CO - OP DEVELOPMENT ACTION
Cooperation, c'est magnifique!
U.S. co-op centers take a closer look at Quebec’s phenomenal co-op growth
Editor’s note: Margaret Bau, USDA co-op
specialist for Wisconsin, and Susan Davis,
Iowa State University Extension, assisted
with this article.
hen Alphonse
DesJardins helped the
first credit union in
North America
incorporate in 1900, he
probably did not guess that it was the
beginning of a cooperative movement
across Canada and the United States
(since credit unions are basically
financial service co-ops owned by their
depositors).
More than a century later, the
DesJardins federation is the largest
financial institution in the Canadian
province of Quebec and the sixth
largest in the nation, with $179 billion
in assets and 10.6 million ownermembers.
It is the province's largest
employer and a major driver of the
region's economy.
A priority of the DesJardins
federation since the 1990s has been
more proactive cooperative
development. It has worked closely with
the Ministry of Industry and
Commerce, the Conseil de la
cooperation du Quebec, and co-ops
themselves to accelerate the growth of
the cooperative business sector.
The collaboration helps start new
co-ops as well as existing ones, issuing
regulations, compiling statistics and
offering programs that foster
cooperative enterprises and the access
to capital that will ensure success.
Co-ops last longer, grow faster
The move to more deliberate co-op
development accelerated in the mid-
1990s, when a research study revealed
that new co-ops in Quebec had a longer
survival rate than investor owned
businesses. Co-ops had a five-year
survival rate of 64 percent, compared to
the typical investor-owned
corporation's 34 percent chance of
making it to year five.
Ten-year survival rates were even
more divergent: 46 percent for co-ops,
but only 20 percent for investor-owned
corporations (IOCs). Average annual
job growth rates were found to be 5.8
percent for co-ops, 2.2 percent for
IOCs. The cooperative advantage was
there for all to see.
These facts played a part in
convincing the provincial government
to establish 11 co-op development
centers to serve its 17 districts. Each is
staffed with a handful of practitioners
skilled in such key areas as new startups,
marketing and youth. Their work
is coordinated with the national co-op
federation and co-op sector
associations.
Between 1995 and 2003, the number
of co-ops launched in Quebec jumped
from 85 to 220; homecare co-ops alone
soared from three to nearly 50.
U.S. co-op developers tour Quebec
In the fall of 2006, Cooperation-Works!, a network of cooperative
development centers in the United
States, led a U.S./Canadian cooperative
study tour to Quebec to learn from this
cooperative growth spurt and the
infrastructure, including the consumerowned
financial services (credit union)
sector, that is helping to make it
possible.
One of the keys to Quebec’s co-op
success was the passage in 2004 of
legislation that guarantees an
“indivisible reserve” for cooperative
development. If a cooperative decides to
convert to a for-profit company, the
reserves of that cooperative are not
divided among its members. Instead, by
law, any reserve funds have to go to
another cooperative. If the co-op
dissolves, the reserves become a
community asset, not an individual
asset.
"Therefore," says, Cooperation-
Works! Executive Director Audrey
Malan, "indivisible reserves remove the
possibility of members gaining huge
windfall profits from renouncing their
cooperative mission, principles and
identity."
Diverse applications of co-op model
The tour included trips to a student-run co-op college bookstore, an
ambulance co-op, a funeral co-op, a
worker-owned micro-brewery, several
home healthcare co-ops and the home
of Alphonse DesJardins, the man
credited with inventing credit unions as
an alternative to traditional banks,
which were often not interested in
handling the finances of workers.
"It was a great networking
opportunity," says Donna Uptagraaft of
the Arkansas Rural Enterprise Center, a
member of CooperationWorks! "I was
impressed with how willing they are to
think big and take risks. And they bring
all the work together well; they do a lot
more coordinating at the provincial
(state) level."
The diversity of types of co-ops was
also very educational, she adds. "We do
a lot of work with agricultural co-ops
back home. In Quebec we saw
cooperative applications we don't see
there."
Bob Mailander of Rocky Mountain
Farmers' Union, another member of
CooperationWorks!, cites "the
interconnectedness of their cooperative
systems, and their ability to access
capital to organize and run their
operations" as a critical element in the
success of Quebec's cooperative
economy.
System’s nuts and bolts
That access to capital includes a
Cooperative Investment Plan that gives
co-op members tax breaks for
supporting cooperative development. A
member investing $100,000 in her coop
can deduct 150 percent off her
provincial taxes.
Since 1985, the plan has channeled
more than $217 million in capital into
cooperatives, including $25.3 million in
2000. In addition, a Deferred Tax
Rebate enables a member to defer both
his federal and provincial taxes on
patronage refunds until the point at
which the shares are disposed.
Through such government
mechanisms as the Cooperative
Investment Plan, the Deferred Tax
Rebate and the creation of the
Nondivisible Reserve — along with the
powerhouse of the DesJardins Co-op
Venture Capital Fund, which has raised
more than $645 million from nearly
118,000 individuals — there are at least
nine funds available to cooperatives.
"The success of the co-op movement
in Quebec is directly attributable to the
pro-cooperative provincial government
policy, the powerful financial and social
driver that is DesJardins, and the
extensive cooperative networks and
sector associations," says Malan. "It
isn't rocket science; it's just a deep
understanding of and a commitment to
the operating principles and practices of
cooperation."
Missouri credit union collaborates with value-added cooperative
Ripley County, called "the lumber capital of the world"
150 years ago, is now Missouri’s second poorest county.
About 50 small sawmills in the area were facing elimination
several years ago. At the same time, many small-scale
forest owners, most of them farmers, did not consider their
woodland as a significant asset.
The Missouri Farmers Union Family Farm Opportunity
Center (Center) helped them develop a business plan for a
value-added hardwood co-op that would not increase
risks for their families.
One key to the co-op's success was that the Center
had helped start several community development credit
unions (CDCU) during the past few years. CDCUs make it
possible for independent businesses, small-scale farmers
and rural families to gain access to capital. While they still
had to meet the credit union's standard criteria, the support
they got made it easier for the 65 members of Ozark
Quality Hardwoods Co-op to move forward.
"What we're trying to do is very challenging, given the
resources in this part of the state," says the Center's Russ
Kremer. "But these farmers have the heart for it. They are
not trying to get rich."
Kremer says that when it opens, the co-op's facility will
employ at least a dozen people. This is welcome news in
Ripley County where, as he points out, people "just want to
be able to watch their kids grow up."
And maybe even their grandkids.
