Skip to main content
Dana Brown

Dana Brown

Director of the Next System Project more

Money & Banking

Credit unions are member-owned financial cooperatives that provide financial services to a designated group, such as government employees, residents of a geographic area, or association members.

Credit union account holders are also the members and owners of the financial institution, with the power to elect its board of directors (on a one-member, one-vote basis) and set the strategic direction for the organization. Credit unions are nonprofits, and since they do not have shareholders and CEOs insistent on increasing earnings and the value of their shares every quarter, credit unions can concentrate on maximizing their impact in the community and on the financial well-being of their members. Earnings are returned to its members, typically through lower interest rates on loans, higher rates on savings, and expanded services. According to the Credit Union National Association, there were at the beginning of 2019 roughly 119 million credit union memberships in America among some 5,500 credit unions. More than 19% of U.S. households use a credit union as their primary financial institution.

Potential Impact

Credit unions can be an essential part of an ecosystem of inclusive financial institutions designed to ensure a broader cross-section of Americans has access to financial services. According to the Credit Union National Association, credit unions provide over $16 billion annually in benefits to the economy. In addition to providing lower cost financial services to their members, one of those benefits is competition that puts a check, however modest, on the ability of banks to extract fees from their customers. Likewise, credit unions have proven to be a more consistent supporter of community economic activity than conventional, for-profit banks: During the 2008 financial crash, mortgage and small business lending by credit unions did not decline as precipitously as it did for banks. Since the crash, credit union mortgage originations have increased 70 percent (while bank mortgage originations have continued to decline) and small business lending growth has dramatically outpaced that of banks.

Transformative Characteristics

The closeness of credit unions to their membership base is one of their chief assets. Their knowledge of their customers enables them to weigh financial risk differently than other financial institutions, with the result that they generally have lower loan delinquency rates even as they serve customers passed over by conventional banks. That is particularly true of community development credit unions (CDCUs), which are specifically committed to providing banking services to people left behind or exploited by for-profit financial institutions. At scale, credit unions mirroring the CDCU mission could eliminate the market for such outfits as payday lenders with manageable short-term loans, financial counseling, and community engagement. Credit unions generally, and CDCUs specifically, can also serve as community development financial institutions (CDFIs), which would enable them to direct more resources to disinvested communities.


Hope Credit Union, Jackson, Mississippi

This regional credit union, operating in five states mostly in the Deep South, is part of HOPE, a community development organization founded in 1994 that includes a development loan fund and a policy center. It aims to provide “low-wealth people and communities with the financial tools and resources needed to achieve a better quality of life.” The credit union has more than 44,000 members, many in communities that have been all but abandoned by conventional banks, and in 2017 exceeded $100 million in total lending. Financing in 2018 for Grambling, Louisiana’s first fresh-food grocery store in 35 years is typical of the kinds of projects that the credit union and its associated development loan fund engage in. It won the Wall Street Journal’s 2018 Financial Inclusion Challenge, with one of the judges noting that Hope “really [goes] into places that have no other financial services” and has an “impressive” community impact.

Laboral Kutxa, Spain

Laboral Kutxa is a Basque credit union with over 22 million euros in assets at the end of 2017. It was formed in 2012 by the merger of the labor credit union that supported the development of the Mondragón cooperatives (the Caja Laboral, established in 1959) and a rural farmers’ credit union (Ipar Kutxa, established in 1965). The Mondragón cooperatives used their credit union not only as their principal banking institution but also as the driver of strategic and financial cooperative development. Before the merger, Caja Laboral had 1,887 working members, over 1.2 million clients and hundreds of offices around Spain. In 2013, Laboral Kutxa and the National Cooperative Bank in Washington, D.C. announced a partnership to support one another’s customers, exchange best practices, and help support the growth of the cooperative sector.


