What are credit unions?

What are credit unions?

A credit union is a not-for-profit financial cooperative set up and controlled by members with something in common to benefit their community.

Credit unions work by members saving into a common fund. That fund is then used to give low-interest loans to the credit union members should the need arise. Members are also strongly encouraged to save

Credit unions are not-for-profit, and therefore exist solely for the purpose of providing services to their members rather than making profits for external shareholders.

Origins of credit unions

As the industrial revolution took hold in Western Europe in the 18th and 19th century, some pioneer thinkers looked into different methods of fostering a more equitable society.

The work of social reformer Robert Owen led to the development of the co-operative movement, which emerged in Rochdale, Lancashire in 1844.

However, it was in Germany that innovators were credited with forming the first credit unions, including the concept of a common bond and community-based organisations that addressed issues such as financial exclusion and poverty.

Successive governments have since championed credit unions as a way to enable a fair and inclusive approach to the provision of financial services. They are particularly seen as an ethical alternative to other high-cost loan providers and banks.

Objectives of credit unions 

Credit unions have four objectives:

1. Promotion of thrift among its members by the accumulation of their savings
2. Provide sources of credit for the benefit of its members
3. The use and control of members’ savings for their mutual benefit
4. The financial education of members

Credit union services 

Credit unions aim to provide all their members with access to the following services:

• Banking transaction services
  Many credit unions offer current accounts, giving members easier access to their savings.
• Savings accounts
  Credit unions offer savings accounts that help members build up their financial assets.
• Affordable loans
  Credit unions give members access to affordable credit and consider their personal circumstances and savings history, as well as their ability to repay.
• Financial education
  One of the credit union objectives is the financial education of its members – hence, we offer suggestions and provide useful resources in order to empower our members to make informed choices about their finances.
• Insurance products
  Most notably, credit unions offer life insurance on members’ savings as well as loan protection insurance, further benefiting our members and the community.