What is Caisse Populaire?

Caisse Populaire is a French Word for ‘Credit Union,’ and it simply refers to financial institutions owned and controlled by its members. These institutions perform similar activities as banks but only provide services to their members. At times, based on member needs, the institutions may perform additional services, such as investment advisory. Caisse Populaires are mostly found in Canada, with the majority of them being focused in the province of Quebec.

How does Caisse Populaire Work?

A group of people may form Caisse Populaire with a common interest – usually, these are formed by people living in the same community. The members of Caisse Populaire pool their money together (deposits) and use it to provide loans and other financial services to its members. The board of directorsBoard Of DirectorsBoard of Directors (BOD) refers to a corporate body comprising a group of elected people who represent the interest of a company’s stockholders. The board forms the top layer of the hierarchy and focuses on ensuring that the company efficiently achieves its goals. read more is elected democratically, with each member getting one vote regardless of the size of their deposits or investments.

As these institutions work towards the welfare of their members and are not profit-oriented, the fees charged are considerably lower. Unlike major banks, these institutions would be more likely to charge lower interest rates on loans while offering higher interest rates on their deposits. Any profit earned by these institutions would be shared by its members.

Types of Services at Cassie Populaire

Similar to a regular bank, the following services are offered at Caisse Populaire –

  • Checkings AccountCheckings AccountA checking account is a bank account that allows multiple deposits and withdrawals. Additionally, it provides superior liquidity.read moreSavings AccountCertificate of DepositCertificate Of DepositA certificate of deposit (CD) is an investment instrument mostly issued by banks, requiring investors to lock in funds for a fixed term to earn high returns. CDs essentially require investors to set aside their savings and leave them untouched for a fixed period.read moreOnline BankingLoansCredit Cards

However, these services are offered only to the members and not to the general public.

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Example of Caisse Populaire

Caisse Populaires are both provincially as well as federally regulated in Canada. Each province (except a few) has its legislation relating to the incorporation and operations of credit unions. The bank act of 2012 provided for the setting up of Caisse Populaire on a national scale. As such, the uni financial corporation became Canada’s first federal credit union in 2016.

Quebec’s credit unions, Canada, are formally federated into the Desjardins group. The Desjardins group was established in 1900 by Alphonse Desjardin, headquartered in Quebec. It is currently the largest federation of credit unions in North America. Other than the traditional banking services, the group also offers additional services such as insurance, real estate, brokerage through its subsidiaries.

Advantages of Caisse Populaire

  • Customers are Members: In a credit union, the members and customers are the same. Therefore, the policies and services would be highly customer friendly.Welfare Oriented Model: Since the Caisse Populaires do not work on a profit-oriented model, there is no constant drive to increase profits on all possible fronts. Rather, these institutions offer a lower rate for loans to benefit the members of society.Charges are Lower: A Caisse Populaire does not charge any fees since all the services are provided only to the members.

Disadvantages of Caisse Populaire

  • Poorer Technology: They have lower assets and deposits. They do not possess sufficient funds to compete technologically with major financial institutions or banks. Therefore, they tend to be quite an old school in their practices and offerings about technology.Location-Oriented: Caisse Populaires was introduced to cater to the needs of members of a particular community. These communities were generally geographically concentrated. Therefore, the services of such credit unions are more likely to be concentrated within a particular geographical area. They are less likely to have worldwide branches and provide banking services from anywhere across the world.Lesser ATMs: Automated Teller machines have greatly reduced manual banking services strain. However, Caisse Populaires are less likely to offer wider ATM facilities than a regular bank.Restricted Membership: They offer services only to their members. Gaining membership into these credit unions is highly restrictive and is not open to the general public. Therefore, non-members cannot enjoy the benefit of the services of credit unions.

Conclusion

Different forms of credit unions exist all over the world. Caisse Populaire is one of Canada’s most popular and effective financial institutions. Though the system has limitations, with the increasing regulations and technology, these may be easily overcome.

This article has been a guide to Caisse Populaire and its definition. Here we discuss types of services at a Caisse Populaire and advantages and disadvantages. You can learn more about accounting from the following articles –

  • Reserve RatioLetter of CreditCompare – Tax Credits vs. Tax DeductionsCRR vs. SLRPump and Dump