'Concern for Community' Calls for New Actions From Credit Unions

Since their inception, credit unions have been hybrid organizations, balancing margin with mission and maintaining a powerful connection to the need and well-being of their members. Like all cooperative organizations, credit unions are shaped and driven by the seven cooperative principles, and the seventh – “concern for community” – speaks directly to that connection. Recently, however, credit unions have evolved their approach to serving their communities. Today, more credit unions are embracing their role not only as a provider of fair and accessible financial services, but also as true community organizations, leveraging their financial and other services, philanthropic efforts and advocacy work in ever more aligned ways to positively impact the people they serve.

Earlier this year, in partnership with the Children’s Miracle Network, Filene published an initial foray into quantifying credit unions’ philanthropic giving and identifying some of the key areas where credit unions are focusing their giving. Here are some key takeaways:

How much do credit unions give? It turns out that it’s not easy to find the answer, because not all credit unions report their giving in the same way – or at all! An effective way to benchmark philanthropic giving is to observe it in relation to net income. On average, we estimated that credit unions with over $500 million in assets gave 1.68% of their net income in 2018, totaling $115.6 million in combined giving. We consider this to be a floor, and that the number of actual gifted dollars is likely much higher. Credit unions will benefit from coming together to align on a shared approach to tracking, measuring, and demonstrating their philanthropic giving and other social impact work.

How much should my credit union give? That depends! Credit unions in the top quartile of our sample contributed 2.30% of their net income. Similarly, the Chief Executives for Corporate Purpose (CECP) 2019 Giving in Numbers report indicated that its top quartile gives on average 1.94% of their pretax profit. Sixty-one Fortune 100 companies are part of the CECP group and their giving is 2.30% of their pretax profit.

We think credit unions can do much more and remain vibrant and growing organizations. In a recent Filene blog post, George Hofheimer proposed a “credit union tithe,” which would commit every credit union to allocating 10% of its budgeted net earnings to social impact work. If every credit union were to have taken the 10% pledge in 2019, $1.48 billion would have been allocated to social impact initiatives. What’s more, we believe this is financially sustainable. Our back-of-the-envelope calculations suggested that all things equal, a systemwide 10% tithe on net earnings from 1979-2016 would have reduced the credit union system’s net worth ratio from 10.9% to a still-healthy 9.79% – while simplifying a core part of the credit union business model, enabling systemic collaboration, providing a strong public policy tool, and bringing credit unions to the forefront of social innovation and sustainability practices worldwide.

What causes do credit unions give to? We found that credit unions tend to support education (especially financial education), health and children’s well-being, housing and food security. It was clear that no matter what causes they supported, credit unions are committed to tackling the most significant and immediate problems faced by their communities. At the same time, nearly 20% of credit unions we looked at provided no specific focus area for their social impact and giving efforts. As the social impact work of credit unions continues to evolve, many organizations will need to revisit their social impact strategy alongside their business strategy.

As your credit union prepares for 2021 and you seek to share your community efforts from 2020, consider the following:

Be strategic when deploying resources. Every community has critical needs, and even the largest credit union cannot afford to assist with all of them. Choose causes that align with the mission, values and business needs of your organization, staff and members. But don’t be afraid to buck the status quo if it is the right move for all stakeholders. When choosing the causes to support, consider:

• Who will benefit from these efforts?
• What do you currently know about this target population and what assumptions are you making that need to be re-examined?
• What long-term benefits are you expecting for your credit union?

Find the right partner. Credit unions are not alone in seeking to transform their communities for the better. Credit unions are typically most successful when they partner with other non-profit and local government actors with the expertise, capability and footprint to target a particular need or population. Local credit union leagues, the National Credit Union Foundation, partnerships with the Children’s Miracle Network Hospitals (often through the CU4Kids program) and United Way are common examples of such collaborative efforts. Many credit unions have also found important partners in local organizations that know their communities best. When partnering, consider:

• In what ways does your credit union already reach your target population? How can you align efforts across your organization and between organizations?
• How might your credit union address social needs in ways that create shared value?

Focus on logistics. Effective philanthropy requires strategy, designated staff, and transparent protocols for selecting partners and causes. Consider:

• What evidence do we have that our efforts can produce the change we expect? Does our model use strategy to drive outcomes?
• Have we carefully reviewed similar programs, perhaps across other industries, to learn what strategies worked under what conditions?

Measure and report. It is not always easy to measure the effectiveness of philanthropy, but it is critical to try. Ask partner agencies to weigh in; they’re the experts. If you’re faced with a situation where metrics are difficult to gather, stories can be a good substitute. Once you have captured your impact, share it!

• How can we communicate the “why” behind our work?
• How can we aggregate and report results to align with the reporting of other credit unions and outside industries?

Get – and keep – employees on board. Their support and engagement fuel program success and create a virtuous circle that can attract and retain good employees. Their participation can be influenced by examining these elements of your culture:

• Is our organization collecting and acting on employees’ feedback surrounding our philanthropic strategy? Have we explored organizing an employee committee to help lead our strategy?
• What benefits – paid volunteering hours, employer donation matches – can we provide to increase engagement?
• Does our organization make it easy to track and aggregate volunteering hours?

Engage members and tell your story – thoughtfully. Look for ways to involve members in your efforts and ensure the causes you embrace matter to them. The best social impact programs are authentic and intended to honor your members and support their communities. Show how your efforts impact all stakeholders – partner organizations, members, employees, the community, government players and more – in an engaging, transparent and quantifiable way. Use your annual report to share impact in real-time through social media. Use traditional press, communications with policymakers and community leaders, and aggregated results with your peer credit unions through your state league, the National Credit Union Foundation, or CU Social Good, for example, to amplify your story.

At Filene, we are excited to continue our research on credit union impact. In October 2020, we launched a new Center of Excellence for Community Social Impact, in partnership with Callahan & Associates, Lake Trust Credit Union, Redwood Credit Union, Summit Credit Union and WSECU. Outcomes of this five-year project, led by Dr. Mai Thi Nguyen at the University of North Carolina, will enable credit unions with insights and resources needed to develop strategic advantages in the communities they serve and drive positive transformation.

The needs of credit unions’ communities have changed this year, and perhaps have never been greater. Partners like Filene stand ready to support credit unions as they innovate to meet new needs.

Taylor C. Nelms (left), Senior Director of Research and Elry Armaza, Custom Research Director Filene Research Institute Madison, Wis.