April 24, 2024 • 26 mins
Can credit unions truly be the gold standard of ethical finance? Join our enlightening exchange with ethics-man Barry Clavin, as we scrutinize whether these institutions are walking the talk of their cooperative principles. We traverse the complex terrain of credit union ethics, addressing their genuine commitment to these values, and the potential benefits of adopting a unified ethical identity. Are there any lessons to be learnt from landmark policy of the Cooperative Bank. Barry sheds light on the strategic advantages such alignment could offer, setting credit unions apart in a financial industry often marred by scepticism.
Step into the world of credit unions, where Louise Shields, at Claddagh Credit Union, describes the emotional bonds woven with members and community-centric values. She paints a vivid contrast to traditional banking models.
We explore the manifestation of Hey Credit Unions ethical values through the experienced lens of John Smith, and how it reflects a dedication to a wide array of stakeholders.
Mick McAteer's insights on economic and social justice underscore the importance of authentically presenting ethical standards to attract a diverse member base.
Rob Harrison explains how the Ethical Consumer Association sees credit unions and emphasises the need to ensure the business is effective and efficient (to its customers or members) as well as considering an ethical dimension.
Talking Credit Unions is a regular podcast dedicated to informing credit union practitioners, leaders, and opinion formers on a variety of industry topics. The podcast is sponsored by the Swoboda Research Centre.
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Episode Transcript
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Chris Smith (00:05):
You're listening to talking credit unions with
Chris Smith.
These podcasts aim tocommunicate topics of interest
from the world of credit unions.
Over the years, the word ethicshas been used with increasing
frequency in the world of creditunions, and it got me thinking.
After all, I see numerousreferences in credit union
(00:28):
literature, websites and othermedia that credit unions are
ethical.
Well, are credit unions ethical?
And if they are so, do theyshout about it enough?
Oh, and meanwhile, who decideson which aspects of ethics the
credit union stands for?
The credit union board ofdirectors, the management or
(00:48):
even the members?
Earlier this year, the SwobodaResearch Centre published a
short paper called theCo-operative Bank: A case study
of the cooperative difference.
It was one of their reflectionseries.
When the co-op bank launchedits groundbreaking customer-led
ethical policy back in 1992, itwas the first time in British
(01:10):
banking history a high streetbank had declared that there
would be some businessactivities that, whilst fully
legal, it would prescribe asunethical and declined to
provide with banking services.
Inclined to provide withbanking services, from
oppressive states toenvironmental degradation,
(01:32):
tobacco manufacture and testingon animals, the bank announced
that business activities inthese areas would no longer be
welcome.
And in some ways, thisrationale for such a radical
decision came about after a kindof long period of introspection
and research by the bank intothe meaning of cooperation for
younger and more discerningcustomers.
The Co-op Bank was faced withan ageing customer base and it
(01:53):
took an honest look at itselfand understanding of what value
we describe to cooperation.
And, in a nutshell, the bankheard from people that being
cooperative, whilst highlyvalued in and of itself, would
not mobilise enough individualsto move their banking.
It was going to take somethingmore tangible, relevant and
differentiating.
(02:14):
Now the author of this report isBarry Clavin.
Barry is an ethics andsustainability expert, an
advisor to businesses,governments, charities and
cooperatives.
An advisor to businesses,governments, charities and
cooperatives, Barry led aworld-class team in the delivery
of a diverse range ofaward-winning sustainability and
community programmes.
Barry's also the creator andauthor of the Annual Ethical
Consumer Report.
(02:35):
I asked Barry should creditunions just copy what the
Co-operative Bank did back in1992?
Barry Clavin (02:43):
Well, obviously the Co-op Bank was in that
envious position in one sense,which is that it's a standalone
bank, it's got its own customerbase, it can engage with them
how it wants, as opposed towhere potentially a conversation
with the credit union movementscould go.
Is that are they best served byrepresenting credit union
members as a collective or doingit across every credit union
(03:05):
union independently?
My view would be that askingthat question as a starting
point, which is where are we now?
What are we strong for?
What are we known for?
Where do we want to get to as aconsequence of that, is where
you've really got to start fromthis point.
Chris Smith (03:20):
You're saying about whether they do it individually
, as credit unions, or whetherthey do it collectively?
What's the downside of themdoing it individually?
Barry Clavin (03:29):
I suppose there'll be a couple of things.
The first thing is obviously ispractically it'd be very
difficult, because you'd havehundreds of credit unions doing
independent explorations withtheir member base to potentially
come up with hundreds ofdifferent answers.
A part of this, and part ofwhat potentially this particular
moment in time the creditunions may look for, is real
high-level cut-through once more, which is with the regulators,
(03:50):
with the media, with consumercommentators.
Is that best served by and forcustomers, potential customers
and members?
What do credit unions stand for?
And if they stand for 100things, as you know, they stand
for nothing and they stand foreverything.
But if we stand for two orthree big things and we know we
do because we've engaged withour membership bases across the
(04:11):
piece I think the potential tohave something which then
potentially differentiates fromothers because it's underpinned
by a member-led approach tothese things, but then it
expresses what are those valuesthat our members care about
across the piece, I think thatwould be quite powerful and
could achieve some of that cutthrough, could achieve the
(04:31):
ability to communicate it muchmore effectively and also,
essentially, it should allowpeople on the other side,
non-members.
If I want to be a member of thecore movement by the credit
unions, what does that mean?
What does it look like?
And how is it different from mejust getting a bank account or
getting a facility somewhereelse?
