Article

Shining a Light on Financial Inclusion

shabbat challah bread with wine and candles
By David Israelson

12 minutes

Ontario’s first new credit union in more than a decade, Lighthouse Credit Union aims to help the Jewish community.

You don’t have to be Jewish to join Lighthouse Credit Union, the first new credit union to be approved in Ontario in more than a decade.

“We will not turn anyone away,” says Michel Cubric, CEO of the CU, which opened its doors—online for now—on June 27. The new credit union is aiming its beam toward the Jewish community, but everyone is welcome to become a member and use its services, he says.

While Lighthouse CU is initially providing virtual banking, it plans to open a physical branch in the Lawrence Ave. W. and Bathurst St. area of Toronto. Based on feasibility studies, Lighthouse CU expects to attract more than 20,000 members in the Greater Toronto Area.

Lighthouse CU was started because people in the Jewish community in Canada have needs that are both wide-ranging and unique. The name is designed to appeal to both aspects, Cubric says.

“We chose the name Lighthouse because light is a component of the Jewish tradition. Light is central to Jewish belief,” he explains.

“There’s the idea of ‘being a light into the world,’” he says. The opening lines of Judaism’s most sacred text, the Torah (also the first lines of the Old Testament), tell how God said “let there be light” at the dawn of creation.

Observant Jewish families light candles every Friday night at the beginning of Sabbath and on holidays, and one of the most popular Jewish holidays of the year is Chanukah, the Festival of Lights.

“We chose a name that’s about shining a light and showing people a path forward,” Cubric says.

The new credit union is capitalized with $15 million of initial Tier 1 capital, enabling it to raise hundreds of millions of dollars of deposits from members that would be insured up to $250,000 per depositor.

Part of Central 1 Network

Shortly after receiving regulatory approval last March, Lighthouse CU joined with the Central 1 Credit Union network, the umbrella organization for British Columbia’s and Ontario’s credit unions representing member-owned retail financial institutions that serve 2.9 million members and hold $70 billion in assets.

Interestingly, while many credit unions across North America have been established to serve particular communities, workplaces or professions, the idea of a Jewish credit union is rare.

Specialized credit unions have a checkered history in Ontario and across Canada; some have been established to serve particular ethnic or cultural communities or sectors such as the arts, but in many cases, these organizations have merged with or been absorbed by larger credit unions.

Before Lighthouse CU, the last time a credit union was approved in Ontario was in 2008. Another organization, Pan-African Credit Union, is seeking provincial approval, aiming primarily to serve the Black community, and there are at least two other applications being considered right now by Ontario’s regulatory authorities.

Serving Canada’s Jewish Community

While rare, Lighthouse CU is not the first credit union in Canada to focus on the Jewish community.

The first Jewish credit union was started in 1910 in western Canada by the Jewish Colonization Association in Wapella, Saskatchewan, to help Jewish immigrants buy farmland. It was an unofficial lending institution in that it did not have a provincial charter.

Then in the 1930s, the Regina Hebrew Savings and Credit Union became the first to receive a certificate of registration in that province. Among other customers, this Regina credit union loaned funds to refugee doctors who had fled Nazi Germany and Europe and were interning in Saskatchewan hospitals.

Today, Canada’s Jewish community numbers more than 435,000—possibly more, as not all Jewish people identify themselves as such on the census—and it is not monolithic. The community includes strictly observant ultra-Orthodox Jews, members of Conservative, Reform and Reconstructionist synagogues, which follow some, but not all, traditions, and non-observant and secular Jews who consider themselves part of the Canadian Jewish community.

Canada’s Jewish community is one of the world’s largest, after Israel, the United States and France. While the largest communities are in the Greater Toronto and Montreal areas, Jewish people live in every province and territory in Canada.

Canadian Jews come from different national and ethnic backgrounds. For example, there are Ashkenazi Jews, whose forebears came from Eastern Europe, Mizrahi Jews from Arab and Spanish-speaking countries, and Bene Israel, whose families hail from East Africa.

Jews have been in Canada since at least 1759. There were waves of Jewish immigration to Canada after Confederation in 1867, in the first two decades of the 20th century, after World War II and the Holocaust, and during the 1970s, when many Jews left the Soviet Union.

