News reports suggest that up to 50% of Canadians will be seriously stressed due to the measures now in place to curb the spread of Covid-19. Suddenly the flow of funds that comprises our ‘economy’ has stalled. Some 2 million workers are no longer really working and will be applying for relief under Federal programs. The MNP survey referenced above clearly indicates that many are worried, and too many have no savings to tide them over. Will credit unions respond?
In many ways credit unions were created to respond to working people in just such circumstances. Traditional financial institutions had viewed modest income households as higher risk and low priority. Working people created their own institutions.
BC credit unions will be on the spot. there will be a many members requesting help. I know many small credit unions are already implementing emergency policy measures to anticipate requests and to bridge individual’s cash flow deficiencies, perhaps while they wait for the payments that may be due from the Federal government.
The real pain will be felt deepest by those without LOC’s and credit cards, low income households that are living closer to the line. Often, these are people with less stable work histories, and poor credit scores. Too often these are the borrowers who are forced to go to loan sharks (aka payday lenders). Too often, they are ‘unbanked’.
Will BC credit unions seek to serve this population or concede them to the predatory lending community? Can credit unions be the ethical lender?
BC credit unions have @$2B in available liquid investments that can be mobilised. The BCFSA has informally indicated that additional lending is expected and the resulting reduced capital ratios are acceptable. Now it is up to credit unions to ensure that the loans go to those who truly need them, not just those with good collateral and relative advantage.
[image from the pledge of the Common Good Army that created BC’s first credit union; “To make honesty and justice the basis for our dealings with our fellow man.”]
Credit unions certainly need to step up and help many as many people as possible bridge the current difficulties. And of course, the long term solutions will involve transforming our social and economic systems so that fewer people find themselves in a vulnerable financial situation.
Relief must be generous and widespread
Marshall Auerback is a market analyst and a researcher at the Levy Economics Institute.
https://www.nationalnewswatch.com/2020/03/30/canadas-response-to-the-coronavirus-better-than-the-us-worse-than-eu/#.XoLLc4hKi-8
“We can’t simply go back to the status quo ante whereby a large portion of Canada’s population remains vulnerable to the effects unleashed by this pandemic. Policy choices made over decades have led to growing inequality which, aside from the moral issues, inhibits economic growth as more and more of GDP is funneled to those at the top that save the most. We need to grow quickly to re-establish full employment. Ottawa should also move further to permanently restructure the “gig economy” by introducing reforms to force employers to pay sick and holiday pay and to treat all workers as employees rather than independent contractors. This global pandemic should also induce a rethink of relying entirely on far-flung supply chains to provide so many manufactured goods. We need to redomicile many supply lines, at least as far as essential goods go, which will also bring back many skilled, high-paying jobs for Canadians.”