Because I can go to a bank andthey will say they've got a
(04:52):
community program, they've gotan environmental program,
they've got a diversity program.
Why the credit unions?
Why not the banks?
So I think the learning that wewere looking to share from that
experience from the co-op bank,which was that that was the
real sustainable difference thatnobody followed.
Nobody was brave enough tofollow the co-op bank and say we
(05:12):
will stand there, ask ourcustomers what they want us to
stand for, give them a vote forit, give them an opportunity to
engage and go ahead with thathard to follow and if each
credit union, for instance, orsome credit unions started
setting up their own ethicalpolicies, we could end up going
off what you've just said.
Chris Smith (05:30):
We could end up with a situation where you've
got ethical policies disagreeingwith each other, whereas if
there were five or sixcornerstones that credit unions
stand for and collectivelybought into that differentiates
them from competitors, thatmight be difficult for
competitors to follow On that aswell.
Barry Clavin (05:52):
It would probably be cost prohibitive if everybody
is going to do this processindependently, rather than
trying to find a model whichsuits everybody is not without
its challenges, but wouldprobably be more pragmatic and
cost-effective.
But also when you're talkingthe regulators and you need to
be able to get to the nub ofwhat you stand for, in those
(06:15):
sort of conversations, which islook, you need, you regulators
need to talk to us, because westand for this, and not only do
we stand for this.
X million members behind usstand for these things as well.
I thought it might be useful toask some credit unions what
they felt about the word ethicsand whether ethics could be a
(06:36):
differentiator between thecredit union and its competitors
.
I started out by asking LouiseShields, who's the Chief
Executive Officer of CladdaghCredit Union, which is a credit
union on the west coast ofIreland, in Galway, and they
have over 50,000 members andassets of over E210 million.
Louise Shields (06:57):
I do think it potentially it has a huge unique
selling point and I think wehave the framework, if you like,
is hard coded with theco-operative principles.
They are in the rules.
I think the banks are likely tobe catching up with us and
particularly with theintroduction of the corporate
sustainability reporting andwithin the Irish sector,
(07:19):
definitely one of our maincompetitors on post is taking
that space and taking it quitewell if you look at their
advertising and that.
But it's ethics, it's likereputation.
You're one step away from itdestroying you and that is the
difficulty of it.
The other major difficulty ofit is everybody's definition of
(07:40):
ethics is different.
What you think is ethical may beabsolutely abhorrent to me.
A lot of it depends on time andplace.
If we look back at the socialnorms of 100 years ago, we would
be horrified in today's climateand similarly, social norms in
different countries are verydifferent.
So I personally I would stepaway from the word ethics
(08:02):
because I think it's too fluidand I think it would be easier
to define particular behavioursand to hold ourselves account to
those behaviors.
Chris Smith (08:15):
In other words, there is a risk of being held
hostage to the word ethics?
Louise Shields (08:19):
Yeah, yeah.
Chris Smith (08:20):
But you know you mentioned the banks there and I
think that's a really good placeto start in that.
What do you think that you doas a credit union that the banks
would find hard to replicate?
Louise Shields (08:32):
I think it is that emotional connection and
that goes back to the community,the sense of ownership.
Literally, people were taken inby the hand when they made
their first communion, by theirgranny to put their communion
money in.
And that emotion is all linkedup with the credit union and you
can see that anytime a changeis made, particularly if a
(08:54):
credit union is brave to changetheir name or to close an office
, you very much have to takepeople on the journey and to
acknowledge the history.
But you can't be held to useyour word as hostage to that
either.
The banks, they're a differentanimal.
They're purely for profit andit makes life very simple.
Profit is easy to measure, it'seasy to see, everybody
(09:18):
understands it From a creditunion, particularly the
co-operative principles.
It is more intangible and it'strying to convince people that
that has a value and they feelit.
Chris Smith (09:34):
But it's very hard to measure and see.
Established 25 years ago, theUK-based HEY Credit Union
formerly Hull and East YorkshireCredit Union has over 20,000
members and assets of over £14million, and for many of those
years John Smith was the HEYCredit Union's chief executive.
(09:55):
He's now supporting the boardof directors and leadership team
as a part-time governanceofficer.
I asked him about the charterthe credit union had created
with ethics in mind.
John Smith (10:05):
We thought at one of our planning days board
planning days we would set out achart showing who our
stakeholders were and what it isthey expect from us and then
how we aim to deliver it forthem.
So we came up with, obviously,our members as being a prime
stakeholder and we thought, youknow, they would obviously want
(10:26):
reliable services and securityof funds and they would want
fair and competitive terms forthe savings and loans and for us
not to discriminate unfairly,also, you know, for a feeling of
ownership for those.
That that was important.
For then we of course, had ouremployees and volunteers as an
(10:48):
important stakeholder.
What would they want?
Well, it'd be things like fairrewards and good conditions of
employment, job satisfaction Ithink that's a big one really
for anybody who chooses to workat the credit union feeling that
they're making a difference andthey would want us to train
them properly and develop theircareers with them and security
(11:09):
of employment.
They want to be consulted aboutthings that happen at the
workplace.
And also we thought you thoughtyou know pride.
They would want to go homefeeling well, I'm really proud
of what I've done at the creditunion.
You know, it's not just a job,it's, it's a calling.
So that was that.
And then we thought well, weserve our local communities.
(11:29):
Obviously, our credit unionserves a distinct geographical
area across the Humber region,as well as some payroll partners
that are further afield.
