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Credit unions and credit cooperatives

Credit unions and credit cooperatives

Decker, Olufemi and Yan, Lili (2023) Credit unions and credit cooperatives. In: Idowu, Samuel, Schmidpeter, René, Capaldi, Nicholas, Zu, Liangrong Zu, Del Baldo, Mara and Abreu, Rute, (eds.) Encyclopedia of Sustainable Management. Springer, Cham, Switzerland, pp. 1-11. ISBN 978-3030020064 (doi:

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Credit unions are regulated financial cooperatives that are owned by their members, who are also their customers. They operate in relationship-based retail banking business (McKillop et al. 2020). A defining characteristic of credit unions is their membership requirement, known as a common bond (Emmons and Schmid 1998; Frame et al. 2002). The common bond specifies who is eligible to join a particular credit union. It is based on a social connection, which could arise through location of residence or place of work, occupation, membership of an association or a combination of these (McKillop and Wilson 2015; Pavlovskaya et al. 2020).

Within their common bonds credit unions operate inclusively, by offering their services to members of all income levels and backgrounds. The early credit cooperatives, that preceded credit unions, were established in the 1800s to provide credit to artisans, traders and farmers who were financially vulnerable and experiencing exclusion (Guinnane 2011, 2001). Modern credit unions remain non-discriminatory and are committed to social responsibility, which is one of the operating principles of the international credit union movement (WOCCU 2017; Decker 2010; Stoffman 2017).

Credit unions’ main purpose is not to make economic profits for distribution to shareholders or managers (Jenster et al. 1990; Worthington 1998; Frame 2002). Rather, they have a dual purpose to balance social and economic goals (Taylor 1971). Surpluses are distributed to members as dividends, used to improve the cost and quality of services or retained to strengthen the institutions’ capital base.

Item Type: Book Section
Uncontrolled Keywords: credit cooperatives; credit unions; finance; financial cooperatives; financial institutions; financial intermediary; financial intermediation
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Faculty / School / Research Centre / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Last Modified: 15 May 2023 12:22

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