The lack of banking services in rural and remote communities such as Cormorant Island, Canada has a significant negative impact on the local economy and social well-being, as dollars flow out of the community. In partnership with the 'Namgis First Nation and the Village of Alert Bay, Vancity Credit & Savings Union opened a new branch with full-service banking on Cormorant Island. Member participation will aid the economy of this remote community.

"Members contribute equitably to, and democratically control, the capital of their co-operative." In this sentence the word "capital" has to be understood as an economic concept and not limited to the concept used in accountancy to acknowledge the share capital of an enterprise. Membership shares that provide capital in a co-operative are not shares like those in investor-owned joint stock companies. Capital paid by members is not money primarily invested to generate an investment return on capital, but is 'pooled capital' invested to deliver goods, services or employment needed by members at a fair price.

"Contribute equitably" is what an impartial observer would judge to be a fair and reasonable contribution given the circumstances of each co-operative and the capacity of its members. It does not mean that all members must contribute equally. It also does not mean that incoming members must make the same contribution to capital to become a member whatever the age of the co-operative and whatever accumulated wealth the co-operative holds. The contribution to and the democratic control of the capital of the co-operative firmly links this Principle to the 2nd Principle of Democratic Member Control. Members can contribute capital in four ways:

• Firstly, in most co-operatives members are required to contribute to the common capital of the co-operative by investing in a membership share or a number of membership shares (which may be voting shares or a combination of voting and non-voting shares) in order to become a member of the co-operative and to benefit from membership. Interest is not usually paid on such membership share or shares, and if interest is paid it is usually at a limited rate.
• Secondly, as co-operatives prosper, they may create reserves, derived from the retained surpluses from the co-operative's activities.
• Thirdly, co-operatives may have needs for capital far greater than what they can save from their economic activities. Many co-operatives expect that members will regularly contribute a portion of their member dividends (sometimes called 'patronage refunds') to be held in reserves. In these cases co-operatives would not pay interest on member-dividends or patronage refunds held in reserves, the member benefiting from continuing participation and future dividends or patronage refunds. In most consumer co-operatives members' dividends or patronage refunds are held in their share accounts, rather than in the co-operative's reserves and receive limited interest.
• Fourthly, co-operatives may invite members to make further voluntary capital investments which do not carry voting rights.

"At least part of that capital is usually the common property of the co-operative." This statement reinforces the need for members to contribute to the capital of their co-operative and for them to do so equitably. Members also control the capital of their co-operative.

There are two key ways in which they do so:

• Firstly, regardless of how co-operatives raise capital for their operations, the final authority for all decisions must rest with the membership in general assembly.
• Secondly, members must have the right to own at least part of their capital collectively, a reflection of what they have accomplished collectively as a co-operative.

"The common property of the co-operative" refers back to the economic meaning of capital. It means that part of a co-operative's capital, either composed of retained surpluses or once subscribed by members as membership shares, is the common property of the co-operative and is not owned or withdrawable by members, i.e. it is "indivisible".

"Members usually receive limited compensation, if any, on capital subscribed as a condition of membership." Capital invested as a requirement of membership as shares that grant voting rights usually receives limited interest or compensation, if any. Capital invested voluntarily is not invested "as a condition of membership" and it may therefore be appropriate to pay interest on such investments, but at a "fair rate", not a speculative rate. In the 1934/1937 review of the Principles, this "fair rate", which was also called "a compensatory rate" was described as "the lowest rate which would be sufficient to obtain the necessary funds". This is a challenging and important restraint because the danger of going beyond a fair or compensatory rate is that members may start investing in a co-operative for capital gain rather than to ensure the success of their co-operative enterprise.

"Members allocate surpluses for any of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership." This sentence explains the three ways surpluses may be used when the activity of co-operatives create surpluses. Whilst being always mindful of the long-term viability of their co-operative, members have the right and the duty, collectively, to decide how surpluses should be allocated.

"Possibly by setting up reserves, part of least of which would be indivisible" . Normally, all or a significantly large portion of a co-operative's retained earnings, called the co-operative's "indivisible reserves", are owned collectively. In long established co-operatives these indivisible reserves will represent the accomplishments of many generations of members and are often the target of those who seek to demutualise co-operatives. This voluntary protection of the co-operative's "collective capital" can, in some legal jurisdictions be reinforced by law through a legal 'asset-lock' that prevents the distribution of residual assets to members on dissolution of a co-operative. The assets are forever common property and can never be shared in the event of dissolution or liquidation. After the payment of all residual debt, the assets that remain must remain indivisible and be used for the development of the co-operative movement. This is the definition and meaning of "indivisible reserves".