Michel Cubric
CEO
Lighthouse Credit Union
Many members of the Orthodox community earn good livings, for example, but they don’t always work for corporations where they can show the bank a pay stub to qualify for a loan. It’s not just within the Jewish community—if you’re not a traditional earner, banks can frown upon you, period.

Jewish people are still coming to Canada, Cubric says. “There’s a surprisingly large number of people coming from the United States,” he says. Jewish people settle in all parts of Canada, “but for most, the starting point is Ontario.” Many new Jewish immigrants to Canada are Orthodox, but not all, he adds.

Jews suffered discrimination in Canada in previous generations. In recent decades, though, Canadian Jews have thrived in professions, business, the public sector, journalism, arts, literature and entertainment.

Helping With the Housing Market

So, with long and successful participation in Canadian life over many generations, why form a Jewish-oriented credit union in Canada now? It’s precisely because the Jewish community is so diverse, Cubric explains.

“A lot of people in the community are well established and have their banking needs met by mainstream financial institutions. But in some parts of the community, people are still struggling,” he says.

Prospective home buyers or borrowers sometimes have trouble meeting the strict criteria set by banks and other lenders to obtain a mortgage.

“Many members of the Orthodox community earn good livings, for example, but they don’t always work for corporations where they can show the bank a pay stub to qualify for a loan.

“It’s not just within the Jewish community—if you’re not a traditional earner, banks can frown upon you, period,” Cubric says.

“There has been an outpouring of support for a Jewish credit union from community organizations, synagogues, schools and young professionals,” said Harley Gold, chair of Lighthouse CU’s board and partner/managing director at Peakhill Capital, in a statement last March when the credit union received regulatory approval.

“A credit union fits well within Jewish principles of community and giving back, and we hope that Lighthouse can serve as a financial beacon for the community,” he said.

The need for a lending institution that serves the needs of these types of borrowers is particularly strong for those who have been trying to navigate Canada’s torrid housing market, especially in such super-hot regions as the Greater Toronto Area, Cubric said.  

The market has eased slightly, as interest rates have been rising this year and mortgage rates climbed. But until mid-2022 it was on an upward tear. Even in July 2022, as prices began to slide, the average home sold in the GTA was still up 1% year-over-year, selling for $1,074,754 .

Asking prices have been going down and are expected to continue to drop this year, but these declines are offset by rising interest rates and tighter stress tests, requiring prospective buyers to qualify for mortgages at rates as high as 7%.

Therefore, one of Lighthouse CU’s priorities is to help first-time buyers, explains Gold.

“If you’re very wealthy, there are places you can live in Toronto, but if you’re not, there are a lot of challenges,” he said in an interview with the Canadian Jewish News. Some Jewish families he knows have opted to leave Ontario for less expensive housing in Jewish communities in the United States, and Lighthouse CU might be able to change this, he said.

“It’s not going to solve every problem with housing, but it will help people stay here and get them into housing.”

Marketing to Everyone

Lighthouse CU’s outreach to Canadian Jews will be wider than aiming toward just one type of buyer or one group. It’s not focusing on Orthodox or any other particular sub-groups within the community. And as Cubric points out, it welcomes new members of all faiths or backgrounds.

“I myself am non-observant, and I know there are a lot of people like me and a lot who are much more observant. We’re here for everyone,” Cubric says, explaining that he is of Brazilian/French descent. He grew up in Brazil and came to Canada in 1995, working 14 years at CIBC, primarily in residential mortgages and world markets.

Lighthouse CU is still developing its marketing program, hoping to attract members through word of mouth from new members seeking to buy homes and the mortgage professionals they engage.

“We won’t have a physical branch for at least 12 months, so the only way we can reach new members is for them to come to us or through an intermediary such as a mortgage broker or directly through our website. We’re making significant improvements to our site and we will start marketing our services to the community very soon,” Cubric says.

“We’ve been working with mortgage brokers who are familiar with the Jewish community, whether or not they themselves are Jewish. Working with them as partners is more expensive than getting members directly, but it’s actually working out well so far, because mortgage brokers have wide networks and we have not yet explored our full marketing potential within the community,” he adds.

“We’re getting as much business as we can handle so far. We’re careful not to take steps that are larger than we can manage,” Cubric says.

