UBC Theses and Dissertations
Credit union participation in community based economic development Eberle, Margaret Patricia
Local B.C. communities facing hardship in the context of global restructuring and reduced demand for primary resource commodities, have increasingly turned to community based economic development (CBED) to strengthen their local economies. These community based strategies differ from place to place but essentially aim to expand the local economy through socially and culturally desirable development, utilizing local resources, and under some form of local control. However there are numerous obstacles to undertaking CBED, one of which is a lack of financing. Credit unions are community based financial institutions which would appear to be likely participants in a process of community based economic development. They possess significant financial resources, and share with CBED a common philosophy of economic self-help, and an orientation towards the local community. The potential for credit union participation in community based economic development is the subject of this thesis. A three part methodology was followed with particular reference to major aspects of the issue. First, a review of the local economic development literature pointed to the importance of financing, management advice and local capacity to develop in the CBED process. The experience of CBED organizations in obtaining assistance from chartered banks and federal government programs such as Local Employment Assistance Development (LEAD) demonstrates that there are significant gaps in support. An alternative such as the credit union is needed. The credit union system was examined to determine if indeed this community based cooperative financial institution holds some promise to assist CBED, and what factors presently act to constrain such participation. There are two fundamental obstacles to credit union participation in CBED. Firstly, there is a lack of will on the part of credit unions to become involved in CBED based on declining member commitment to credit union philosophy. Secondly, credit unions are presently unable to reconcile high levels of risk inherent in lending for CBED with their non-profit structure. Educating credit unions as to the potential benefits arising from CBED may heighten their interest in participating in CBED and there are mechanisms the credit union can employ to reduce risk. Furthermore, credit unions can play some important non-financial roles in support of CBED, which a local orientation and cooperative decision-making framework can enhance. The empirical portion of the research documented the CBED initiatives of Nanaimo District Credit Union and Vancouver City Savings Credit Union. It demonstrated firstly, that there is interest among individual credit unions within the credit union system to participate in CBED, at least in an incremental way; secondly, that credit unions have tended to follow a marginal business development strategy in support of CBED in their respective communities; and thirdly, there are a number of alternative roles, strategies and institutional arrangements for doing so. Based on this review of the major issues and the experience of two credit unions currently participating in CBED, it appears that credit unions do hold some potential an alternative source of community capital and expertise for community based economic development, but at present appear to lack the philosophical basis for doing so, and furthermore, face some constraints to pursuing a financial role in CBED.
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