Unlike banks, credit unions lend out capital. They raise their capital through retained earnings. Banks raise capital through the public markets. When they need money, they go to the markets; they raise capital.
There are two things at play here. The credit unions, as with all financial institutions regulated in Canada, need to raise more capital in order to meet a higher regulatory standard. We need to maintain larger amounts of capital and we're trying to lend it out.
Credit unions often run up against their capital requirements and are unable to lend out as much as they would like to members or customers because they hit their capital levels.
A credit on 5% of their growth would allow them to both retain more capital, get a tax credit for it, and meet the regulatory requirements, and incent them to grow more capital, credit for it, lend out more. Our research shows that, on average, for every $1 of capital credit unions retain, they lend $12. The multiplier effect is times 12.