So what would they want?
Well, the local communitieswant us to support the local
economy, maintain a localpresence, have branches in the
main towns if possible, andsupport local campaigns.
(11:52):
If there's something thatpeople are really precious about
, we would want to be seen to bealigned with that and also, I
think, be a good corporatecitizen as well, so that you
know we would try to do theright thing by the area, not
have premises that are causing aproblem for people in the
street.
And then we thought well,suppliers are a stakeholder as
(12:14):
well, aren't they?
So you know they want us to paythem promptly, support local
businesses as much as possible.
So when we're looking forsomeone to supply us with goods
and services, if there's a localsupplier that we can use within
our region, we try to use themwhen possible.
We would do that.
(12:38):
Then central and localgovernment well, obviously they
would want us to pay rates andtaxes, be prompt with our
returns and also have goodstandards of governance so we
don't cause them any problems.
And then and this is the onereally that we nabbed from the
Co-operative Bank really, andI'm quite proud to say that
really, as a cooperator, 'pastand future generations'.
We know that a lot of ourmembers are very keen for us to
(12:59):
stay true to the values andethics that we were founded with
.
You know they soon kick up ashine if they think we're doing
something that's not in linewith their ethics.
And also, you know they'd wantus to protect those assets that
we've built up with their helpfor future beneficiaries.
So you know they don't want tohear in their local press one
(13:22):
day that the credit union isselling out to some PLC or
whatever.
They want us to look after theassets for forevermore really.
Chris Smith (13:41):
Mick McAteer is a campaigner for economic and
social justice with a longexperience of representing
consumers both in the UnitedKingdom and across Europe, with
a focus on financial markets andpublic policy.
He was one of the originalfounders of the London-based
Hackney Credit Union and he wasalso one of the first fellows of
the School for SocialEntrepreneurs At European level.
(14:02):
He was previously the chair ofthe European Commission's
Financial Services User Group.
I started out by asking Mick;do you think credit unions need
to show how ethical they are?
Mick McAteer (14:13):
There is an expectation that credit unions
should be more ethical thanfor-profit financial
institutions, and I think it'sreally important that they have
to demonstrate that.
You know, I mean like anyorganisation, you know, we just
can't take them at their wordanymore.
You know there's a greatersense of expectation amongst the
public and consumers andsociety generally that any
(14:36):
finance institution, regardlessof its makeup, has to
demonstrate its commitment toethical standards.
You know.
So, yeah, you know you have toback this up nowadays with
evidence about what you're doingto demonstrate that you are
behaving ethically.
Chris Smith (14:53):
Do you think members of credit unions, or
even potential members of creditunions, care if their business
is ethical or got some sort ofmorality to it?
Mick McAteer (15:03):
It's an interesting point, you know,
because certainly in ourexperience you know credit union
members and this is a grosssimplification but they tend to
fall into two types really.
You know there's people whowant to use credit unions
because they provide a goodservice.
They know affordable loans, sothey quite often good sort of
(15:24):
dividend rates as well.
So they do it for the pureconsumer reasons, because they
offer a good deal.
But I think the other categoryof member is a type of person
who does put ethics to theforefront of their choices.
So the credit union.
They see the credit unionmovement as a way of
demonstrating their commitmentto ethical finance as well.
(15:47):
So two broad categories really.
People who behave likeconsumers, generally just want a
good deal, but then anothergroup of people who really do
think that ethical matters arean important consideration when
they're making a decision aboutwho to bank with.
Chris Smith (16:01):
Really, you think that people would actually make
some form of, maybe financial,sacrifices?
They know that at least thebusiness that they're dealing
with is a good fellow I think.
Mick McAteer (16:13):
So I mean again, you know it's it very much
depends on individual.
But we do know there are somepeople, for example, certainly
in parts of London for example,where the credit union members
themselves, the ones who aresavers, might be better off, you
know, than sort of the averageperson, you know but they're
willing to make that commitmentto the organisation because they
(16:36):
see the ethical benefit, theysee the wider social impact that
actually supporting a creditunion can have.
And I think in those cases thattype of member, I think, is
probably willing to sacrifice areturn and they can probably get
better interest elsewhere ifthey put in one high interest
(16:57):
bond or whatever.
But I think they're willing togive up or forego that bit of
financial return to actuallydemonstrate their own ethical
commitment to the credit unionsector.
(17:36):
And I think this is where Ithink this issue of being
ethical and sustainable anddemonstrating a bigger social
impact I think is reallyimportant for credit unions,
because the credit unions wantto attract people, the younger
generation of members, you know,who will turn into older
members at some stage, you know.
So it's all about gettingpeople you know to commit from a
(18:00):
younger age.
Younger people, I think, doactually expect to see a
demonstration of that ethical orsocial or sustainability
commitment for all of them,regardless of the financial
institution.
It doesn't have to beaccredited.
I just think there is a biggerexpectation amongst the younger
generation that it isn't justabout profit or about money.
There's finance institutions,big and small, to have a
(18:24):
responsibility to a wider set ofpeople than just the members or
the savers or the depositors orthe consumers.
Chris Smith (18:40):
Rob Harrison is one of the founders of the Ethical
Consumer Research Association.
He's also an occasional editorof the Ethical Consumer magazine
and his most recent book is theHandbook of Ethical Purchasing
Principles and Practice.
I asked Rob if he believescredit unions are ethical, and
he started by firstly describingthe work of the Ethical
Consumer Association.
