GLASGOW, Scotland-A former prime minister of the United Kingdom firmly believes credit unions have a strong and influential role to play in finance around the world, and with it an opportunity to be seized upon.
The Right Hon. Gordon Brown, the former prime minister who was prior to that Chancellor of the Exchequer (equivalent to the U.S. Treasury secretary), told credit unions assembled for WOCCU's World Credit Union Conference here that credit unions as organizations have "brought morality into the discussion of money, have brought conscience into the supply of credit, and have given a human face to banking and finance in this world."
At several points during his remarks he noted that the recent financial crisis has only highlighted the importance of such an "ethos" in business.
While credit unions in the U.K-and in particularly England-have remained smaller players with a low profile, that has changed in part over the past decade as the result of changes Brown helped champion while in office. That included the creation of the Growth Fund in 2004, following recognition that many people were being financially excluded and could not find affordable credit (often referred to as the underserved in the U.S.) The fund was created to increase the availability of affordable personal loans via third- sector (not-for-profit) lenders, such as credit unions.
The creation of that fund, said Brown, who remains a member of Parliament representing Kirkcaldy and Cowdenbeath in Scotland, where he was born, has led to a 175 percent increase in CU membership over the past 10 years, and a 350 percent increase in the assets as the result of the $175 million that credit unions have helped loan out.
400,000 Beneficiaries
"Locally you make a difference in every area in which you operate. Four-hundred-thousand people have benefited as a result," said Brown. "One of the astonishing effects of that is the money saved in what would have been in crushing payments is almost as much as the money in the Growth Fund. People have been freed from the loan sharks and the harassment that comes with that. Savings are 30 percent above what they were a year ago."
Brown, however, said that what he finds most "exciting" isn't the accomplishments of credit unions to date, but those yet to come. "It's not just your achievements of the past, but your commitment to be at the service of people in the future; the principle that everybody is a neighbor of everybody else. In situations where there is poverty and injustice and suffering, where there is a need to act, there is a moral obligation to meet the needs of our other citizens."
Brown said the period of social and economic change that is coming around the world may be even greater than many in his audience anticipate, and will be far more "dramatic" than even the change of the last 20 years.
"We've got to prepare ourselves for that world," he said.
An Asset Taken For Granted
One challenge, said Brown, will be finally leveraging a strength credit unions take for granted.
"You have the one asset that money can't buy, the one asset banks around the world would spend billions of dollars on but they can't buy, and that is trust based on mutuality," said Brown. "There is enormous opportunity. The challenge is to harness all the new technology to the basic idea you have that when people work together for a common purpose there is nothing that you cannot achieve."
The next decades will mean the emergence of an even broader global economy in which perhaps a billion people will join the middle class, reminded Brown. "People will be willing to spend for the best financial services, he said. "But we will also see huge numbers of people who will lose out. They will understand their relative disadvantage, which will be far more visible, than ever before."
He cited, in particular, Africa, which has 15 percent of the world's people (and 25 percent of its young people), but just 1 percent of the world's wealth. "What are we going to do to make the world a better place, and how can the financial mechanism we are a part of, the credit union movement, make a difference?" asked Brown, who believes there must be greater coordination among the world's economies.
Reiterating a theme he raised earlier, Brown said one thing the world has learned it needs is a better financial system.
"You have one asset that most of our financial institutions found that they did not have when it came to the crisis of 2008-09. What they found was that people did not trust them; they found their behavior was so unacceptable that the financial markets froze and nobody trusted anybody else," Brown said. "It told us something about ourselves and the ways we relate to each other. If you buy something from someone in your local market, you expect them to act responsibly and to have the values you expect in your own family. People ask then why it is that some of our major financial institutions forgot even those most basic values and acted in a way that was irresponsible. People are trying to understand why some of these businesses were advising one client to do one thing and another client to do another. People are starting to understand that at the base of a financial system it's not enough to have good mathematical models and executives who can fly around the world, it's necessary to have people who have good moral principles."
Future Crashes
Those principles, said Brown, are evident in credit unions and if other institutions do not adopt the same, there will be "financial crashes in the future."
"You are built on the principles of mutuality so people can see that each of us has to benefit and it has to be built on trust. Where we cooperate we achieve more rather than when we compete against each other. You cannot walk away from the notion that there is a fiduciary duty. Without it, the good undercut by the bad, and the bad undercut by the worst."
Brown applauded the World Council's efforts to be heard during G-20 discussions and said credit unions now face a simultaneous opportunity and a challenge.
"The challenge will be to harness all the massive developments taking place in technology without losing sight of the human purpose and dimension in relationships," he said. "There is a big agenda ahead. I hope you can set it not just for your own institutions but for the world of finance.
"At the core of all the religions of the world is a central theme, do as you would have other people do to you," continued Brown. "Treat your neighbor as yourself. Call it, if you like, the moral sense. Call it conscience. Call it duty. Call it, as Abraham Lincoln did, the better angels of our nature. That is after all what is at the heart of the credit union movement."
