A Business Model Built On The Cooperative State Of Mind

A cooperative financial services partner dedicated to members and the community is an appealing model – one that requires passion, innovation, and a desire to be different.


How would a credit union recognize if it had digressed from being all about the member to simply being? Would the shift show up on the balance sheet? Would the Board resign? Would unsatisfied member feedback become commonplace?

As credit unions add products and services to meet members’ needs and demands, the line between credit union and bank blurs. The word “bank-lite” is thrown around, and many of the original tenets of the cooperative model now appear in the for-profit and entrepreneurial space as well.

Fundamentally, a major philosophical difference still exists between the cooperative and for-profit financial sectors. At the same time, many credit unions have not updated the guidelines they use to define success – not just as a financial institution but as a cooperative financial institution – since they opened their doors.

In this new good guy marketplace, what solid metrics can credit unions use to determine if they are using the cooperative model to its maximum potential and elevating their message of member-centric ideals above the masses?

Feel Good Messaging Isn’t Good Enough
Credit unions volunteer, donate, create local jobs, and stimulate the economy. The institution wins and so does the community. Sounds clear-cut right?

It isn’t.

Credit unions that consider these benchmarks the best defining factors of their cooperative principles should consider the following quote from a well-known leader of a financial institution: “[Name of the institution] is committed to making opportunities possible ... by responding to financial needs, helping drive economic growth, and supporting the communities where we do business.”

In 2010, this institution:

  • Provided $200 million in philanthropic giving;
  • Provided more than $1 billion in loans and investment to more than 120 community development financial institutions (CDFIs);
  • Provided more than $48 billion in credit to nonprofit, government, and anchor institutions;
  • Promoted volunteerism and service with employees who donated more than one million hours of volunteer service.

Is this financial institution rooted in a cooperative or a for-profit model?

The quote is a part of Bank of America’s first corporate social responsibility report and belongs to Brian Moynihan, B of A’s chief executive officer. Bank of America is volunteering, donating time and money, creating jobs, and stimulating the economy. That sounds familiar.

Putting aside the sheer volume of assistance provided (which would indicate this institution is a bank and not a credit union), if leaders in the cooperative financial industry need to think twice about the above question, how will the average consumer tell the difference between the two?

If They Can’t See It, You Can’t Prove It
In the modern business space, the only way to escape being lumped in with the general identity of a do-good institution is to distinguish, as clearly as possible, what you do, who you do it for, and why. Then you have to prove it works.

As credit unions become an increasingly powerful force in the lives of their members and communities, it is more critical than ever that they be clear about the benefits and potential of the cooperative model. The cooperative difference is rooted in the fact that credit unions were created outside the financial system as it existed. Funded by their users and focused on the local needs of a group or community, the primary goal of credit unions is to enhance the availability of credit and thereby create consumer demand in a depressed economy.

Credit unions around the country are giving members access to record-low interest rates, saving members millions in interest payments, and making credit available to small business. In short: They’re proving the cooperative financial system works.

The future requires every credit union to look not only at itself but also to other credit unions and the network they create for support and direction. This involves expanding the traditional benchmarks for what define institutional success and failure.

Credit unions have many indices that provide benchmarks and rules of thumb for financial performance. But there’s another type of measurement that proves valuable for gauging credit union success. This measurement has the potential to re-energize and inspire teams in a new way. It’s a cooperative score, and here are a few examples of what cooperative benchmarks might look like:

  • Does the credit union actively market its democratic process as a credit union advantage?
  • What percentage of members vote in elections?
  • Does the credit union have a vibrant volunteer community?
  • Does the credit union pay a dividend that is clearly labeled as an ownership dividend?
  • Does the credit union post documents on a policy-sharing website?

Credit unions’ power comes from an entire industry working together as one. A cooperative score reflects something larger than the experience of one member or one institution; it’s the pulse of a movement. And with the right tools, the industry’s individual credit unions can move forward as one.




Oct. 10, 2011


  • Excellent article, thanks for advancing this discussion -- especially as International Cooperative Year approaches.

    FYI: at the National Federation of CDCUs, we have taken a lead in organizing a host committee for IYC. On November 1, we will bring together co-ops from all sectors -- housing, credit, food, and workers' coops -- for a seminar to make the cooperative difference more visible and build connections between sectors.
    Cliff Rosenthal
  • I agree with Cliff Rosenthal comments.
    Gary Bell