Credit Unions

The credit unions are the cooperative financial institutions,  that is owned and controlled by its members, and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members. Many credit unions exist to further community development or sustainable international development on a local level. Worldwide, credit union systems vary significantly in terms of total system assets and average institution asset size, ranging from volunteer operations with a handful of members to institutions with several billion dollars in assets and hundreds of thousands of members. Yet credit unions are typically smaller than banks.
The World Council of Credit Unions (WOCCU) defines credit unions as "not-for-profit cooperative institutions". In practice however, legal arrangements vary by jurisdiction. For example in Canada credit unions are regulated as for-profit institutions, and view their mandate as earning a reasonable profit to enhance services to members and ensure stable growth. This difference in viewpoints reflects credit unions' unusual organizational structure, which attempts to solve the principal-agent problem by ensuring that the owners and the users of the institution are the same people. In any case, credit unions generally cannot accept donations and must be able to prosper in a competitive market economy.
Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union and they elect their board of directors in a democratic one-person-one-vote system regardless of the amount of money invested in the credit union.

A credit union's policies governing interest rates and other matters are set by a volunteer Board of Directors elected by and from the membership itself. Credit unions offer many of the same financial services as banks, often using a different terminology; common services include: share accounts (savings accounts), share draft (checking) accounts, credit cards, share term certificates (certificates of deposit), and online banking. Normally, only a member of a credit union may deposit money with the credit union, or borrow money from it. As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health. In the microfinance context, "credit unions provide a broader range of loan and savings products at a much cheaper cost (to their members) than do most microfinance institutions".

In the credit union context, "not-for-profit" should not be confused with "non-profit" charities or similar organizations. Credit unions are "not-for-profit" because they operate to serve their members rather than to maximize profits. But unlike non-profit organizations, credit unions do not rely on donations, and are financial institutions that must turn what is, in economic terms, a small profit (i.e. "surplus") to be able to continue to serve their members. According to WOCCU, a credit union's revenues (from loans and investments) need to exceed its operating expenses and dividends (interest paid on deposits) in order to maintain capital and solvency and "credit unions use excess earnings to offer members more affordable loans, a higher return on savings, lower fees or new products and services". WOCCU's position is deeply rooted in global credit union history. F.W. Raiffeisen, the founder of the global movement, wrote in 1870 that credit unions "are, according to paragraph eleven of the German law of cooperatives, "merchants" as defined by the common code of commerce. They accordingly form a sort of commercial business enterprise of which the owners are the (Credit) Unions' members".
The World Council of Credit Unions is both a trade association for credit unions worldwide and a development agency. WOCCU's mission is to "assist its members and potential members to organize, expand, improve and integrate credit unions and related institutions as effective instruments for the economic and social development of all people".
Credit unions in the United States have traditionally used a state/national trade association relationship that aligns credit unions with state "Credit Union Leagues" followed by national affiliation with the Credit Union National Association (CUNA) of Madison, Wisconsin. Federal credit unions may also be members of the National Association of Federal Credit Unions (NAFCU).
The Credit Union Executives Society (CUES), based in Madison, Wisconsin, provides professional development and resources to thousands of credit union executives and directors worldwide. It partners with world-renowned universities to offer graduate-level executive education specifically for credit union leaders.
In the United States, as of 2005 credit unions have 86 million members, which is 43.47% of the economically active population. U.S. credit unions are not-for-profit, cooperative, tax-exempt organizations.
U.S. credit unions can be chartered by either the federal government ("federal credit unions") or by a state. The states of Delaware, South Dakota, and Wyoming do not regulate credit unions at the state level; in those states, a credit union must obtain a federal charter to operate. All federal credit unions and 95% of state-chartered credit unions have "share insurance" (deposit insurance) of at least $250,000 per member through the National Credit Union Share Insurance Fund (NCUSIF). This deposit insurance is backed by the full faith and credit of the United States government and is administered by the National Credit Union Administration. As of December 2006, the NCUSIF had a higher insurance fund capital ratio than the fund for the Federal Deposit Insurance Corporation (FDIC). U.S. credit unions also typically have higher equity capital ratios than U.S. banks.
As of April 2008, the world's largest credit union was Navy Federal Credit Union, serving U.S. Department of Defense employees, contractors, and families of servicepeople, with over $35 billion USD in assets and over 3 million members.