Partnerships with food cooperatives have become a sweet spot for credit unions, and a look at five strategies show how working with non-FI cooperatives can be a profitable investment in not only the community but also the credit union.
Partnerships can take various forms and offer various benefits such as ATM locations, loan growth, joint marketing ventures, and credit card offers.
1. Find Like-Minded Grocers
In the Shenandoah Valley,Park View Federal Credit Union($130M, Harrisonburg, VA) partners with Friendly City Food Co-Op.The grocer opened in mid-2011 after it raised $673,000 in founding loans from its members, says John Beiler, CEO of PVFCU.
CU QUICK FACTS
PARK VIEW FEDERAL CREDIT UNION
data as of 06.30.2014
- HQ: Harrisonburg, VA
- ASSETS: $130M
- MEMBERS: 8,976
- BRANCHES: 4
- 12-MO SHARE GROWTH: 4.34%
- 12-MO LOAN GROWTH: 10.36%
- ROA: 0.49%
According to Beiler, the co-op, which is now a SEG of the credit union’s, offers the only PVFCU ATM in downtown Harrisonburg, but that’s not where the relationship ends.
We service their business account, Beiler says. We’ve participated in their annual meetings, run loan and membership specials, and provided financial education to their employees.
The credit union has made approximately 80 loans to the 105 food co-op members who used that membership to join the credit union. The loans have a current balance of $2,652,906, Beiler says, and there has been one charge-off, for $977.
It’s been a good way for us to expand our reach into the broader community, Beiler says. It’s the easiest way for someone to join our credit union who wouldn’t otherwise be eligible.
What Is A Food Co-Op?
Like credit unions, food co-ops are owned by their members. Instead of distributing financial services, however, they offer groceries or nonperishable goods. Members often get to make decisions regarding the production and distribution of theirco-op’s product and tend to opt to patronize local producers and sources.
Next: Lending To The Growers
2. Nurture A Grower’s Market
Self-Help Credit Union($672.6M, Durham, NC) has put together loans for Weaver Street Market in nearby Carrboro, NC, that have included terms and structures the foundling organization can accommodate.
Self-Help loans helped launch the market in 1988 and later expand it to better compete with the likes of Whole Foods and Trader Joe’s. When others wouldn’t finance the cooperative grocery store, Self-Help was there.
CU QUICK FACTS
SELF-HELP CREDIT UNION
data as of 06.30.2014
- HQ: Durham, NC
- ASSETS: $672.6M
- MEMBERS: 60,713
- BRANCHES: 19
- 12-MO SHARE GROWTH: 15.35%
- 12-MO LOAN GROWTH: 26.21%
- ROA: 1.20%
Self-Help is a community development lender and this project was creating jobs, offering ownership opportunities for workers and community members, and providing healthy food for the community, says Bob Schall, who heads up capitalizationat Self-Help and serves as president of the Self-Help Ventures Fund. It fit our mission.
The credit union structured the original financing package to allow the co-op time to grow, Schall says. Now, Weaver Street has three stores, a wholesale bakery, and more than 15,000 community members and 190 employees that help support 180 local farmersand other producers.
Self-Help, meanwhile, continues to work with dozens of cooperatives of various kinds, Schall says. This year we financed the new location of the Hendersonville Community Co-Op inwestern North Carolina and we’re developing commercial property that will rent to a new food co-op in Durham.
Next: Be Aware Of Food Deserts
3. Make An Oasis In A Food Desert
ASI Federal Credit Union($312.6M, Harahan, LA) began investing in other co-ops in the years following the devastation of New Orleans by Hurricane Katrina in 2005. Those effortsinclude helping to fund the New Orleans Food Co-Op, another grocery chain’s flagship site, and several smaller projects.
Since Hurricane Katrina, ASI has seen a steady growth in membership as well as commercial, consumer, and mortgage loans, says the credit union’s CFO, Hema Banangada. Our members have been loyal, knowing that ASI is always lookingto reinvest in our community.
CU QUICK FACTS
ASI FEDERAL CREDIT UNION
data as of 06.30.2014
- HQ: Harahan, LA
- ASSETS: $312.6M
- MEMBERS: 70,319
- BRANCHES: 14
- 12-MO SHARE GROWTH: -1.23%
- 12-MO LOAN GROWTH: 13.03%
- ROA: 0.36%
ASI uses its status as a community development credit union to participate in the Healthy Foods Revolving Loan Fund, which targets census tracts designated as food deserts, including one that is now hosting the New Orleans Food Co-Op,the city’s first food co-op.
