Credit union
Member-owned cooperatives offering banking services with a community focus.
A credit union is a member-owned nonprofit cooperative financial institution. They may offer financial services equivalent to those of commercial banks, such as share accounts, share draft accounts, credit cards, credit, share term certificates, and online banking. Normally, only a member of a credit union may deposit or borrow money. In several African countries, a credit union is commonly referred to as a SACCO ('savings and credit co-operative'). Credit unions differ from banks in that those who have accounts are its members and owners, and they elect their board of directors in a one-person-one-vote system, regardless of the amount invested. They are not-for-profit, meaning their purpose is to serve members rather than to maximize profits, and they must make a small surplus to remain in existence.
- type
- Financial cooperative institution
- global_assets_2018
- US$2.19 trillion
- notable_feature
- One-person-one-vote member ownership
Lore & Background
It provided cheap loans from regular savings, required members to commit to a moral life, and to plant two trees annually. In the United States, St.
Reader's Guide
Credit unions represent a distinct alternative to commercial banks, operating as member-owned cooperatives that prioritize service over profit. Their one-person-one-vote governance structure ensures democratic control by members, regardless of deposit size. Historically, credit unions have demonstrated greater stability during financial crises: in 2006, only 3.6% of credit union mortgages were subprime, compared to 23.6% at banks, and banks were two and a half times more likely to fail during the crisis. American credit unions more than doubled lending to small businesses between 2008 and 2016, from $30 billion to $60 billion, while overall small business lending declined by about $100 billion. Public trust in US credit unions stands at 60%, versus 30% for big banks, and small businesses are 80% more likely to be satisfied with a credit union. Their not-for-profit status, distinct from charities, requires them to generate a surplus to maintain solvency. Credit unions also differ from modern microfinance by placing control over financial resources in the hands of members rather than a small number of providers.
Did You Know?
- In several African countries, a credit union is commonly referred to as a SACCO ('savings and credit co-operative').
- In 2006, only 3.6% of credit union mortgages were subprime, compared to 23.6% at commercial banks.
- American credit unions more than doubled lending to small businesses between 2008 and 2016, from $30 billion to $60 billion.
Frequently Asked Questions
What is a credit union?
A credit union is a nonprofit financial cooperative owned collectively by its members rather than by outside shareholders. It operates on a community-focused model where account holders are simultaneously the owners of the institution.
How does a credit union differ from a commercial bank?
The core distinction lies in ownership: credit union members elect their board of directors using a one-person-one-vote system, whereas bank shareholders vote based on shares held. Additionally, credit unions are generally restricted to serving their own membership for deposits and lending.
What kinds of financial products do credit unions provide?
They offer a range of services comparable to traditional banks, including savings accounts, checking accounts, credit cards, personal loans, certificates of deposit, and digital banking platforms. The specific lineup varies from one credit union to another.
What does 'SACCO' mean in the credit-union context?
SACCO stands for 'savings and credit co-operative,' a term widely used across several African countries to describe what is essentially a credit union. It reflects the same cooperative, member-driven structure found in credit unions globally.
How large is the global credit-union sector?
As of 2018, credit unions worldwide held roughly US$2.19 trillion in assets. Their defining structural feature remains the one-person-one-vote democratic ownership model shared by all members.
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