Alternatives for Providing

Credit Union Service

To Nunavut

Arctic Co-operatives Ltd.

May, 2004

CONTENTS

SUMMARY ……………………………………………………….. 3

INTRODUCTION ………………………………………………… 10

OPTIONS ………………………………………………………….. 12 Deposit insurance………………………………………… 12 Development under existing Nunavut legislation ……….. 13 Use existing Credit Union / Co-operative system……….. 17 Lending option ………………………………………….. 19

INFORMATION AND COMMUNICATIONS TECHNOLOGY …. 21

LEGISLATION AND REGULATION …………………………….. 24 Role of the government of Nunavut……………………… 26

OPERATIONAL APPROACH …………………………………….. 27 Clearing and banking operations…………………………. 29

STAGING …………………………………………………………… 30

FINANCIAL SUPPORT ……………………………………………. 32

FINANCIAL OUTCOMES …………………………………………. 35 Cost comparison among options………………………… 35 Deposit expectations…………………………………….. 35 Management option……………………………………… 36 Financial assumptions…………………………………… 39

APPENDIX A: Background..………………………………………… 44 First business plan…………………………………………….. 44 Other recent attempts…………………………………………. 44 Quebec Desjardins developments…………………………….. 45 Yukon Credit Union Evaluation………………………………. 46 Changes in the Credit Union System…………………………. 47 Anishinabek Nation Credit Union……………………………. 48

APPENDIX B: Projected statements………………………………… 49

RAE; May 25, 2004 2 SUMMARY

This Options Paper offers a description of one framework, the Credit Union model, to bring advanced banking products to the most remote communities in Canada. It is not a detailed feasibility analysis of this model but a general description of the potential that exists within it and a description of some options for how it could be implemented.

This model is made possible by using an existing network of co-op commercial locations, local self help development and electronic technology.

This paper does not propose a “best” solution nor does it compare “banks” to “credit unions”. Its purpose is to provide information on the credit union alternatives available. Its main conclusion is that there are feasible means by which existing businesses (co- operatives) can enable delivery of financial services to Nunavut communities.

The concept is to put in place one to three main offices (credit unions or branches of other Credit Union institutions) that serve a series of sub-branches located in co- operatives in the various Nunavut communities. A sub-branch is a full or part time bank teller located in the store who is connected with the main branch via computer. A member will be able to access his/ her account from any sub-branch or on-line.

The main branch is in turn linked to a southern service bureau, credit union central or large credit union, or even to all three. These linkages will provide access to clearings, national financial systems, investment networks, information processing and banking expertise.

The financial and developmental advantage of the credit union option is found in using the existing co-operatives. These co-operatives offer existing physical facilities, electronic network and local volunteer networks. Importantly, they offer an example and focus for implementing peer lending programs and financial education processes without needing to create a credit union in each c