Credit unions have long fulfilled a need that for-profit banks could not meet. During the history of credit unions in America, they are often established in areas where larger banks vacated during times of recession, such as low-income, urban and rural communities. Many credit unions were formed by individuals to meet the needs of a group that they themselves were a part of, whether it was related to employment, a common trade, or attendance at a particular church. Credit unions are self-defined as community institutions, however many often fall short of targeting their community and instead market member-by-member. A successful credit union is one that is able to offer credit union member services within thier community that result in membership growth and loyalty.
In the 1970's, big banks pulled out of low-income, non-white areas, and alternatives emerged to fill the void. The first alternative was the emergence of check cashing or payday lenders. They often set up shop in near proximity to out-of-business retail or fast food establishments. These for-profit institutions are still in place today in low-income areas, and charge incredibly high rates and fees. The fact that they remain prevalent testifies to the community they serve, who often feel they can't afford to be a part of mainstream banking. Their focus is on giving anyone who walks in the door a place to cash checks or receive small, expensive loans in a pinch. They typically do not offer any other form of financial services, and their for-profit status does not bode well for strengthening the financial position of the community.
The second alternative for those who sought out other forms of banking were credit unions. Credit Unions design their product offerings and member services to both fit the needs of their members, as well as help their members gain long-term financial success. One such example is how a credit union offered creative lending solutions through their core technology that worked to help its member's financial status as an alternative to expensive payday loans while establishing a savings account to help them gain firmer financial ground.
"The focus of a credit union is its membership, not its locality, and although these are intimately connected, they are clearly not synonymous, " explains James DeFilippis in his essay On Community, Economic Development and Credit Unions: The Case of Bethex FCU and the South Bronx. Some credit unions serve people in a fixed location, yet when members move, they often remain members. Other credit unions serve a particular business or type of employee, who are as geographically dispersed as the company that employs them. Others are 'open' credit unions, which have charters that allow them to cross the borders of geography.
The term "community" is a valued term by CU executives that extends beyond a geographic location, and building that sense of community is a priority for many CU's. Because every credit union member is an owner, the commonality and equality of caring about the success and growth of the credit union leads to a greater sense of community. Credit unions who understand the importance of their community often give back to those they serve through creative ways, such as scholarships, free financial education, and outreach. Seeing this will not only attract new members from within the community they serve but further build the sense of pride and loyalty from their existing members.
