Credit Unions vs Banks

Credit unions, called by various names around the world, are member-owned,not-for-profit financial cooperatives that provide savings, credit and other financial services to their members. Credit union membership is based on a common bond, a linkage shared by savers and borrowers who belong to a specific community, organization, religion or place of employment. Credit unions pool their members’ savings deposits and shares to finance their own loan portfolios rather than rely on outside capital. Members benefit from higher returns on savings, lower rates on loans and fewer fees on average.

Credit unions worldwide offer members from all walks of life much more than financial services. They provide members the chance to own their own financial institution and help them create opportunities such as starting small businesses, growing farms, building family homes and educating their children.

Regardless of account size in the credit union, each member may run for the volunteer board of directors and cast a vote in elections. In some countries, members encounter their first taste of democratic decision making through their credit unions.


Credit Unions

Commercial Banks

Other Microfinance Institutions (MFIs)


Not-for-profit, member-owned financial cooperatives funded largely by voluntary member deposits


For-profit institutions owned by stockholders


Institutions typically funded by external loans, grants and/or investors



Members share a common bond, such as where they live, work or worship. Service to the poor is blended with service to a broader spectrum of the population, which allows credit unions to offer competitive rates and fees.


Typically serve middle-to-high income clients. No restrictions on clientele.

Target low-income members/clients, mostly women, who belong to the same community.


Credit union members elect a volunteer board of directors from their membership. Members each have one vote in board elections, regardless of their amount of savings or shares in the credit union. 


Stockholders vote for a paid board of directors who may not be from the community or use the bank’s services. Votes are weighted based on the amount of stock owned.


Institutions are run by an appointed board of directors or salaried staff.



Net income is applied to lower interest on loans, higher interest on savings or new product and service development.

Stockholders receive a pro-rata share of profits.


Net income builds reserves or is divided among investors.

Products & Services

Full range of financial services, primarily savings, credit, remittances and insurance.

Full range of financial services, including investment opportunities.


Focus on microcredit. Some MFIs offer savings products and remittance services.


Service Delivery

Main office, shared branching, ATMs, POS devices, PDAs, cell phones, Internet


Main office, shared branching, ATMs, POS devices, PDAs, cell phones, Internet


Regular visits to the community group