Progressive Canadian CUs Share Lessons In Biz Lending

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Interest in commercial lending isn't limited to credit unions in the United States. Indeed, in many respects U.S. credit unions trail the programs already in place among Canada's credit unions,

That was clear when representatives of three Canadian CUs were chosen to share their insights and business practices related to their own business lending efforts before WOCCU's International Leadership Institute here. In two cases, specific business niches have been carved out by credit unions in British Columbia, details of which are shared above (and in future issues).

First, an overview. In British Columbia, and primarily the competitive Vancouver market, credit union loan portfolios are comprised primarily (65%) of first mortgages. The remainder of the portfolio is business loans (about 17%) and consumer loans (about 15%). "We've found a phenomenal amount of growth in the small commercial loans, while the residential mortgage side is level, as are consumer loans," observed Wayne Nygren, CDEO of Credit Union Central of British Columbia, which is both a trade association and the provincial corporate.

Despite the competition between Vancouver's financial co-ops, Kim Andres, VP of CU development with Credit Union Central, noted that three years ago VanCity, CoastCapital CU, Envision CU, and Credit Union Central formed an alliance to expand service to what are referred to as SMEs (small and medium-size enterprises).

"It is estimated that commercial members generate three times the net return of retail members," said Andres, noting that Canadian credit unions have a commercial marketshare of approximately 18%. "It is profitable if you manage it well, and that's the key. Don't get into it if you can't manage it well."

Canada's credit unions serving English-speaking markets are apparently succeeding. A survey of 10,000 members by the Canadian Federation of Independent Business rated credit unions as No. 1 for service among financial institutions. For other credit unions to achieve similar results, Andres said they must be innovative, which she defined as "using an asset you already have and using it differently. Most credit unions already have a good, solid core of functional services that can be leveraged for business services. You just may have to backfill a bit."

Before any credit union launches business services, it must know itself, its members, its market and its competitors, said Andres. "Assess your competitive strengths, assess your market opportunity, develop your product service and value proposition, take a lot of time to plan the launch, and manage the results," she advised.

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