By working with the New Orleans Food Co-op, we saw an opportunity to give back to our community, and provide a source of fresh food, post Katrina, to an underserved area, Banangada says. Having our community center down the streetmade us close neighbors in a project we wanted to be involved in.
The ASI CFO adds this advice: Communication and research are key. Do your homework and find out as much as possible about the borrower: How much experience do the managers have in their industry? How are they going to spend the funds? Have theytaken everything into account in regard to their revenues and expenses, insurance, and taxes?
Food Deserts & Credit Unions?
Food deserts occur in rural and urban areas and present an opportunity for credit unions to invest in the community while addressing tangible, everyday needs. Read more on CreditUnions.com today.
| CLICK TO READ MORE | AND EVEN MORE |
Next: New Heights Through Cross Promotion
4. Promote Across Cooperatives
Summit Credit Union ($2B, Madison, WI) is a major player in the capital city’s annual Co-Op Connection,a free event that showcases local co-ops, the products and services they offer, how to join or start one, and the value they bring to the community. At this year’s four-hour event, Co-Op Connection featured more than 25 participants.
It’s an opportunity to live Cooperative Principle No. 6 cooperation among cooperatives, says Rebecca Gerothanas, senior vice president of operations at the 139,176-member Summit.
CU QUICK FACTS
SUMMIT CREDIT UNION
data as of 06.30.2014
- HQ: MADISON, WI
- ASSETS: MADISON, WI
- MEMBERS: 139,176
- BRANCHES: 30
- 12-MO SHARE GROWTH: 3.18%
- 12-MO LOAN GROWTH: 16.06%
- ROA: 16.06%
She also points to the credit union’s partnership with the Willy Street Co-Op in Madison, a natural foods grocer that works with more than 180 local farmers and vendors. According to Gerothanas,Summit has adopted Willy Street’s methods in livening up its annual member meeting.
We transformed our traditional annual meeting into a family-friendly festival, with music, prizes and kids’ activities, Gerothanas says. More than 1,000 members participated in Summit’s 2014 Member Fest.
In addition incorporating what it’s learned from other co-ops into its own operations, Summit has also been investing more in and around its hometown. It’s lending relationship with local member-owned ventures include a very tangible$10 million in credit to grow in the hands of cooperatives through Summit Credit Union business loans and lines of credit, Gerothanas says.
Next: Credit Cards Help Co-Ops Click
5. Promote Products To New Audiences
The partnership between Wedge Community Co-Op and SPIRE Credit Union ($619.2M, Falcon Heights, MN) in the Twin Cities centers on cards, including a Wedge-branded Visa card.
The store’s website proclaims: Banking with SPIRE isn’t only a smart choice for the short-term payback, it’s a smart choice for the long haul. Join and discover the creditunion difference great rates, member ownership, local decision-making and truly local service. It’s the same cooperative philosophy you’ve come to appreciate!
Casey Carlson, vice president of marketing at SPIRE, says to make the partnership tick, the credit union must help Wedge members overcome skepticism about credit cards and ensure they understand how the program benefits the causes they care about.
CU QUICK FACTS
SPIRE CREDIT UNION
data as of 06.30.2014
- HQ: FALCON HEIGHTS, MN
- ASSETS: $619.2M
- MEMBERS: 65,380
- BRANCHES: 12
- 12-MO SHARE GROWTH: 2.87%
- 12-MO LOAN GROWTH: 1.60%
- ROA: 0.67%
For example, as the Wedge explains on its website, when members use SPIRE’s Wedge-branded Visa card, SPIRE shares interchange fee from that purchase with the Wedge. In turn, the Wedge donates the money to a non-profit it started in 2007, theOrganicField School, to train the next generation of organic farmers.
Once they really understand how the credit card works, they love it, Carlson says.Investing in our surrounding communities is very important to SPIRE. We have a philosophy we call Giving Back’ and Wedge credit cardpartnership is an example.
The Cooperative Way
These examples, and others like them, underscore the power of the cooperative model.
It’s a powerful business model, says Adam Schwartz, founder of the consulting firm The Cooperative Way. Schwartz, who leads seminars on the subject, adds that partnershipslike these can help secure the industry’s future.
Here we are about 75 years in as a real movement and we’ve lost some of that original, founding mission, Schwartz says. So unless we work hard to keep reminding people of the difference, we’re going to continue fadingaway. People are going to see us as just a bank with a different name.