Executive Summary
Given the similarities between credit unions and other types of cooperative organizations around the world, Filene asked agricultural cooperative experts, Michael L.Cook and Fabio. R. Chaddad, to study how credit unions might use the experience of North American and European cooperatives to find ways to meet their own capital needs.
Cook and Chaddad explain how different types of cooperatives around the world create and form capital. Their study reveals that cooperatives have a variety of flexible and effective capital formation tools at their disposal. U.S. credit unions, on the other hand, rely exclusively on retained earnings for capital formation.
What is the research about?
To meet business challenges, cooperative organizations and U.S. credit unions face a similar constraint: how to raise capital in a cooperatively held organization?
To answer this deceptively simple question, Cook and Chaddad, explain how different types of cooperatives around the world create and form capital. Previous Filene studies on credit union capital issues discuss the significance of U.S. credit unions’ limited capital formation tools. What we learn in this study is that cooperatives of all shapes and sizes around the world have a variety of flexible and effective capital formation tools at their disposal. In contrast, U.S. credit unions are the one-trick pony of capital formation in the world of cooperatives, since the only capital formation tool available to them is retained earnings. This study introduces us to capital formation tools by looking at our distant cousins in the agricultural cooperative world and our closer relatives in the European cooperative credit marketplace.
What are the credit union implications?
The goal of this study it to broaden the view of U.S. credit union in regards to capital formation. Although U.S. credit unions are currently well capitalized, the future business challenges, and thus the capital needs, of the industry may require such flexible and varied tools enjoyed by other cooperatively held organization.