Archive for December, 2008|Monthly archive page

Pie in the Sky: The Self Sustained Credit Union

Principle #4 does point to the use of agreements with other organizations and external funding as options available to credit unions, but that doesn’t mean they are necessarily required.

What if , instead of relying on external agreements, your credit union always looked first to members to fill its needs. In this age of large memberships, don’t many of your members have the skills to do the things you are outsourcing? Even if you had to bring together many members to work towards a common design/development/marketing/community goals, isn’t that what a co-op is all about?

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Principle #4: Autonomy and Independence (Part 2)

This article is part of the 7 Principle Series. The other articles in the series are located here

Now that everyone has had time to soak in the first half of Principle #4: Autonomy and Independence, it’s time to look at the second half:

If the cooperative enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the member and maintains the cooperative autonomy.

External Funding and Agreements

Back in Principle #3 we highlighted the fact that Members of a credit union contribute to the capital of a credit union. Principle #4 gives another way to infuse capital into a credit union, through external funding. It also outlines the power to enter into agreements with other organizations.

It’s hard to imagine a 100% self sustained CU and thanks to Principle #4 we don’t have to.

I know that “agreements with other organizations” and “capital from external sources” are pretty broad terms. It easily covers everything from core provider agreements, to CUSOs, to yes, even accepting government funds.

There’s a Catch

While “agreements” and “external sources” are very broad brushes they do not come without limits. The litmus test by which these agreements and external funding sources must be judged is two pronged. They must maintain member control AND maintain the autonomy of the credit union. (Many times these two go hand in hand.)

We’ve previously established that the way member control plays out in modern day CUs is through boards and it’s evident here as well. Boards approve agreements entered into by a credit union, thereby maintaining member control. While board approval is one level of member control, it’s important that these agreements don’t lock down a CU in such a way that even the board’s influence is limited. (I’m thinking about things like very long term deals with core processors and other vendors.)

What’s Your Take?

  • How have external funding sources or agreements helped your membership?
  • Have any of them ever limited member control?
  • What kind of checks and balance do you use to ensure these things don’t end up limiting member control?