Rob Harrison (18:59):
We do consumer publishing and we do a magazine
which is like a witch guide toyou know your ethical tea or
your ethical cars, your ethicalwhatever?
And out of that we also look atfinancial services choices for
ordinary consumers and we lookat all the places that you could
put your money, all the placesyou could invest, all the places
you could get mortgages allthis kind of stuff.
(19:20):
We'd like a consumer publisher.
And when we look at creditunions, we look at them in the
context of the services theyprovide and we go order what do
credit unions provide?
Well, they do.
Kind of savings is a criticalone, and so if we look at all
the savings accounts in the UKthat you could open as an
ordinary person, we find peoplelike Barclays and HSBC and
(19:44):
Santander, very big players inthe carbon sector.
They're getting masses ofcriticism.
People from XR are gluingthemselves to the front doors of
these businesses in centralLondon there's also universities
are moving away from thesecompanies in pace because of
their carbon involvement, andthat's just carbon.
(20:06):
They're involved in masses ofother really annoying things
that people are upset about.
So when we call credit unionsethical, what we mean is is that
, compared to Barclays, they'rebloody fantastic because they
are not taking your money andgiving it to really problematic
things around the world.
(20:26):
For the first reason they'reethical because they're not a
mainstream bank that also doescommercial lending to problem
sectors, and so we kind of putcredit unions in in a similar
box for our consumers asbuilding societies, because they
kind of they're, you know, thekind of member controlled and
they and they don't as a ruleget involved in risky lending to
(20:47):
dodgy projects, and so that isthe kind of that's the kind of
beginning and end of the answerthat we have to wire credit
unions.
Ethical because they're actuallyfor an ordinary consumer whose
choice is across a range ofthings, they're not doing really
terrible things, but on theother side of that, you know,
they are.
Also they're addressing youknow some of them.
I mean, there's a it's acomplicated market net, but
(21:09):
they're addressing social needin communities, and so they're
kind of going beyond that.
So they're doing something elseas well, lots of them, and
they're kind of doing, you knowthey're trying to address, you
know, inequality by providingnot outrageously priced loans to
people who will be taken awayby loan sharks otherwise.
(21:31):
So there are those two reasonsthat we see them as ethical, and
that's in our guides and ourmagazines, that's what we talk
about when we talk about creditunions and so you know we're
kind of yeah in the macro sense.
Chris Smith (21:45):
When you look across the whole financial
sector, they stand out as justbeing really good Rob is there
a risk of businesses jumping onthe ethical bandwagon by merely
stating their ethicalcredentials but not delivering a
quality service to theircustomers?
Rob Harrison (22:03):
I think one of the early misunderstandings of when
people saw ethical consumption,lots of businesses thought, hey
, great, we could make a load ofmoney here, charge a load of
extra for ethical add-ons anddaft people give us extra money
for stuff and actually thatnever materialized.
And super ethical uh you know,super expensive ethical stuff
(22:23):
really struggled.
Um, and I guess it was obviouswhen you looked at it in the
people would wanted to makeethical choices in markets.
But it's price and quality first.
All every time You've got toget the price and quality right
and then the ethics.
And if you haven't got theprice and quality right, don't
even bother.
You've got to concentrate onthat first, if you see what I
(22:45):
mean, because otherwise you knowyou can create a reputation
that ethical stuff is great butit doesn't work and we don't
need that.
And that was certainly the casewhen we were, when we were
young, when it was firsthappening.
The ethical coffees tastedterrible and the, the washing
powders didn't wash and all thatkind of stuff, and that was
(23:06):
like part of the, that was partof the joke really at that time
around green consumption and ina sense that's sort of been
fixed and so, and no, it hasbeen fixed, and there's some
fantastic coffee and washingpowders out there, but, um, but
yeah, price and quality firstevery time.
But then you know, it's areally good differentiator if
(23:27):
there are lots of other peoplearound doing the same thing and
it's also and it's also a goodway of just educating people
about you know, the world aroundthem.
If you're saying, look, we'resolving a problem, some people
haven't even noticed that's aproblem, if you see what I mean.
And like, when we're writing atEthical Consumer, we're
rewriting about banks and youknow, and carbon, some people
(23:50):
it's just never occurred to themthat banks are funding new
fossil fuel, you know,extraction in the North Sea and
all this kind of stuff.
So it's a good way of justinforming people about the world
around them.
Chris Smith (24:10):
A good way of informing the world around them,
says Rob Harrison.
What's that got to do withcredit unions, you might say?
The fifth item of the RochdalePrinciples of 1844 states that
cooperative societies and creditunions must provide education
and training to their membersand the public.
And, according to the 1995 ICArevision, co-operatives should
(24:35):
inform the general public,particularly young people and
opinion leaders.
So where does that leave us?
Well, we've heard that creditunions are seen by many as
ethical businesses, and it seemsthat merely stating a business
is ethical is probablyinsufficient without providing
some form of ethical standardsand measuring the credit union's
(24:57):
activity against thosestandards.
Now, there are many creditunions doing this in different
shapes and forms already, butI'm particularly interested in
what Barry Clavin's view was.
He said that credit unionscould collectively state a small
amount of clear, agreedstatements that sets credit
unions apart from itscompetitors, a combined ethical
(25:20):
stance that uniformly informsmembers and prospective members
what credit unions stand for andwhat credit unions will avoid.
(25:43):
Thank you to my guests and thankyou to the Swoboda Research
Centre for their sponsorship andsupport of these podcasts.
