We say credit unions are different; what is that difference?

SPRINGFIELD, MA (May 18, 2021) — The U.S. credit union system is a citizen-based, community-rooted network that reaches one in every three Americans. The international credit union system reaches 291 million members in 118 countries through 86,000 credit unions.

Many of the challenges that citizens around the world face have their impact at the community level. Those communities turn to their locally owned and led credit unions to mitigate those challenges. That is true today with the economic impact of the pandemic.

As local and national economies are impacted by the economic shock of COVID-19, credit unions are often the first financial responder in helping their members cope with the economic impact.  Credit unions help members restructure their finances to adjust to their impacted financial condition and become more tech-savvy. Small businesses turn increasingly to credit unions for workout assistance and finance, as they try to sustain or restart their business. Rural communities turn to their credit unions to provide an economic path for their young people and their community’s revitalization.

We say credit unions are different; what is that difference? Cooperative democracy is not an explicit determining factor when consumers decide which financial institution to choose financial services from. What consumers look for is the convenience, the cost and the quality of the service. They expect competitive pricing and service or they will find it elsewhere. These are their first-order, or necessary, conditions. Yet, price and convenience, even service can be very ephemeral in creating loyalty.

Across many countries, people comment that what stands out about credit unions is the passion with which they serve their members. The institutional mission is not driven by maximization of shareholder value or return on shares of a commercial stockholder owned institution. That internal passion and drive for member service comes from the cooperative structure and values. The one member, one vote cooperative principle notion that every member is as important as another is what drives the internal service culture of credit unions. It is not the cooperative structure and the democracy which the consumer sees. It is the resulting passion which drives the service that they like.

As they have done repeatedly through times of crisis, credit unions everywhere continue to help members through the pandemic. Credit unions provided repayment moratoriums on loans, interest waivers and interest free advances. Credit unions found ways to restructure and help their members’ finances when they lost their employment. Credit unions continued to serve their communities and lend money when other financial institutions pulled back on providing financing during the pandemic.

This is the credit union difference. The real hallmark of a credit union, of a cooperative, is to provide the member with the best alternatives for them for the long run versus the most profitable alternative for the credit union. These are their second-order, or sufficient, conditions for creating loyalty.

This is what members around the world, impacted by the economic fallout of the pandemic, notice and what they will remember. This is how credit unions help their members protect and improve their and their families’ lives. It is driven by the DNA of their cooperative mission, rather than an imposed corporate social responsibility program. This is different from the simple commoditization of financial services.

Credit unions must first meet the necessary conditions of convenience, cost and quality. Otherwise, consumers will move if credit union work to meet the second order conditions but do not maintain the necessary first order conditions.

2021 is the year that provides credit unions with the opportunity to exercise the credit union difference by helping members overcome the impact of the pandemic. It is a year to refresh the credit union brand.

This brand is happening around the world as credit unions address the root drivers of instability. They support food security, help people earn their livelihood and finance jobs, help members feed, clothe shelter and educate their families. In many parts of the world, they address the conditions of economic disruption that drive civil conflict and poverty. In doing so, credit unions provide for economic, and therefore, political stability.

In Latin America, credit unions reach low-income, small farmers, micro-entrepreneurs, small businesses and women, largely unserved by other financial institutions. Central American credit unions work to revitalize rural communities by integrating financial and real markets access to provide economic opportunities for young people. In Asia, credit unions participate in almost all commerce and production activities in local communities and play a major role in financial support for micro and small businesses working through the economic impact of the COVID-19 crisis. Credit unions in Europe provide access to affordable financial services for the unserved and vulnerable populations.

Around the world, the credit union system is delivering far more than what individuals are actually seeing. Credit unions of course offer the same types of services that the banking system offers. These are the basis for all financial providers—offering deposit accounts and loans. In most cases, providers are primarily driven by financial reward to their bottom lines. We all recognize it and that is acceptable. An honest system with trust should permeate through the system back to the borrower or depositor.

