Tag Archives: credit unions

Can cooperatives help us create an equitable economy?

Can cooperatives help us create an equitable economy?

By Salvador Menjivar | LinkedIn | Twitter

Salvador is Beneficial State Foundation’s Executive Director based in Oakland, CA.

There are many different types of cooperatives in the U.S. and some have been more successful than others in establishing roots in the communities where they reside. Contrary to popular narratives, co-ops are as American as apple pie, and they have a long history in the United States.

In 1752, Benjamin Franklin founded the country’s first federally-recognized cooperative business—the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Moreover, by refusing to ensure houses not up to fire safety standards, the company set new criteria, which would eventually be incorporated into building codes and zoning laws, for housing safety.

Cooperatives also played a key role in the South for enslaved Africans and African Americans seeking to build lives for their families following the Civil War. W.E.B. Du Bois often spoke of cooperative economics in his work, and recognized the Underground Railroad as a co-op in which abolitionists shared resources to help enslaved Africans escape. Vigilance committees within the Underground Railroad provided food, clothing and shelter, and raised revenue so these resources could be readily available for runaways. Additional cooperatives were later established to help build wealth within Black communities, such as the Freedom Quilting Bee in Alberta, Alabama, which helped African American women earn money collectively, enabling its members to purchase land and a factory. Ownership of their labor allowed some of the women to make enough money to purchase their freedom from sharecropping.

Contrary to popular narratives, co-ops are as American as apple pie, and they have a long history in the United States.

Today, co-ops are defined as legal entities created and operated with the intention of benefiting their members. There are multiple cooperatives structures which are commonly used today: consumer co-ops, worker owned co-ops, employee owned businesses, and real estate co-ops.

REI is a well know consumer co-op, where people come together to buy products at better prices. Worker-owned coops are increasing, but still rare in the U.S.; according to some sources there are just over 300.

Alabama Freedom Quilting Bee, Encyclopedia of Alabama

Employee Stock Option Plans (ESOP) are slightly different than co-ops—cooperative structures grant each member or worker-owner an equal share of the business AND an equal vote in decision-making, regardless of pay or seniority. In the case of an ESOP employees are granted the option of acquiring company stock, usually at a discounted prize. However, the objective of an ESOP is usually to reward employees for the growth and profitability of the business, not to create a distrusted ownership of the company. Kelly-Moore Paint is one of the most widely-recognized companies with an employee stock ownership program.

Real estate co-ops facilitate the ownership of housing by members, making property ownership more affordable. For example, the NYC Real Estate Investment Cooperative (NYC REIC) consists of more than 400 members who “are pooling their money and power to secure space for community, small business, and cultural use” in New York City. In California, the East Bay Permanent Real Estate Cooperative was born out of a collaboration between the People of Color Sustainable Housing Network and the Sustainable Economies Law Center. The East Bay Real Estate Cooperative is “designed to remove land from the speculative market, create permanently affordable housing and commercial space…and assert democratic control into the development process in the face of mass displacement in the Bay Area,” says Chris Tittle, Director of Organizational Resilience at the Law Center.

Some of the most successful co-ops in the U.S are financial co-ops, also known as credit unions, and they can provide a great alternative to traditional big banks. Credit unions are not-for-profit institutions that either invest profits back into the organization or distribute profits among members as dividends in the form of earned interest. Technically, credit unions are owned by their account holders, known as members. As not-for-profit institutions, credit unions pay no state or federal taxes, meaning they can charge lower interest rates than banks for most financial services. Today, more than 100 million Americans are members of credit unions in the U.S.

It’s time for a new economic system—one that balances the needs of all its stakeholders.

Co-ops offer great hope for addressing one of the biggest problems of our current economic system: the concentration of wealth among a shrinking number of investors in big corporations and banks. From 1979 to 2007, “paycheck income of the top 1 percent of US earners increased by over 256 percent.” During the same period of time, “the bottom 90 percent of earners saw little increases to their average income, with a dismal 21 percent increase from 1979 to 2015.

Stagnant wages in the U.S. are just one of many factors that have made home ownership a lofty goal for countless working-class families. Homeownership remains a significant driver of wealth in the United States, which is why many housing rights advocates are looking at collective ownership models that make home ownership a possibility for people who have historically been excluded from the housing market. In general, co-ops offer an opportunity for communities to reimagine what ownership looks like with a lense towards equity.

Cooperatives represent a solution that can help increase ownership within untapped communities, build generational wealth, and foster economically resilient neighborhoods. A robust and innovative co-op movement is one of the keys to an equitable economic system that abandons models which value profits over people and the planet. It’s time for a new economic system—one that balances the needs of all its stakeholders, including workers, community, the environment, and even investors.

