Diversity Insight: It’s in Credit Unions’ DNA

DNA molecule on a blue background
Jerlando F. L. Jackson, Ph.D.  Photo
Founder and Executive Director
Organizational Disparities Institute

6 minutes

Six reasons why credit unions are uniquely positioned to carry out diversity and inclusion objectives.

I have studied diversity and inclusion challenges in organizations across multiple employment domains (e.g., business, not-for-profit, and government) for approximately 25 years. After controlling for industry-based differences, I have found that the workplace experiences and challenges of women and people of color are fairly similar across organizational types. (For more details, see my writings in the Journal of Organizational and Leadership Studies and The Encyclopedia of Diversity and Social Justice.)

When I was asked to consider how my work applies to credit unions, I did a deep dive into the history and organizational dynamics of credit unions and how they differ from traditional banks. After doing so, I came to the conclusion that credit unions are uniquely positioned to carry out diversity and inclusion objectives. In effect, doing so is in their DNA.

The analog to DNA is purely heuristic, in that the process of establishing organizations embeds qualities and properties based on key decisions made at the inception, largely shaped by those who are present and those who are believed to be beneficiaries. The analogy to DNA was selected here because, as a society, we understand our own life outcomes and expectancies are linked to the genetic instruction assigned to us at birth. At the danger of being accused of humanizing organizations, for this exercise simply humor me with the thought that organizations are very similar to us in this regard.    

What follows are six reasons why credit unions are special when it comes to D&I.

1. History of Providing Access to Financial Services 

Historically, credit unions were among the first to make space for and provide financial support to non-White Anglo-Saxon Americans. In the early 1900s, this represented Franco-Americans, who identify fully or partially with their French heritage. Credit unions were also among the first financial institutions to provide services to women and the poor in the United States. Credit unions have been at the forefront of making financial services available for populations who were often not granted access to traditional banks. As credit union executives endeavor to remain true to or re-commit to their history, a call to action to be more diverse and inclusive is necessary to this objective. 

2. Operational Mission is to Help People

Credit unions operate with a core principle of helping people by providing user-friendly, cost-effective rates. Historically, that included providing these services to individuals who were otherwise excluded. Driven by a mission to help, credit unions create unique financial opportunities for their members. The desire to include historically excluded groups and create meaningful opportunities is an integral component of D&I efforts. For other organizations, integrating D&I principles into the organizational mission presents a core challenge. In contrast, credit unions have D&I built into their mission and a longstanding history of serving marginalized groups. 

3. Patrons as Members Not Customers

Credit unions constitute their relationships with their patrons as members, as opposed to customers. In doing so, “patrons” are a part of the organization (they are, in fact, owners) and not apart from the organization, creating a group dynamic centered around membership. A fundamental aspect of group membership is that the members are peers. In turn, the relationship you establish with a peer (e.g., same status) is distinctly different from the relationship you establish with a customer (e.g., buyer-seller dynamic). Valuing each individual and treating group members as peers is a key aspect of D&I. Credit unions are built to foster peer relationships and to consider individuals as members. 

4. People Driven, Not Profit Driven

Credit unions are established as not-for-profits because their purpose is to service member needs as opposed to maximizing profits. Credit unions have an emphasis on generating income to cover operational expenses, while the rest of the financial industry has an additional, primary focus on profit margins. Without an emphasis on profit, credit unions are better positioned to maintain a focus on the people and communities they serve. This focus, coupled with the industry’s history of serving women and people of color, can further drive D&I efforts through cultivating relationships with current and future members.

5. Serve Small Communities and Identifiable Groups

Credit unions are established with members generally aligned with an affinity group(s) (e.g., the Navy, a university or city/region). The business strategy is thus designed with specific groups and people in mind, and not a generic notion of customers. In doing so, “faces and names” come to mind when considering services to meet the needs of members. With those “faces and names” come stories that make the personalization of services easier and more meaningful. A key aspect of confronting organizational disparities is knowing and understanding the stories of organization members in an effort to better understand their experiences and challenges. Credit unions’ affiliation with affinity groups and efforts to fill critical gaps in the provision of financial services provide a greater opportunity to understand social inequities facing women and people of color.

6. Invest in Small Businesses and Cost-Conscious Customers 

Credit unions have a strong track record in investing in small businesses that often have trouble securing financial support from traditional banks. For example, credit unions tend to provide more than 50 percent of the loans made to small businesses in any given year, according to this 2018 U.S. Small Business Administration report by Rebel A. Cole. Small businesses tend to be the financial pillars of small rural towns and communities of color. Similarly, credit unions tend to be the preferred vendors of cost-conscious patrons. In particular, patrons who have to think carefully about their monthly expenses find great value in credit unions. While many businesses have to be strategic about supporting customers in these traditionally underserved markets (e.g., mom and pop shops), they are the core market for credit unions. By embracing these customers, credit unions foster a natural market that is diverse and provide value to this unique clientele. 

Credit unions have embedded in their DNA important organizational properties that bode well for excelling at D&I. Their inclusive nature, diverse member base, and people-focused mission provide credit unions with a competitive advantage. In many ways, credit unions already lead the financial industry when it comes to D&I measures. The challenge for credit unions is translating their history of D&I efforts into a contemporary effort that supports an increasingly diverse U.S. population. 

For D&I initiatives to be successful, they must originate from the top. I am inspired by CUES’ commitment to elevate the importance of D&I to the leadership (e.g., executives and board members), and the industry’s history of supporting underserved individuals. Collectively, with guidance and committed resources, D&I efforts could accelerate the growth and positive impact of credit unions in North America. 

Jerlando F. L. Jackson, Ph.D., is a globally recognized organizational scientist, leadership strategist, entrepreneur and university professor. He is founder and executive director of the Organizational Disparities Institute. 

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