Same Sector, Different Stories: How CDFI Credit Union Experiences Vary by Institution Type

Introduction

Credit unions are a keystone of community banking that date back centuries. Compared to banks, credit unions are cooperative in model, which means they are governed by their membership; they provide financial and depository services to members.

One hundred sixty-two community development financial institution (CDFI) credit unions responded to the Federal Reserve's 2025 CDFI Survey. This Regional Matters post captures responses across credit unions - including recent changes in demand, their capacity to meet new demand, and factors that limit their ability to expand financial services to more members. This post also highlights community relationships that have helped several respondents navigate roadblocks and expand banking and credit access.

What Kinds of Credit Unions Responded to the Survey?

Almost all credit union survey respondents (91 percent) primarily deliver consumer finance products to their membership, which aligns with the credit union business model. One-third of respondent credit unions reported they have no secondary business line (i.e., business lines where CDFIs dedicate the second most resources and staff time). Of those with a secondary business line (109 credit unions), more than half said they offer home purchase improvement financing for consumers (55 percent), while fewer offer residential real estate finance (16 percent), which includes the purchase of single or multifamily units.

Many credit union respondents also reported that they carry additional special designations. For example, 31 percent of respondents were minority depository institutions (MDIs). Cooperativas, cooperative credit unions based in Puerto Rico, made up about 30 percent of credit union respondents. The responses of these types of institutions help provide a window into the unique opportunities and challenges of different CDFI credit union membership, service areas, and banking cultures.

Another institutional dimension to consider is credit union size. Forty-three percent of respondent credit unions held less than $100 million in total assets at the time of the survey. According to the National Credit Union Administration's definition, these institutions are considered small credit unions. In comparison, the largest credit unions in the survey sample held more than $1 billion in assets. Staff size can also help illustrate difference in scale of these institutions. For small credit unions, the median number of full-time employees was 12. For larger credit unions, the median was 90 employees.

Small credit unions, MDIs, and cooperativas are nonexclusive respondent subcategories that each represent at least about one-third of the survey sample. Due to their diverse membership, geographic service areas, and capacity, we explore their shared and unique experiences in the following sections.

Different Credit Unions, Different Experiences

Overall, demand for credit unions' products and services generally increased during 2024, but a smaller share increased compared to other types of CDFIs.

When comparing different credit unions within their own sector, some similarities and differences emerged. Cooperativas were 7 percent more likely to report demand increases than the rest of the credit union sample. In addition, they reported they were more capable of meeting rising demand than the rest of the sample.

On the other hand, MDIs' demand change was similar to that of other non-MDI credit unions. However, 18 percent of MDI respondents reported having a harder time keeping up with increasing demand, compared to just 4 percent of non-MDI credit unions. Small credit unions also reported more difficulty meeting increased demand compared to their larger counterparts. Four of the seven MDI respondents who had a harder time meeting rising demand were also small credit unions. (For reference, these respondents said they were moderately, somewhat, or not at all able to meet rising demand.)

Cooperativas Most Challenged by Funding

Although they were better able to meet demand than other types of credit unions, about half of cooperativas reported that operational funding and lending capital limitations prevented them from meeting more demand.

Specifically, the most frequently reported challenge was limited availability of operational capital. Of the cooperativas that reported funding challenges, 32 percent reported that there were not enough funders offering operational capital and one quarter each said operational capital was not offered by funders, or that funding was restricted to nonoperational uses. Aside from earned income from deposits and interest, CDFI credit unions may also seek to attract funding from outside sources to help further meet their missions. With regard to lending capital, 63 percent of cooperativas said they were challenged by the high cost of debt capital.

Small Credit Unions More Likely To Be Challenged by Staffing and Sourcing Operational Capital

Eighty-three percent of small credit unions that had a harder time keeping up with rising demand said that staffing challenges prevented them from being able to do more. Specifically, they said that finding and attracting the right candidates to hire (62 percent) and having limited resources (60 percent) - especially to train employees appropriately (48 percent) - were the biggest hurdles.

Small credit unions (69 percent) also faced more challenges with funding compared to larger credit unions (44 percent). Similar to cooperativas, small respondents most frequently said that funding is restricted to nonoperational uses (38 percent) or that funder application requirements or compliance reporting hindered their use for operational funding (35 percent).

Technology Issues Were Ubiquitous for Credit Unions of All Sizes

No matter the respondent credit unions' size, most agreed that technology challenges posed a barrier to meeting more demand (78 percent). Of these credit union respondents, the most frequently cited tech issue was managing the high cost of client-facing technology (80 percent). Many more respondents said that integrating their existing systems with new technologies also slowed down their ability to do more business (71 percent).

Additionally, in its 2026 Risk Officer Report, the Federal Reserve's Financial Services survey of financial institutions revealed that fraud and scams were on the rise, resulting in higher costs and losses for financial institutions - creating increasingly challenging environments for financial institutions to operate safely. Notably, around 60 percent of 2025 CDFI Survey credit union respondents said that security concerns and challenges hindered their ability to meet demand.

Relationships as Potential Keys to Expanding Services

Credit unions typically have relationships or partnerships with other financial institutions, municipalities, nonprofit organizations, and philanthropic organizations in their communities. These relationships can help credit unions better serve their membership and could serve as a resource to overcome some of their challenges. In response to an open-ended question about factors that enabled respondents to better meet their missions, some small credit unions shared insights about their community partners.

One small credit union cited receiving social deposits from philanthropic partners. The foundations took note of the credit union's mission to serve traditionally underbanked individuals and, thanks to mission alignment, began making deposits. The respondent noted that these deposits can be reloaned to members at low rates, as intended by the philanthropic partners.

A few small credit unions also leveraged community partners to expand services to low-income or younger members. This included offering more development services like financial education classes. One respondent shared they were working with Individual Taxpayer Identification Number members to identify what gaps existed in financial education so the credit union could more efficiently and effectively serve them.

Financial institutions reaching underbanked individuals can require creative solutions. However, for mission-driven CDFI credit unions, this unlocks a field of potential membership and helps improve finance and banking outcomes in their target markets.

Conclusion

Most credit unions have seen growing demand over the last few years. However, as evidenced by responses to the 2025 CDFI Survey, different types of credit unions experienced different levels of demand increase, capacity to meet rising demand, and roadblocks to meeting additional demand.

Community partnerships of all types can help CDFI credit unions overcome some challenges and ready new individuals for credit union membership. Partnerships among credit unions may also help overcome some barriers. For example, smaller credit unions may improve efficiency by working with or learning from larger institutions. Small credit unions (or those with cultural ties to one another, like cooperativas) may also partner with one another to share back-office services or knowledge.

Additionally, many credit unions are already members in industry networks where they share experiences and knowledge with each other to improve their organizations. This type of member network also typically opens doors to additional grant funding and technical training opportunities. No matter the partnership, CDFI credit unions leverage their relationships to expand their membership and overall financial access.

Views expressed are those of the author(s) and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.