Credit union must be community-driven: Simailak
Atuqtuarvik studying made-in-Nunavut financial institution
The government of Nunavut has sidestepped any direct role in the territory’s growing credit union movement, saying community activists need to take the lead in creating an alternative to profit-driven banks.
David Simailak, minister of economic development, said the credit union movement will only succeed if support comes from citizens first, before large institutions like government get involved.
“We all know that a credit union movement must be community-driven,” Simailak said in an interview. “That’s the only way something like that is going to work.”
Credit union supporters have wondered what the government will do since the Bank of Montreal announced last month that they will pull out of the territory in November. Many customers and residents have criticized the bank’s decision, saying it proves Nunavummiut should have a local solution to residents’ financial needs.
For now, Simailak said the government won’t commit any funding to help replace the bank, although he will “seriously” consider any future funding proposals.
He acknowledged that efforts to create a Northwest Territories credit union failed in the mid-1990s when fundraising by Arctic Co-operatives Ltd. fell about $1 million short of the $6 million required to create the new financial institution.
Without government backing, Nunavut’s renewed credit union movement, including a growing base of volunteers in Iqaluit, will have to depend on the support of Nunavut Tunngavik Inc. and Atuqtuarnvik Corp., a lending agency for Inuit businesses.
But their support is not unconditional. Atuqtuarvik Corp. launched a feasibility study this month on whether Nunavut should create its own financial institution, but won’t be limiting itself to credit union research. The group will also look at whether it would be better to set up a full-fledged bank or trust company.
Ken Toner, president of Atuqtuarvik, said the study will determine how a new institution can fill the gap left by banks uninterested in doing business in the communities.
Toner, who worked at the Bank of Montreal in Iqaluit 10 years ago, said other banks have failed to step in to communities around the territory because of their profit-oriented structure.
“Usually, with a bank, it’s one-size-fits-all,” Toner said. “They’re focused on the bottom line. They have shareholders and they expect a reasonable return.
“We’re trying to explore other options, other means of delivering banking services.”
Toner said the upswell of interest in forming a made-in-Nunavut alternative to southern banks comes at an opportune time. The federal Bank Act has changed recently, allowing groups to start up their own bank for as little as $5 million.
Also, banks that already exist are now allowed to contract their services to third-party organizations that deal in loans, rather than being forced to set up an entire operation in a new market from scratch.
However, Toner noted that the territorial government will have to step in if Nunavut wants a credit union of its own.
While banks fall under federal regulations, he said credit unions require provincial or territorial laws in order to operate. Senior bureaucrats in the GN’s finance department said current legislation in Nunavut allows groups to create a credit union, but technically, can’t open it for business.
The GN and NTI signed an economic development strategy last year, stating that they would aim to form a community savings and loans network, such as a credit union, by 2008.