Rigorous Approval Process

Lighthouse CU is the first new credit union in Ontario to be approved by the Financial Services Regulatory Authority, which took over all aspects of regulating CUs in the province in March. The process for establishing a new credit union in Ontario has changed recently but remains rigorous, says Michael Hatch, VP/government relations at Canadian Credit Union Association.

“In March 2022, Ontario proclaimed the new Credit Unions and Caisses Populaires Act 2020, which modernized the credit union regulatory environment,” he explains.

As the first credit union to come in under the full authority of FSRA, Lighthouse CU represents an important development in the credit union (and caisses populaires) sector, says Mehrdad Rastan, FSRA’s EVP/credit union and insurance prudential.

“New entrants are a sign that the sector is thriving and growing and is playing a meaningful role in serving the financial needs of over 1.7 million people across the province,” Rastan says. “FSRA determined that the founders of Lighthouse presented a strong business case and demonstrated a need for these services within the community.”

“It’s not an easy thing to start a new financial institution,” says Steven Kokaliaris, FSRA’s acting director/approvals & insurance prudential supervision. “Each application is different. Over the years we have seen many applications come and go, groups that put in their names and then for one reason or another don’t follow through.

“You need a group of people who are experienced and committed in order to succeed, especially to get it off the ground,” he says. “There are reporting requirements and a comprehensive governance framework. It’s a lot of work just to get your charter, then you have to get ready to open.”  

Kokaliaris says that when he began working and overseeing credit unions in the late 1990s (at Deposit Insurance Corporation of Ontario, then the deposit insurer), there were 460 credit unions in Ontario.

“There were more than 1,500 credit unions before that,” he adds. Today there about 60.

Steven Kokaliaris
Acting Director/Approvals & Insurance Prudential Supervision
Financial Services Regulatory Authority
Applicants have to satisfy the same approval criteria noted in the Credit Unions Act, but the expectations are a lot greater today. As a result, the staff and board members of credit unions have to be much more skilled and experienced than in the past.

Risk Rules Are Evolving

“Risk management practices are always evolving,” notes Kokaliaris. “I think that at one time, the process for approving new credit unions was not as rigorous as it is now.

“Applicants have to satisfy the same approval criteria noted in the Credit Unions Act, but the expectations are a lot greater today. As a result, the staff and board members of credit unions have to be much more skilled and experienced than in the past.” 

CCUA’s Hatch agrees that credit unions have to scale a high bar now to be approved. It can take up to three years from start to finish before a new credit union can open.

“Credit union applicants typically must show that it is in the public interest to start the credit union and that the group’s needs are not currently being met by other credit unions or financial institutions,” he explains.

Applicants also need to show that they have adequate capital and that they have set up governance processes. They need a credible management team, executive team and board of directors.

“It helps to have people with professional experience—accountants for example—and people who have run a business,” Kokliaris adds. Applicants also need to present their plans for maintaining capital, their marketing strategy and their technology plans, and they are required to file reports with FSRA regularly.

Opening in Turbulent Times

Cubric says he’s aware that Lighthouse CU has opened at a time when many observers consider the housing market, particularly in the GTA, to be in a precarious situation. But awareness does not mean fear.

“At the beginning of COVID in March 2020, we read reports that there was going to be a record number of mortgage defaults and there was concern about the survivability of some financial institutions. Yet the residential market in Canada in 2020 turned out to be the best in 50 years, and 2021 wasn’t far behind,” he says.

“House prices have already pulled back, but do I expect the world to fall in? No. There is a correction in the housing market, but people are employed. Obviously, we’re monitoring the economy all the time, but I’m confident. It is what it is,” he says.

"We are delighted to welcome Lighthouse Credit Union to the sector,” said Martha Durdin, who recently retired as president/CEO of CCUA, in a March news release.

The launch of the first credit union in Ontario since 2008 “highlights the strength and stability of our growing credit union system, built on the diversity and member focus of cooperative finance,” she said.

“Working to serve both Jewish and non-Jewish communities, we are excited to see the contributions Lighthouse will bring to the sector and the communities they will serve,” Durdin added.

Cubric says that after Lighthouse CU’s residential mortgage business becomes more established, the credit union hopes to grow into small-business banking.

“And we’re going to work a lot with customers on financial literacy,” he adds. The credit union wants to make sure there’s lots of light on that subject.

David Israelson is a non-practising lawyer who writes about Canadian business topics. cues icon

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