Social value reporting: Rebalancing legitimacy in credit unions

Credit unions are co-operative non-profit organisations which serve the financial needs of their members, many of whom may have had difficulty accessing credit from the traditional banking sector. Since the establishment of the first credit union in Ireland in 1958, the credit union movement has become synonymous with a positive impact on the local communities that they serve in the form of a multitude of benefits provided, chiefly through their promotion of thrift and provision of finance, but also through sponsorships and academic scholarships for specific groups. In essence, credit unions have become trusted partners within their localities, thereby generating and sustaining a degree of moral legitimacy – societal approval of the organisation, based on the desirability of what it stands for. Of course, to do so, a credit union must also be economically viable.
However, as with all financial institutions, credit unions must operate within the terms of the financial regulations and laws imposed by the relevant authorities in the jurisdiction(s) in which they exist. These rules, regulations and laws provide the regulatory basis, under which credit unions are entitled to operate. Many of these rules and regulations presume that the societal legitimacy of financial institutions is transactional - i.e. their legitimacy is based on the provision of financial services at a price, such as an interest rate, to cover the risks of these transactions. Consequently, these rules and regulations aim to minimise these risks, and tend to ignore sources of legitimacy other than the pragmatic legitimacy of economic exchange.
While it is acknowledged that regulation is necessary, recently there is a perception that rules and regulations have increased to such an extent that many credit unions view them as overly restrictive. Consequently, based upon the time and effort required to satisfy the current reporting regime, many within the sector feel that credit unions may have lost sight of their moral legitimacy in their attempts to satisfy their regulatory legitimacy.
In an effort to rebalance their legitimacy, a small number of credit unions in Ireland and the United Kingdom have recently started to voluntarily report upon their social impact/value. This form of social value reporting is seen as an attempt by such credit unions to demonstrate their unique contribution to society in a form not currently being dominated by prevailing assumptions about the pragmatic and transactional basis for the existence of such financial firms. By interviewing in excess of twenty individuals with an interest in this sector, including credit union managers, a government minister, representative body officials and consultants, this report attempts to shed some light on the efforts of those in this area to bring greater attention to the moral legitimacy of the credit union movement.
Our findings suggest that current attempts to highlight the moral imperative of the credit union movement using social value reporting are primarily aimed at their members and society in general. However, by increasing awareness amongst this cohort, it is hoped that over time, others, including the political establishment and regulator, may recognise the unique social value/impact generated by the credit union movement, and may ultimately reconsider the regulatory requirements imposed on this sector.