If you wish to read BarryClavin's paper, which is the
'Cooperative Bank (25:51):
A case study of the cooperative difference'
referred to in this podcast.
Go to the Swoboda ResearchCentre website.
You'll find it there.
You can also check out theSwoboda Conference Making
Collaboration Work, which is onthe 24th of May and is held in
Dublin, and you'll be able tojoin senior managers and
directors from Irish and Britishcredit unions, together with
(26:14):
key stakeholders, to discuss thecritical issue of getting
collaboration going and gettingit right.
If you've any feedback, ideasor suggestions, my email address
is smithowls@ gmailcom.
This is Chris Smith sayingthanks for listening.
(26:35):
Bye now.
You're listening to talking credit unions with
Chris Smith.
These podcasts aim tocommunicate topics of interest
from the world of credit unions.
Over the years, the word ethicshas been used with increasing
frequency in the world of creditunions, and it got me thinking.
After all, I see numerousreferences in credit union
(00:28):
literature, websites and othermedia that credit unions are
ethical.
Well, are credit unions ethical?
And if they are so, do theyshout about it enough?
Oh, and meanwhile, who decideson which aspects of ethics the
credit union stands for?
The credit union board ofdirectors, the management or
(00:48):
even the members?
Earlier this year, the SwobodaResearch Centre published a
short paper called theCo-operative Bank: A case study
of the cooperative difference.
It was one of their reflectionseries.
When the co-op bank launchedits groundbreaking customer-led
ethical policy back in 1992, itwas the first time in British
(01:10):
banking history a high streetbank had declared that there
would be some businessactivities that, whilst fully
legal, it would prescribe asunethical and declined to
provide with banking services.
Inclined to provide withbanking services, from
oppressive states toenvironmental degradation,
(01:32):
tobacco manufacture and testingon animals, the bank announced
that business activities inthese areas would no longer be
welcome.
And in some ways, thisrationale for such a radical
decision came about after a kindof long period of introspection
and research by the bank intothe meaning of cooperation for
younger and more discerningcustomers.
The Co-op Bank was faced withan ageing customer base and it
(01:53):
took an honest look at itselfand understanding of what value
we describe to cooperation.
And, in a nutshell, the bankheard from people that being
cooperative, whilst highlyvalued in and of itself, would
not mobilise enough individualsto move their banking.
It was going to take somethingmore tangible, relevant and
differentiating.
(02:14):
Now the author of this report isBarry Clavin.
Barry is an ethics andsustainability expert, an
advisor to businesses,governments, charities and
cooperatives.
An advisor to businesses,governments, charities and
cooperatives, Barry led aworld-class team in the delivery
of a diverse range ofaward-winning sustainability and
community programmes.
Barry's also the creator andauthor of the Annual Ethical
Consumer Report.
(02:35):
I asked Barry should creditunions just copy what the
Co-operative Bank did back in1992?
Barry Clavin (02:43):
Well, obviously the Co-op Bank was in that
envious position in one sense,which is that it's a standalone
bank, it's got its own customerbase, it can engage with them
how it wants, as opposed towhere potentially a conversation
with the credit union movementscould go.
Is that are they best served byrepresenting credit union
members as a collective or doingit across every credit union
(03:05):
union independently?
My view would be that askingthat question as a starting
point, which is where are we now?
What are we strong for?
What are we known for?
Where do we want to get to as aconsequence of that, is where
you've really got to start fromthis point.
Chris Smith (03:20):
You're saying about whether they do it individually
, as credit unions, or whetherthey do it collectively?
What's the downside of themdoing it individually?
Barry Clavin (03:29):
I suppose there'll be a couple of things.
The first thing is obviously ispractically it'd be very
difficult, because you'd havehundreds of credit unions doing
independent explorations withtheir member base to potentially
come up with hundreds ofdifferent answers.
A part of this, and part ofwhat potentially this particular
moment in time the creditunions may look for, is real
high-level cut-through once more, which is with the regulators,
(03:50):
with the media, with consumercommentators.
Is that best served by and forcustomers, potential customers
and members?
What do credit unions stand for?
And if they stand for 100things, as you know, they stand
for nothing and they stand foreverything.
But if we stand for two orthree big things and we know we
do because we've engaged withour membership bases across the
(04:11):
piece I think the potential tohave something which then
potentially differentiates fromothers because it's underpinned
by a member-led approach tothese things, but then it
expresses what are those valuesthat our members care about
across the piece, I think thatwould be quite powerful and
could achieve some of that cutthrough, could achieve the
(04:31):
ability to communicate it muchmore effectively and also,
essentially, it should allowpeople on the other side,
non-members.
If I want to be a member of thecore movement by the credit
unions, what does that mean?
What does it look like?
And how is it different from mejust getting a bank account or
getting a facility somewhereelse?
Because I can go to a bank andthey will say they've got a
(04:52):
community program, they've gotan environmental program,
they've got a diversity program.
Why the credit unions?
Why not the banks?
So I think the learning that wewere looking to share from that
experience from the co-op bank,which was that that was the
real sustainable difference thatnobody followed.
Nobody was brave enough tofollow the co-op bank and say we
(05:12):
will stand there, ask ourcustomers what they want us to
stand for, give them a vote forit, give them an opportunity to
engage and go ahead with thathard to follow and if each
credit union, for instance, orsome credit unions started
setting up their own ethicalpolicies, we could end up going
off what you've just said.
