Compounding Community Capital: Canada's Credit Unions and the Untapped Assets of Poor Communities

This paper was commissioned by the  Microcredit Summit Campaign in 2006.The paper discusses the role that credit unions have played, and can play in helping poor people overcome poverty. It argues that every village:

• Has the basic financial and human resources it needs to build its own financial institution;
• Must have its own financial institution if it hopes to have adequate and uninterrupted access to financial services.

The paper states that the Canadian credit union approach focuses mainly on:

• Education;
• Women's empowerment;
• Savings mobilization and community-based self-reliance;
• The cultivation of a cooperative financial system;
• The networking of credit unions to achieve economies of scale, to deliver complex services and to project a national voice.

The paper states that:

• Village financial institutions should not structure themselves solely to attract borrowers;
• Credit unions have an advantage over microfinance institutions because they return a significant part of their profits to their client base;
• It is the size and competence of the whole national credit union system that drives performance, not the size of individual units in it;
• There is less of a trade-off between outreach and sustainability in the credit union approach.

The paper identifies:

• Main challenges as the issues of governance and outreach;
• Main opportunities in the fight against poverty as the cooperative values and community finance.