By Amanda Morrall
With the Big Four celebrating banner profits, the victories of the smaller players that make up the financial hinterland are easily missed.
One that is quietly turning heads is Credit Union Aotearoa, reportedly the fastest growing credit union in the world.
Membership is growing 15% annually, compared to the standard 2-3% experienced by most of its peers.
"We appeal to a particular type of market,'' explains Bleakley. "The Maori, Polynesian, low income, unemployed and those looking for an alternative banking system who are separate from loan sharks, rip off merchants and back street financiers.''
With an opening deposit requirement of only $10, the credit union has picked up a segment of the population mostly scorned by the mainstream banks.
At the same time, it's also grown on the back of customers from a completely different postal code and income bracket, a good chunk of which are depositors with between NZ$50,000 and $80,000 to bank.
While the credit union has identified its core market in the lower socio-economic neighbourhoods, Bleakley said they have an open door policy.
"We want anyone looking for a personal banking facility, we're not different from the other credit unions in the world of New Zealand.''
While the credit union actively markets to its prime banking customers in South Auckland and the like, the bulk of its business has come from word of mouth, adds Bleakley.
Investors are finding the credit union on their own.
There are two types, said Bleakley. "People who are interested in what we do from a philanthropic point of view, (the credit union's raison d'etre is to educate its membership as well as provide a banking service) and those chasing the interest rates."
Risk and return
Because a good bulk of Credit Union Aotearoa's clients are low or no income, becoming a financial backstop would seem risky at best. And yet the union's default rates are enviably low.
Bleakley said the default rates are low because the credit union actively works to educate its membership and help them budget for repayment. Additionally, they have a regular income, as the majority receive some kind of Government benefit. Regardless, the risk still exists.
"We're like any other organisation, nothing is fully secured. We're well aware of that. We base a lot of our security around the fact that we've been in business 22 years now, we're successful, we're profitable, we have very good reserves, we have strong assets, we have a low delinquency rate of between one or two per cent which a lot of the banks would like to have."
The biggest identified risk is a potential change in government policy affecting beneficiary rates.
"We know this is political madness but it's a risk we have identified. Apart from that the investors have to consider the risk themselves."
Because the credit union does not hold more than NZ$20 million in member funds, there is no legal obligation for it to have a credit rating. Credit Union Aotearoa holds $15 million presently.
"We'd like to have one," said Bleakley, "but the practicality of a small organisation like us going through the exercise of a credit rating is not warranted.''
In any event, the union hasn't needed one. Raising funds hasn't proven difficult, said Bleakley.
While it may be of no consequence to the credit union, investors have come to look to credit ratings as a form of insurance, or at least a gauge of financial stability.
In the absence of a credit rating, Bleakley suggest would be investors or new members should evaluate a credit union on the basis of its board, balance sheet, how they use their funds and where they lend to.
"In our own case, our board is made up of seven directors, four Maori business people all highly qualified in business or other activities.''
"All of us have a statutory supervisor, (in our case Perpetual Trust Ltd) who monitors our accounts, we report to them monthly. They monitor our ratios to make sure our liquidity, our capital ratios, capital adequacy, our profitability, our creditor liabilities all those core ratios are maintained and we have to make sure we don't breach our trust deeds by breaching any of these. We also have external and internal auditors, in our case, they're high profile audit companies, external and internal. They keep a close eye on our financial activities."