Chris Smith (05:30):
We could end up with a situation where you've
got ethical policies disagreeingwith each other, whereas if
there were five or sixcornerstones that credit unions
stand for and collectivelybought into that differentiates
them from competitors, thatmight be difficult for
competitors to follow On that aswell.
Barry Clavin (05:52):
It would probably be cost prohibitive if everybody
is going to do this processindependently, rather than
trying to find a model whichsuits everybody is not without
its challenges, but wouldprobably be more pragmatic and
cost-effective.
But also when you're talkingthe regulators and you need to
be able to get to the nub ofwhat you stand for, in those
(06:15):
sort of conversations, which islook, you need, you regulators
need to talk to us, because westand for this, and not only do
we stand for this.
X million members behind usstand for these things as well.
I thought it might be useful toask some credit unions what
they felt about the word ethicsand whether ethics could be a
(06:36):
differentiator between thecredit union and its competitors
.
I started out by asking LouiseShields, who's the Chief
Executive Officer of CladdaghCredit Union, which is a credit
union on the west coast ofIreland, in Galway, and they
have over 50,000 members andassets of over E210 million.
Louise Shields (06:57):
I do think it potentially it has a huge unique
selling point and I think wehave the framework, if you like,
is hard coded with theco-operative principles.
They are in the rules.
I think the banks are likely tobe catching up with us and
particularly with theintroduction of the corporate
sustainability reporting andwithin the Irish sector,
(07:19):
definitely one of our maincompetitors on post is taking
that space and taking it quitewell if you look at their
advertising and that.
But it's ethics, it's likereputation.
You're one step away from itdestroying you and that is the
difficulty of it.
The other major difficulty ofit is everybody's definition of
(07:40):
ethics is different.
What you think is ethical may beabsolutely abhorrent to me.
A lot of it depends on time andplace.
If we look back at the socialnorms of 100 years ago, we would
be horrified in today's climateand similarly, social norms in
different countries are verydifferent.
So I personally I would stepaway from the word ethics
(08:02):
because I think it's too fluidand I think it would be easier
to define particular behavioursand to hold ourselves account to
those behaviors.
Chris Smith (08:15):
In other words, there is a risk of being held
hostage to the word ethics?
Louise Shields (08:19):
Yeah, yeah.
Chris Smith (08:20):
But you know you mentioned the banks there and I
think that's a really good placeto start in that.
What do you think that you doas a credit union that the banks
would find hard to replicate?
Louise Shields (08:32):
I think it is that emotional connection and
that goes back to the community,the sense of ownership.
Literally, people were taken inby the hand when they made
their first communion, by theirgranny to put their communion
money in.
And that emotion is all linkedup with the credit union and you
can see that anytime a changeis made, particularly if a
(08:54):
credit union is brave to changetheir name or to close an office
, you very much have to takepeople on the journey and to
acknowledge the history.
But you can't be held to useyour word as hostage to that
either.
The banks, they're a differentanimal.
They're purely for profit andit makes life very simple.
Profit is easy to measure, it'seasy to see, everybody
(09:18):
understands it From a creditunion, particularly the
co-operative principles.
It is more intangible and it'strying to convince people that
that has a value and they feelit.
Chris Smith (09:34):
But it's very hard to measure and see.
Established 25 years ago, theUK-based HEY Credit Union
formerly Hull and East YorkshireCredit Union has over 20,000
members and assets of over £14million, and for many of those
years John Smith was the HEYCredit Union's chief executive.
(09:55):
He's now supporting the boardof directors and leadership team
as a part-time governanceofficer.
I asked him about the charterthe credit union had created
with ethics in mind.
John Smith (10:05):
We thought at one of our planning days board
planning days we would set out achart showing who our
stakeholders were and what it isthey expect from us and then
how we aim to deliver it forthem.
So we came up with, obviously,our members as being a prime
stakeholder and we thought, youknow, they would obviously want
(10:26):
reliable services and securityof funds and they would want
fair and competitive terms forthe savings and loans and for us
not to discriminate unfairly,also, you know, for a feeling of
ownership for those.
That that was important.
For then we of course, had ouremployees and volunteers as an
(10:48):
important stakeholder.
What would they want?
Well, it'd be things like fairrewards and good conditions of
employment, job satisfaction Ithink that's a big one really
for anybody who chooses to workat the credit union feeling that
they're making a difference andthey would want us to train
them properly and develop theircareers with them and security
(11:09):
of employment.
They want to be consulted aboutthings that happen at the
workplace.
And also we thought you thoughtyou know pride.
They would want to go homefeeling well, I'm really proud
of what I've done at the creditunion.
You know, it's not just a job,it's, it's a calling.
So that was that.
And then we thought well, weserve our local communities.
(11:29):
Obviously, our credit unionserves a distinct geographical
area across the Humber region,as well as some payroll partners
that are further afield.
So what would they want?
Well, the local communitieswant us to support the local
economy, maintain a localpresence, have branches in the
main towns if possible, andsupport local campaigns.
(11:52):
If there's something thatpeople are really precious about
, we would want to be seen to bealigned with that and also, I
think, be a good corporatecitizen as well, so that you
know we would try to do theright thing by the area, not
have premises that are causing aproblem for people in the
street.
And then we thought well,suppliers are a stakeholder as
(12:14):
well, aren't they?
So you know they want us to paythem promptly, support local
businesses as much as possible.
So when we're looking forsomeone to supply us with goods
and services, if there's a localsupplier that we can use within
our region, we try to use themwhen possible.
