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Credit Unions


Credit unions have different names worldwide. Among its other names is not for profit financial cooperatives, member owned etc. Credit union is a bond or a linkage that is shared by borrowers and savers who either belong to an organization, community or religion. Credit unions do group their member’s savings and shares to finance to finance their own portfolio. They do not depend on the outside capital for funds. Their members do benefit a lot from their lower rates on loans and higher returns on savings.

These unions offer their members more than financial services. They also have their own financial institutions that help them in creation of opportunities. There is no biasness as each member is allowed to run for the volunteer board of directors and cast a vote in elections. Most people prefer credit unions over others. There are differences between credit unions, commercial banks and the microfinance institutions. These are:

Credit unions are not for profit financial cooperatives that are funded by member deposits while commercial banks are for profit institutions that are owned by stakeholders while microfinance institutions are typically funded by external loans, grants or investors. Credit union members share a common bond that is blended well with their service to a broader spectrum of the population. This allows these unions to offer competitive rates and fees. Commercial banks serve middle to high income clients while microfinance targets low income earners who are mostly women hailing from the same community.

In terms of governance, credit union members elect a volunteer board of directors from their membership while commercial banks stockholders vote for a paid director or directors who are not necessarily a must that they hail from that community. Microfinance, institutions are run by an appointed board of directors.
Credit unions earn from their net income that is applied to lower interest on loans and higher interest on savings while commercial banks stockholders receive a pro rata share of profits while in microfinance the net income is divided among investors.

Credit unions products range from financial services which are primarily credit remittances and insurance while commercial banks products and services include investment opportunities and microfinance focusses on micro credit.

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