Democratic participation in credit union decision-making is not required, and in some cases, credit union managers and boards actively work to frustrate broad-based member participation. Also, credit unions overall are not leaders in home loans to people of color and in low- and moderate-income communities. A 2016 Federal Reserve report found nearly 16% of credit union home loans went to people of color, compared to 25% at independent mortgage companies. Credit unions normally cannot manage accounts the size of, for instance, a city government seeking to divest from big banks. However, some Oregon cities participate in a state insurance program that makes credit union use more feasible.

More Resources


Download and Share

Dana Brown

Dana Brown

Director of the Next System Project more

More related work


Los elementos de una economía democrática

Los elementos de una economía democrática

Las políticas y prácticas tradicionales evidentemente nos están fallando frente a las tendencias decadentes de largo plazo en cuanto a la desigualdad de ingresos, la concentración de la riqueza, la desinversión y desplazamiento de las comunidades, la pobreza persistente con carácter racial y geog read more
Public pharmaceutical

Public pharmaceuticals

Public pharmaceutical enterprises are free from the constraints of profit maximization and can define their bottom line based on such values as their contributions to public health and local economic resiliency. read more
Public holding company

Public holding company

The effects of a local firm facing economic disaster can ripple destructively through a community. Public holding companies could take either partial or full ownership positions in distressed firms to prevent the economic and social dislocations associated with liquidation or collapse. read more
Community development financial institution

Community development financial institutions

CDFIs are committed to providing services that create and broaden economic opportunities in neighborhoods that have faced historical disinvestment. read more
Low-income limited liability company

Low-profit limited liability companies

An L3C straddles the line between a nonprofit and for-profit venture, an enterprise with a profit goal that is subordinate to its charitable mission. read more
Participatory budgeting

Participatory budgeting

Participatory budgeting democratizes public investment by giving people the power to decide how public dollars are spent. read more
Element of the Democratic Economy: Social Wealth Fund

Social wealth fund

A social wealth fund embraces the collective ownership of assets to provide services and democratically distribute resources within a society or community. read more
Worker cooperative

Worker cooperatives

A worker cooperative provides for both democratic ownership and democratic governance of the workplace, unlike traditional businesses in which ownership is often antagonistic to the workers who create value for the firm. read more
Municipal enterprise

Municipal enterprise

Municipal enterprises are businesses or services owned by local public authorities that provide services or generate revenue for local communities. read more
Employee stock ownership plan

Employee stock ownership plan

Description An employee stock ownership plan (ESOP) enables full or partial ownership of a business by its employees through a pension plan or trust. The first ESOP was created in 1956 by a San F read more
Element of the democratic economy: Public bank

Public Banks

How financial institutions owned by and accountable to the people help create a nonextractive economy. read more
The commons

The Commons

The commons are collective resources—encompassing things as varied as land, seed banks, and open-source software—managed by self-organized social systems under mutually acceptable terms. read more
Land bank – Elements of a Democratic Economy

Land Bank

Land banks can acquire abandoned, foreclosed, and tax-delinquent properties in order to convert them into productive use. read more

Community Land Trust

CLTs are nonprofit organizations that acquire and steward land in a “trust” for the permanent benefit of low-income communities. read more
Green Bank

Green Bank

A green bank can help communities transition away from fossil fuels and build resilience against climate change. read more
Community benefit agreement

Community Benefit Agreement

A legally binding product of negotiations between a developer and community members who have banded together to safeguard their community’s interests. read more

Resident-Owned Community

Resident-owned communities (ROCs) are manufactured housing neighborhoods (sometimes referred to as mobile home or trailer parks) in which the land is community-owned and managed. read more

Limited Equity Housing Cooperative

A limited equity housing cooperative is a residential development owned and managed by a democratically governed, nonprofit cooperative corporation, such as a tenants’ union. read more
Democratic energy utility

Democratic Energy Utility

Democratic energy utilities are nonprofits run by the public or community members in a way that enables their engagement in decision-making and distributes ownership. read more