Credit Unions in Canada: Design Principles for Greater Co-operation
Fulton, M., Fairbairn, B., & Pohler, D. (September 2017) Credit Unions in Canada: Design Principles for Greater Co-operation. Centre for the Study of Co-operatives: University of Saskatchewan. Blog summary here.
The Canadian credit union system is facing unprecedented challenges, and credit union leaders are struggling with how to structure their governance arrangements, not only within their own organizations but also at the system level. This report highlights the efficiency-autonomy trade-off that is present in co-operation among credit unions.
In attempting to create new national organizations, Canadian credit unions face a trade-off between efficiency and autonomy. The consolidation of the credit union system is ultimately a problem of governance. Unless a governance structure is found that fosters shared norms and values in addition to economic benefits, it is unlikely that credit unions as a system will be able to overcome free-riding behaviour, foster trust and legitimacy, and adapt and respond to a rapidly changing and uncertain environment. All these challenges must be met if the credit union system is to achieve the efficiencies required to operate in Canada’s highly competitive financial industry. This paper identifies six design principles that can contribute to the good governance of a new national organization. These principles have proven valuable in achieving co-operation in a range of other settings, two examples of which are also discussed in the report.