By Homer Fager
The craft industry-cooperative movement can be traced back tothe mid-1700s and the beginning of the Industrial Revolution, when local craftsman found themselves with little access to markets and financial services as a result of the newly created industrial processes.
Although cooperative arrangements and principles of cooperationexisted long before, the cooperative movement began with the application of cooperative principles to business organization. The first cooperative successes were in retail and agricultural crafts.
The definition of “craft” industries is not entirely consistent, but typically is a business model based on their supply chains and production systems, along with consumers being within a regional/local community. The “craft” industries definition of regional/local community has been defined as the interacting regional within which a business services their customers. An example would be the baker who sells his bread to the local residents and sources his flour from a local mill, which sources itsgrain from a local farmer.
A leading principal within the craft industry is “local is the new global”.
The craft credit unions share the same regional characteristics as the brewer and baker. The credit union sells its financial productsto the local residents and regional businesses and sources its funds from the same community. The craft marketplace can be a circular set of events: the brewery and the bakery obtain operating funds from the credit unions, the local residents and businesses deposit their monies in the credit union, and the brewery and the bakery deposit their revenues from local residents and businesses, etc.
A Tale of Two Enterprises
Craft breweries and small (craft) credit unions are a tale of two craft enterprises representing the success against decline story of one versus the other. In the past 60 years, one has prosperous, craftbreweries, while the other, craft credit unions, has deteriorated.
Craft breweries numbered 100 in the 80’s and 1000 by 1996 and 7,000 by 2018. Out of 17,000 plus U.S. credit unions in 1970,there are fewer than 5,000 today.
The success of the craft breweries is that true craft brewers do not desire to be Goliaths, they want to be successful Davids. A key to being a successful craft credit union is to understand by definition you are a regional enterprise and only need to measure yoursuccess within your local community.
As a craft credit union your consumer focus is the local community; your task is to create strong ties with local residents and business. Just because you are not a mega-giant does not mean you cannot experience solid growth and financial health. Many craft brewers have successfully created strong community ties resulting in a revival of community economic development.
Three Advantages
In their book “Beer School: Brewing Success at the BrooklynBrewery,” authors Steve Hindy and Tom Potter, founders of the Brooklyn Brewery, identified three advantages craft enterprisesenjoyed. I agree with their three advantages, however for different reasons. My explanations of the advantages are based on the credit union roll within their community.
- The competitive advantage of "local": Build local relations by leveraging member’s community ties and partnering withmember’s employers and social organizations.
- Small is the new big: Deliver a specialized level of banking service that mega institutions cannot match.
- Education is key: Educated consumers are integral to success; therefore, your education process must communicate basic knowledge in a form passable from existing members topotential members, which leads to a culture of “consumer-focused banking.”
Sense of Shared Community
The U.S. credit union movement was born out of a sense of shared community (craft industry) and was based on occupation, association, or geography. These bonds still hold tight, especiallyamong small institutions. Along with their shared people helping people beliefs these institutions offer a consumer-focused banking alternative to payday lenders and impersonal mega financialinstitutions.
One reason for the success of the craft breweries was the lowering of the excise tax rate, thereby releasing funds for reinvestment in their businesses and employees. Small credit unions need regulatory reforms to allow them to fund programs directed to low- and moderate-income consumers. Craft credit unions can be especially beneficial in assisting low-income consumers improve their financial status.
A Force Multiplier
Ensuring craft credit unions can be proactive in meeting the needs of their communities they must be able to match the mega financial institutions’ economies of scale. Just as the coalitionthat rallies the craft breweries created a force multiplier, it’s also the solution for craft credit unions to equalize the advantages ofmega institutions and is the change agent for the resurrection of the craft credit union movement.
As a financial network, craft credit unions must maximize their impact to benefit low-income consumers’ economic justice status. As a coalition craft credit unions can leverage proven cloud-AI technologies to deliver the digital tools and digitized processes require to comply with member’s cloud mobility expectations and expand their underserved and unbanked consumer activities.
Homer Fager is the former president of core data processor FedComp Inc., a small business owner and advisor, and a multi-million-dollar project manager, providing him an extensive resume of experience in governance, risk, and consulting work. He began his 40-year career as a degreed aerospace engineer with major US Industrial companies. In his 30 plus years as amanager with multinational companies he severed in various positions, Project Manager to C-Level in industries