This year, Canada will welcome the highest influx of immigrants it has seen in over 100 years: more than 300,000 people seeking refuge, reunification with family, and opportunities for a new life.
As they settle across Canada, many of these newcomers will seek financial services ranging from bank accounts to mortgages to business loans. And many will encounter barriers to receiving those services due to language issues, income instability, lack of local credit history, and cultural differences.
This is where Canada’s “ethnic” credit unions come in. Since the rise of the credit union movement in Canada, ethnic credit unions have played a critical role in helping immigrants settle into Canadian life. According to a report by the Federation of Canadian Municipalities entitled Starting on Solid Ground: The Municipal Role in Immigrant Settlement, “Newcomers settling into life in Canada are, first and foremost, settling into life in a community, where local people, services and organizations can make a real difference in creating a welcoming environment.”
Canadian communities have come together to create a wide range of credit unions serving both
new Canadians as well second- and third-generation Canadians — from the Sikh communities in B.C., to the Ukrainian enclaves in Manitoba, to the Eastern European neighbourhoods throughout Ontario, and beyond.
A cultural foundation
Ethnic credit unions, with their community-first approach and cultural foundation fill a niche by providing services that take their members’ unique customs, languages, and cultural needs into consideration. They not only enable both recent and well-established immigrants to maintain a strong connection to their homeland, they also provide access to the financial services and supports that are crucial to building a new life in Canada.
Ethnic credit unions have played a significant role in helping newcomers to Canada – people who would be rejected by banks” – Martha Durdin
“What is becoming evident,” according to Starting on Solid Ground, “is that a much broader range
of services, beyond those provided by federally or provincially supported services like orientation, language training, and employment, is needed to support immigrants in their first five to 10 years
in Canada to ensure successful settlement and integration, both in near and long terms.”
Ethnic credit unions offer some of those essential services. “Ethnic credit unions have played a signi cant role in helping newcomers to Canada — people who would be rejected by banks,” says Martha Durdin, CEO of the Canadian Credit Union Association. “They have helped people integrate into their community and into Canada, and served them in their own language. They build that sense of community and they invest in their own community.”
A timeless story
n the 1920s, Wasyl Topolnicky, a Ukrainian economist familiar with the credit union movement, immigrated to Canada and witnessed the challenges faced by many new immigrants in receiving the financial support necessary to purchase homes and start businesses. He launched the first Ukrainian credit union in Saskatoon, in 1939, then moved to Winnipeg and launched several more, including Carpathia Credit Union (8,820 members, $445 million in assets), in 1940.
He organized a dozen people to found Carpathia,” says Walter Dlugosh, Carpathia Credit Union’s CEO. “And we continue to have that bond of association. In fact, of the three closed-bond credit unions remaining in Winnipeg, two are Ukrainian.”
Today Carpathia operates five branch locations, serving both the influx of new immigrants as well as the established Ukrainian community in Winnipeg. It also contributes to the local community by sponsoring events and religious groups that “would have difficulty existing without our support,” says Dlugosh.
The story is a timeless one for many ethnic credit unions across Canada: immigrants lack access to the financial services they need, come together to create a bond of association, and start their own credit union to serve their community’s needs.
The old and the new
While Carpathia has been operating for more than 70 years, the much younger Khalsa Credit Union (13,696 members, $348 million in assets), incorporated in Surrey, B.C., in 1986, has been rapidly growing to serve the needs of one of the largest Sikh communities in the world outside of India. From the 51 founding members who joined together to create the closed-bond credit union 30 years ago, it has grown to include five branches in Vancouver’s Lower Mainland as well as Victoria, with a sixth opening in Surrey.
Khalsa caters to its community by providing custom products that take into account the Sikh culture and unique immigrant circumstances. “We have a very strong community, which is very active in the housing market, and in the restaurant sector, so we help them manage these areas,” says Dalbir Singh Mehta, Khalsa Credit Union’s CEO.
One example is its equity mortgage, which takes into account income from all family members in the traditionally extended family household. “When new immigrants come from India, for example, they may bring a big down payment but they do not have the same level of income in Canada,” Mehta says. “We recognize that they all work hard, so we give them a mortgage based on the whole family’s income.”
Challenge breeds innovation
Credit unions have always been at the forefront of innovation when it comes to finding creative solutions to financial problems. And this is particularly true for ethnic credit unions. Latvian Credit Union (2,000 members, $50 million in assets), based in Toronto, was the first to offer extended hours, says Andris Lagzdins, CEO. “Plus, we don’t charge service fees. We also publish an annual book of all the Latvian organizations around the world. It costs a fair bit of money, but if you’re a member, it’s free.”
We have a very strong community, which is very active in the housing market, and in the restaurant sector, so we help [members] manage these areas” – Dalbir Singh Mehta
Incorporated in 1959, the closed-bond credit union has been a central part of the Latvian community in Toronto, located right within the Latvian Canadian Cultural Centre, which also houses Latvian schools, youth groups, and arts and culture organizations.
But the community is shrinking, says Lagzdins. “Our demographics have changed. We have a lot of older members. And younger members aren’t coming to us as quickly as we would like.”