However, this has not always been the case. Poland lost all the money that individuals had in their credit union system at the end of World War II due to the theft from the Soviet Union. After the fall of communism in Russia, Poland resurrected its credit union system. It has been wildly successful. Here in the U.S. we have about 6% of the nation’s assets in the credit union system. Poland has approximately 16%—despite starting up from zero in 1989 after the trade unions in Gdansk gained certain concessions. Among those were allowing individuals to own their own businesses. Credit unions followed up immediately after that and gave the common citizen the financial power to deposit and lend in a cooperative fashion, free from government control. They had to meet regulatory standards, but the end result was positive for democracy.

In Cuba, a sort of informal financial cooperative exists. The farmers lend to one another with pooled money. The farmer is then able to get the tractors and other equipment necessary to farm. They have a difficult time getting it from the state-run financial institution(s). This financing is promoting democracy in a communist state. It would be nice if that could extend to the general public in the form of a credit union. In Puerto Rico, Hurricane Maria had devastating effects. Michael Ostrowski, President and Chief Executive Officer of Arrha Credit Union, witnessed a financial system there that cared little about the outlying areas and kept its money in just seven banks. The local “co-operativas” (credit unions) rallied to make loans and defer payments. They were and continue to be the lifeblood of those outlying areas. They borrowed money from local businesses that were flush with cash to help their members. This happens because of the cooperative democratic principles that the credit unions are based on.

These financial arrangements through member owned cooperatives help democracy grow. Earlier in the article, it mentions the credit union difference is its passion for its members and the ways that credit unions help during crisis and its communities. How true and how lucky to have a healthy credit union system in the United States.

To avoid the erosion of the credit union system, one is to continue to foster true democratic growth through membership growth; however, this can only happen if individuals recognize the value of having a credit union in its backyard. Credit unions are driven by and for its members due to its cooperative structure and member value culture; not shareholder value or profit culture. The loss of recognition by individuals like members and its communities who enjoy the difference that credit unions make is worrisome. However, credit unions are seeing a surge in appreciation and recognition due to the loss of local community banks. Individuals and community members are turning to their local credit unions for their borrowing and banking needs with local decision-making. We are blessed to have credit unions in the United States and throughout the world who are laser focused on its members and their success.

Another worry that can erode the credit union system is the Big Banks and Fintech (virtual banks).  As they get even bigger, with little regulatory oversight, what is going to happen to the great small institutions that took care of the community needs and do not always put the mighty dollar first?  The comparative value of the credit union to Big Bank and Fintech is putting the economic welfare of its members and communities first before the profit of the institution.

In a true extension of democratic ways, credit unions shine through in the United States and around the world offering services to the underserved in an inclusive, fair, and equitable fashion. On the front line, during a global pandemic, helping and educating members and their communities to overcome the impact of the crisis shouts out “we are all in this together.”

Brian Branch, President and CEO, World Council of Credit Unions

Michael Ostrowski, President and CEO, Arrha Credit Union


About Arrha Credit Union

We’re member-owned and operated so you’ll always feel at home here. And, since we have no stockholders to pay, profits (after operating expenses) are returned directly to you and your fellow members, in the form of competitive dividend rates, low loan rates and reduced fees for services. Arrha Credit Union is regarded as the premier educational base credit union in the Western Massachusetts financial community. Originally chartered on October 5, 1929 with thirty-one original members. Today we serve those individuals who live or work in Hampden, Hampshire or Franklin counties. In addition, we continue to serve the employees of the Springfield Public Schools, American International College, Springfield Technical Community College, Minnechaug Regional High School and the Massachusetts Career Development Institute along with the retirees and their families. In addition we have approximately 11,000 members and more than $114 million in assets.

World Council of Credit Unions is the global trade association and development platform for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions’ financial performance and increase their outreach.

World Council has implemented 300+ technical assistance programs in 90 countries. Worldwide, 86,055 credit unions in 118 countries serve 291 million people. Learn more about World Council’s impact around the world at


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