We would do that.
(12:38):
Then central and localgovernment well, obviously they
would want us to pay rates andtaxes, be prompt with our
returns and also have goodstandards of governance so we
don't cause them any problems.
And then and this is the onereally that we nabbed from the
Co-operative Bank really, andI'm quite proud to say that
really, as a cooperator, 'pastand future generations'.
We know that a lot of ourmembers are very keen for us to
(12:59):
stay true to the values andethics that we were founded with
.
You know they soon kick up ashine if they think we're doing
something that's not in linewith their ethics.
And also, you know they'd wantus to protect those assets that
we've built up with their helpfor future beneficiaries.
So you know they don't want tohear in their local press one
(13:22):
day that the credit union isselling out to some PLC or
whatever.
They want us to look after theassets for forevermore really.
Chris Smith (13:41):
Mick McAteer is a campaigner for economic and
social justice with a longexperience of representing
consumers both in the UnitedKingdom and across Europe, with
a focus on financial markets andpublic policy.
He was one of the originalfounders of the London-based
Hackney Credit Union and he wasalso one of the first fellows of
the School for SocialEntrepreneurs At European level.
(14:02):
He was previously the chair ofthe European Commission's
Financial Services User Group.
I started out by asking Mick;do you think credit unions need
to show how ethical they are?
Mick McAteer (14:13):
There is an expectation that credit unions
should be more ethical thanfor-profit financial
institutions, and I think it'sreally important that they have
to demonstrate that.
You know, I mean like anyorganisation, you know, we just
can't take them at their wordanymore.
You know there's a greatersense of expectation amongst the
public and consumers andsociety generally that any
(14:36):
finance institution, regardlessof its makeup, has to
demonstrate its commitment toethical standards.
You know.
So, yeah, you know you have toback this up nowadays with
evidence about what you're doingto demonstrate that you are
behaving ethically.
Chris Smith (14:53):
Do you think members of credit unions, or
even potential members of creditunions, care if their business
is ethical or got some sort ofmorality to it?
Mick McAteer (15:03):
It's an interesting point, you know,
because certainly in ourexperience you know credit union
members and this is a grosssimplification but they tend to
fall into two types really.
You know there's people whowant to use credit unions
because they provide a goodservice.
They know affordable loans, sothey quite often good sort of
(15:24):
dividend rates as well.
So they do it for the pureconsumer reasons, because they
offer a good deal.
But I think the other categoryof member is a type of person
who does put ethics to theforefront of their choices.
So the credit union.
They see the credit unionmovement as a way of
demonstrating their commitmentto ethical finance as well.
(15:47):
So two broad categories really.
People who behave likeconsumers, generally just want a
good deal, but then anothergroup of people who really do
think that ethical matters arean important consideration when
they're making a decision aboutwho to bank with.
Chris Smith (16:01):
Really, you think that people would actually make
some form of, maybe financial,sacrifices?
They know that at least thebusiness that they're dealing
with is a good fellow I think.
Mick McAteer (16:13):
So I mean again, you know it's it very much
depends on individual.
But we do know there are somepeople, for example, certainly
in parts of London for example,where the credit union members
themselves, the ones who aresavers, might be better off, you
know, than sort of the averageperson, you know but they're
willing to make that commitmentto the organisation because they
(16:36):
see the ethical benefit, theysee the wider social impact that
actually supporting a creditunion can have.
And I think in those cases thattype of member, I think, is
probably willing to sacrifice areturn and they can probably get
better interest elsewhere ifthey put in one high interest
(16:57):
bond or whatever.
But I think they're willing togive up or forego that bit of
financial return to actuallydemonstrate their own ethical
commitment to the credit unionsector.
(17:36):
And I think this is where Ithink this issue of being
ethical and sustainable anddemonstrating a bigger social
impact I think is reallyimportant for credit unions,
because the credit unions wantto attract people, the younger
generation of members, you know,who will turn into older
members at some stage, you know.
So it's all about gettingpeople you know to commit from a
(18:00):
younger age.
Younger people, I think, doactually expect to see a
demonstration of that ethical orsocial or sustainability
commitment for all of them,regardless of the financial
institution.
It doesn't have to beaccredited.
I just think there is a biggerexpectation amongst the younger
generation that it isn't justabout profit or about money.
There's finance institutions,big and small, to have a
(18:24):
responsibility to a wider set ofpeople than just the members or
the savers or the depositors orthe consumers.
Chris Smith (18:40):
Rob Harrison is one of the founders of the Ethical
Consumer Research Association.
He's also an occasional editorof the Ethical Consumer magazine
and his most recent book is theHandbook of Ethical Purchasing
Principles and Practice.
I asked Rob if he believescredit unions are ethical, and
he started by firstly describingthe work of the Ethical
Consumer Association.
Rob Harrison (18:59):
We do consumer publishing and we do a magazine
which is like a witch guide toyou know your ethical tea or
your ethical cars, your ethicalwhatever?
And out of that we also look atfinancial services choices for
ordinary consumers and we lookat all the places that you could
put your money, all the placesyou could invest, all the places
you could get mortgages allthis kind of stuff.
(19:20):
We'd like a consumer publisher.
And when we look at creditunions, we look at them in the
context of the services theyprovide and we go order what do
credit unions provide?
Well, they do.
Kind of savings is a criticalone, and so if we look at all
the savings accounts in the UKthat you could open as an
ordinary person, we find peoplelike Barclays and HSBC and
(19:44):
Santander, very big players inthe carbon sector.