This blog post reflects the author’s personal views and opinions, and does not represent the views and opinions of Beneficial State Bank and/or Beneficial State Foundation.

How do I know if my bank is good?

How do I know if my bank is good?

By Jhana Valentine | LinkedIn

Jhana is Beneficial State Foundation’s Social and Environmental Impact Associate based in Oakland, CA.

“How do I know if my bank is good?”

When I was first asked this question, I was surprised and a little embarrassed that I didn’t have an answer. At the time, I’d started an internship at Beneficial State Foundation and experienced how easy it was to move my money into a community bank. I was energized to see the Defund DAPL movement gaining momentum. I was trying to convince my best friend that not all banks were bad and that many banks and credit unions actually do a lot of good in their communities so she should move her money to one of them. I didn’t have a name for it at the time, but I was encouraging her to join the Banking on Values movement.

The Banking on Values movement, led by the Global Alliance for Banking on Values, aims to positively change the banking sector by influencing the ways in which banks and other financial institutions serve human needs, our environment, and the real economy. Consumers can engage in the Banking on Values Movement by encouraging their bank to adopt values-based banking principles or by moving their money to bank that already does.

My best friend was pressing me, as she often does, to get to the heart of the matter: “Are there principles or practices that distinguish a good bank? How do I know if my bank is upholding these principles? How do I know that my bank isn’t funding projects I don’t support, like the Dakota Access Pipeline?”

The Banking on Values movement reminds us that our deposit dollars don’t disappear into a black box

Underlying the over-simplified binary of “good” and “bad” banks are our values.  I value fairness and equity.  So when I hear about a bank charging people of color higher interest rates than white people, that goes against my values and I don’t want my money to support those practices. When I learn that my bank actively supports projects that preserve and develop affordable housing, I feel proud to bank with an institution that aligns with my values.

The Banking on Values movement reminds us that our deposit dollars don’t disappear into a black box. That money is recirculated in the economy, either by investing in the people and products we see in the real economy, or participating in the financial economy of stocks, securities, and speculation. Values-based banks demonstrate that a bank can generate positive social and environmental impact and remain financially sustainable by making loans directly into the real economy.

In my role I track and measure the impact metrics of Beneficial State Bank, a values-based bank.  We look at numerous social and environmental indicators of our bank’s loans, from the number of kilowatt hours produced by clean energy projects to the number of small and local businesses that have distributed ownership models, such as cooperatives. This work has given me an in-depth understanding of how good banking can be translated into concrete indicators, policies, and practices that can help any one of us determine if our bank is aligned with our values.

I often think back to my friend’s questions because they remind me that the impact metrics I’m collecting can help a consumer make an informed decision about where they bank. My hope is that one day all banks measure and publish not only their financial indicators of success, but also their social and environmental impact metrics. Drawing upon the work of the Global Alliance of Banking on Values members, who are working together to develop best practices for impact measurement, I’m now much more equipped to answer my friend’s questions with concrete examples.

Here are some principles and practices that distinguish a “good” bank:

To determine if your bank is upholding these principles and practices, you might have to do some digging:

  1. Read through your bank’s website. Do they share a mission and vision that resonates with you? Do they provide concrete examples of how they are living up to this mission? Do they publish information about what they’re not supporting, such as private prisons and pipelines?
  2. Talk to your banker. How is the bank involved in the community? Do they have special products or pricing that serve communities that have historically been left out of the banking system?
  3. Check their certifications and associations. If your bank is a certified Community Development Financial Institution, Community Development Credit Union, or certified B Corporation, or a participant in the Global Alliance of Banking on Values or Community Development Bankers Association, there’s a good chance they’re a values-based bank.

Thanks to dedicated organizations, you can check if your bank is funding certain projects that have negative social and environmental impacts:

  1. Food and Water Watch will tell you if your bank has funded the Dakota Access Pipeline.
  2. Rainforest Action Network will tell you if your bank is funding activities that directly contribute to climate change.

For me, values are at the heart of the matter, whether I’m picking out food at the grocery store, deciding how to spend my free time, or putting my money into a bank or investment vehicle. I know that we all have a unique blend of values, but I think there are as many similarities among people as there are differences. I think many of you would agree that you don’t want your money working against you. And so, if you only saw your bank’s purely financial statements, that information alone wouldn’t convince you that your bank is good. I think you’d want more comprehensive information. The Banking on Values movement has inspired me to consider us all as stakeholders of the banking industry. As a depositor stakeholder, I want my bank, which holds my money, to support the communities and ecosystems that sustain, nourish and make my life beautiful. What do you want from your bank?

For more tips on how to find a values-aligned bank near you, check out our Move Your Money toolkit.

This blog post reflects the author’s personal views and opinions, and does not represent the views and opinions of Beneficial State Bank and/or Beneficial State Foundation.