In what seems like forever ago, before life at Filene, I was sitting at my former credit union in southwest London when in walks Lee, one of our members.
Lee was a fairly new member, a young man in his mid-20s with dark scruffy hair wearing his beaten-up work overalls. I could tell instantly by the nervous look on his face that something was wrong. I called out to him as I'd been the person who opened his account with him. He had been proud of his new credit union membership.
Lee came over to my desk and sat down. I could tell he had something to ask but couldn't quite get the words out. "I'm embarrassed," he finally said. I didn't understand and probed a little further. Turns out Lee was just three days away from his next pay check but due to some unforeseen expenses, he was coming up short this week and couldn't afford to buy his bus fare for the next few days. He wondered if the credit union could help him. Lee needed just £20 (just over $26 at today's exchange rate).
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Now as we all know, a bank wouldn't lend just $26 and some of you are probably thinking your credit union wouldn't either. I mean, you're going to lose money on that loan! The time and people costs alone would mean this loan just simply doesn't make sense. Right? Well, our credit union didn't think it made sense either.
We did it anyway.
That Friday, Lee came straight to our office with his pay check and paid off his $26 loan. He also brought a group of friends to open credit union accounts.
What we did that day was help someone in need and keep them away from the dreaded payday lenders and "loan sharks" that he may have turned to if we hadn't been there. What we did was create a credit union advocate for life. What we did was help a member of our community help himself in a financially unstable time.
Credit unions exist for this reason. To do the right thing.
What this may seem like to some, however, was an act of charity, and I guess to an extent it was. Acts of charity and giving to the community are a part of the credit union mission though – even if it's not said directly. Cooperative Principle 7 tells us that as cooperatives, we need to have a concern and care for community. This doesn't have to be giving out small loans at a loss – it can take so many different forms, from implementing "green policies" to helping local charitable organizations.
Doing this also has fiscal benefits. Research from the Global Alliance for Banking on Values has shown values-based financial institutions (which credit unions are!) are rapidly outpacing their "big banking" counterparts with an assets growth rate of 12.9% in comparison to just 0.7% from 2009 to 2013.
This asset growth is no joke and can be considered a response to consumers' desires to work with financial partners like credit unions. Consider this: 75% of millennials believe businesses are focused on their own agendas rather than helping to improve society. Conversely, 78% of millennials would recommend an organization based on the role it plays in bettering society, according to Deloitte.
If credit unions aren't well placed to help better society, I don't know what organizations are. We do have to remember though, we are not-for-profit, not non-profit.
Just because we have concern for community doesn't mean we should be fiscally or strategically irresponsible with members' money. We can serve and care for all individuals in our community through the development of products and services that benefit the member and the credit union (and thus all its members). This is something we have been working on at Filene, specifically with our Accessible Financial Services Incubator. In addition, our Impact pilot QCash reaches out to the market who is stuck in a payday lending cycle – just like Lee may have been.
I wish my credit union had a payday loan alternative like QCash back then, so Lee and other members wouldn't have had to feel embarrassed asking for what they need. Plus, it would have been a prime example of where mission can meet margin.
James Marshall is Impact Manager at the Filene Research Institute. He can be contacted at 608-661-3763 or [email protected].
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