They're getting masses ofcriticism.
People from XR are gluingthemselves to the front doors of
these businesses in centralLondon there's also universities
are moving away from thesecompanies in pace because of
their carbon involvement, andthat's just carbon.
(20:06):
They're involved in masses ofother really annoying things
that people are upset about.
So when we call credit unionsethical, what we mean is is that
, compared to Barclays, they'rebloody fantastic because they
are not taking your money andgiving it to really problematic
things around the world.
(20:26):
For the first reason they'reethical because they're not a
mainstream bank that also doescommercial lending to problem
sectors, and so we kind of putcredit unions in in a similar
box for our consumers asbuilding societies, because they
kind of they're, you know, thekind of member controlled and
they and they don't as a ruleget involved in risky lending to
(20:47):
dodgy projects, and so that isthe kind of that's the kind of
beginning and end of the answerthat we have to wire credit
unions.
Ethical because they're actuallyfor an ordinary consumer whose
choice is across a range ofthings, they're not doing really
terrible things, but on theother side of that, you know,
they are.
Also they're addressing youknow some of them.
I mean, there's a it's acomplicated market net, but
(21:09):
they're addressing social needin communities, and so they're
kind of going beyond that.
So they're doing something elseas well, lots of them, and
they're kind of doing, you knowthey're trying to address, you
know, inequality by providingnot outrageously priced loans to
people who will be taken awayby loan sharks otherwise.
(21:31):
So there are those two reasonsthat we see them as ethical, and
that's in our guides and ourmagazines, that's what we talk
about when we talk about creditunions and so you know we're
kind of yeah in the macro sense.
Chris Smith (21:45):
When you look across the whole financial
sector, they stand out as justbeing really good Rob is there
a risk of businesses jumping onthe ethical bandwagon by merely
stating their ethicalcredentials but not delivering a
quality service to theircustomers?
Rob Harrison (22:03):
I think one of the early misunderstandings of when
people saw ethical consumption,lots of businesses thought, hey
, great, we could make a load ofmoney here, charge a load of
extra for ethical add-ons anddaft people give us extra money
for stuff and actually thatnever materialized.
And super ethical uh you know,super expensive ethical stuff
(22:23):
really struggled.
Um, and I guess it was obviouswhen you looked at it in the
people would wanted to makeethical choices in markets.
But it's price and quality first.
All every time You've got toget the price and quality right
and then the ethics.
And if you haven't got theprice and quality right, don't
even bother.
You've got to concentrate onthat first, if you see what I
(22:45):
mean, because otherwise you knowyou can create a reputation
that ethical stuff is great butit doesn't work and we don't
need that.
And that was certainly the casewhen we were, when we were
young, when it was firsthappening.
The ethical coffees tastedterrible and the, the washing
powders didn't wash and all thatkind of stuff, and that was
(23:06):
like part of the, that was partof the joke really at that time
around green consumption and ina sense that's sort of been
fixed and so, and no, it hasbeen fixed, and there's some
fantastic coffee and washingpowders out there, but, um, but
yeah, price and quality firstevery time.
But then you know, it's areally good differentiator if
(23:27):
there are lots of other peoplearound doing the same thing and
it's also and it's also a goodway of just educating people
about you know, the world aroundthem.
If you're saying, look, we'resolving a problem, some people
haven't even noticed that's aproblem, if you see what I mean.
And like, when we're writing atEthical Consumer, we're
rewriting about banks and youknow, and carbon, some people
(23:50):
it's just never occurred to themthat banks are funding new
fossil fuel, you know,extraction in the North Sea and
all this kind of stuff.
So it's a good way of justinforming people about the world
around them.
Chris Smith (24:10):
A good way of informing the world around them,
says Rob Harrison.
What's that got to do withcredit unions, you might say?
The fifth item of the RochdalePrinciples of 1844 states that
cooperative societies and creditunions must provide education
and training to their membersand the public.
And, according to the 1995 ICArevision, co-operatives should
(24:35):
inform the general public,particularly young people and
opinion leaders.
So where does that leave us?
Well, we've heard that creditunions are seen by many as
ethical businesses, and it seemsthat merely stating a business
is ethical is probablyinsufficient without providing
some form of ethical standardsand measuring the credit union's
(24:57):
activity against thosestandards.
Now, there are many creditunions doing this in different
shapes and forms already, butI'm particularly interested in
what Barry Clavin's view was.
He said that credit unionscould collectively state a small
amount of clear, agreedstatements that sets credit
unions apart from itscompetitors, a combined ethical
(25:20):
stance that uniformly informsmembers and prospective members
what credit unions stand for andwhat credit unions will avoid.
(25:43):
Thank you to my guests and thankyou to the Swoboda Research
Centre for their sponsorship andsupport of these podcasts.
If you wish to read BarryClavin's paper, which is the
'Cooperative Bank (25:51):
A case study of the cooperative difference'
referred to in this podcast.
Go to the Swoboda ResearchCentre website.
You'll find it there.
You can also check out theSwoboda Conference Making
Collaboration Work, which is onthe 24th of May and is held in
Dublin, and you'll be able tojoin senior managers and
directors from Irish and Britishcredit unions, together with
(26:14):
key stakeholders, to discuss thecritical issue of getting
collaboration going and gettingit right.
If you've any feedback, ideasor suggestions, my email address
is smithowls@ gmailcom.
This is Chris Smith sayingthanks for listening.
(26:35):
Bye now.
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