, with the support of different levels of government and various investors, social economy initiatives like PACU initiative can change the lives of many families in the Black community and other marginalized communities. In so doing can make a meaningful impact on the Black social economy and the economy overall. A recommendation for a future study is a comparison of U.S. and Canadian credit unions, focusing on how CUs in the respective countries; to learn how they can service people of colour, and to become familiar with their challenges and ownership structures (Gordon Nembhard, 2020).
My hope is this multimedia artifact and paper assists people in recognizing that a Black-led/focused credit union would not only serve Black or marginalized communities but benefit the economy overall. The real need is for people to know how every individual and their economic decision can make everyone better off. If a credit union can help some people, everyone is better off with that economic lift. The more people that can be apart of, and aware of the economic system, the more people can make better decisions, to have better control over their lives. Whatever institutions like the PACU institute can contribute, it means a better society for all.
Resources
Copyright Free Music. (2018 January 22). Royalty Free Music | Victory - Hip Hop Beat | No Copyright Instrumental [Video]. YouTube. https://www.youtube.com/watch?v=4D- LoMTbvx4&feature=youtu.be
Crear, S. (2009). Cooperative Banks, Credit Unions and the Financial Crisis. World Council of Credit Unions, Inc.
Federal Deposit Insurance Corporation (n.d.) FDIC. Retrieved June 18, 2020, from https://www.fdic.gov
Gordon-Nembhard, Jessica. (2013). Community Development Credit Unions: Serving and Protecting Assets in Black Communities. The Review of Black Political Economy, 40(4), DOI: 10.1007/s12114-013-9166-6
Gordon-Nembhard, Jessica. (2014). Collective Courage: A History of African American Cooperative Economic Thought and Practice. Philadelphia: Penn State University Press.
Hossein, Caroline. (2019). A Black Epistemology for the Social and Solidarity Economy: The Black Social Economy. The Review of Black Political Economy, 46(3), 209-229.
Pan-African Credit Union Initiative (PACU). (2020). PACU. Retrieved June 20, 2020, from www.pacu.ca
Quarter, Jack, Laurie Mook, & Ann Armstrong. (2018). Understanding the Social Economy: A Canadian Perspective. Toronto: University of Toronto Press (pp. 3-32).
World Council of Credit Unions (WCOCU). (2020, June 10). African American Credit Coalition and the World Council of Credit Unions have committed to a Global Credit Union Response to Racial Turmoil. https://www.woccu.org/newsroom/releases/African-American_Credit_Union_Coalition_and_World_Council_Commit_to_Global_Credit_Union_Response_to_Racial_Turmoil