Carpathia has been facing a similar challenge. With a penetration rate of about 10 per cent of the Ukrainian population in Winnipeg, “we haven’t grown by leaps and bounds,” says Dlugosh, adding that benefits like service in Ukrainian are no longer such a draw to third- and fourth-generation Ukrainians who speak English in their everyday lives.
“For many members, their account was opened by their grandfather, and this is their tie with the Ukrainian community,” says Dlugosh. “Potential members may not be as interested in belonging based on ethnic reasons. It’s coming down to what’s in it for me and who has the cheapest rates, and this is our biggest challenge now.”
In Toronto, Estonian Credit Union (5,000 members, $125 million in assets), founded in 1953, has discovered an effective way to rejuvenate its membership: get them while they’re young. really young. “We start as young as kindergarten so kids grow up thinking of us as ‘my bank,’” says Anita Saar, CEO. “When they graduate from kindergarten, we give them a stipend that gets them to open an account. And we pay their membership dues.”
Facing a decline in its original, founding membership — World War II refugees who came together to create the credit union in their church basement — Estonian Credit Union has aggressively targeted both younger and older youth. In addition to kindergarten stipends, it also offers $1,000 scholarships to university and college-bound students. “Usually everyone gets one,” says Saar. “And we make them come to the AGM to get it. That forces them to listen to my speech about why we’re such a great financial community. We’re an important part of the glue that keeps our small ethnic community going. And we’ve been successful at rejuvenating our membership with the younger generation.”
Estonian also hires a lot of young people from within its community. “Estonians tends to be introverted, and it’s hard to get jobs these days. We help them on their career paths,” says Saar, adding that they then tell their parents and friends about the credit union.
Investment in community culture
Investing in community is one of the hallmarks of all credit unions, and ethnic credit unions often play a critical role in providing financial support to cultural institutions like ethnic film festivals and newspapers, churches, youth, and sports groups.
“As much as the Estonian community is healthy, we are healthy,” says Saar. “That’s why we support the Estonian Film Festival, sororities and fraternities, and Boy Scouts/girl guides.”
Similarly, the Latvian Credit Union supports the Latvian National Federation with funds for schools and summer camps. It also purchases ads in the Latvian newspaper and is considering starting its own scholarship fund.
Khalsa, too, donates 10 percent of its net income, or $200,000 this past year, in the form of scholarships and bursaries to students pursuing post-secondary education. It also provides funding for sports clubs, as well as much-needed items for the homeless. All of which creates an environment where supporting members, giving back and fostering cultural well-being becomes a mutually beneficial relationship that can lead to successful integration into Canada for new immigrants.
“The great benefit of credit unions is that they’re small and adaptable, and responsive to the needs of their communities,” says Durdin. And in a country that is often said to have been built on immigration, being adaptable and responsive to the needs of an ever-evolving membership is just smart business. ◊
Open or closed?
While most credit unions allow anyone to become a member, some operate within
a closed-bond of association, whether by ethnicity, occupation, or community residency. For closed-bond ethnic credit unions, this means members must be of specific ethnic origin or a descendant of such members. “Closed-bond credit unions accept all kinds of members but some have bylaws that outline a percentage that must adhere to specific criteria,” says Martha Durdin, CEO of the Canadian Credit Union Association.
Recent changes to credit union regulations have allowed ethnic credit unions to broaden their membership. Carpathia, for example, while originally a closed-bond credit union, now operates on a hybrid model that allows it to accept associate members — people who don’t meet the original bond of association. “A change in the Credit Union Act has allowed us to open up in terms of business,” says Walter Dlugosh, CEO. “It’s been more lucrative for us.”
Estonian Credit Union switched to full open-bond membership when the rules changed in its region. “The Ontario financial regulations changed around 2010, allowing us to become open bond,” says Anita Saar, CEO. “We took advantage of that. We haven’t made a huge deal of it, but we have brought in people from outside our community. But we’re also growing within our own community.”
It’s a question many ethnic credit unions contemplate as their roles within their communities evolve over time. “Why remain closed bond? Is it still important? It’s a topic we revisit regularly,” says Dlugosh.
A tough transition
New immigrants to Canada face numerous financial barriers as they settle into life in their new country. A Prosper Canada document entitled Financial Literacy and Newcomers to Canada has identified four common financial challenges experienced by immigrants in their first five to
10 years in Canada:
- LANGUAGE: Many new immigrants lack the advanced language comprehension skills required to accurately translate Canadian financial terms and concepts.
- SECURITY: Lack of financial security in some countries creates a feeling of apprehension for many new immigrants about the safety and reliability of financial products and services in Canada.
- CREDIT HISTORY: A lack of credit in their home country or a credit history that isn’t recognized in Canada can make it difficult for new immigrants to access credit in the first few years after their arrival, making it challenging to purchase a home or start a business.
- FINANCIAL MISINFORMATION: Inaccurate or incomplete information from peers and more established members of their community, or cultural pressure to save face can prevent new immigrants from getting the right kind of financial help.
Ethnic credit unions are well positioned to address all of these challenges and ease the transition for new immigrants.