Native American Credit Unions: Building Financial Access and Capability

The structure and mission of credit unions uniquely positions them to effectively provide a range of basic financial services critical to Native communities.

Abstract: Among the most unbanked and underbanked in the United States, Native Americans have much less access to affordable, good-quality financial services. Native credit unions fill important credit and capital needs of the underbanked consumers throughout Indian Country. They also provide a unique business profile different from two other mainstream Native financial institutions, Native-owned banks and Native Community Development Financial Institution (NCDFI) loan funds. Native credit unions’ social mission, cooperative ownership structure, and focus on financial education align closely with the needs of most Native communities. Increased visibility, sponsor support, and industry resources signal the potential for the growth and expansion of Native credit unions to create even greater opportunities for financial access and capability in Native communities.

Executive Summary: Building access to capital and affordable financial services are among the most critical needs of Native communities throughout the nation. Native Americans are more likely to be unbanked or underbanked than other minority groups in the United States. In 2013, 16.9% of Native Americans were unbanked, having neither a checking nor a savings account at an insured institution. An additional 25.5% were underbanked, using alternative financial services outside of the banking system. With lower levels of usage of checking and savings accounts, Native Americans have fewer options for obtaining affordable credit for both emergencies and for life’s major purchases, such as purchasing a vehicle.

Native Americans who lack checking and savings accounts have fewer options for obtaining affordable credit for both emergencies and for major purchases such as a motor vehicle.

Moreover, without access to mainstream financial services, they face challenges in establishing credit histories and acquiring financial capability. Financial capability includes financial literacy (knowledge) and the opportunity to act (products and services). Some studies indicate that financial education alone is not enough to improve an individual’s financial well-being. Increasing access to affordable financial products—checking and savings accounts at a minimum—has great potential for improving financial outcomes for Native Americans. Matt Fellowes, former research fellow at the Brookings Institution emphasizes this relationship.

“Bank accounts are essentially an on-ramp to economic mobility and wealth in this country.”

Native American-focused mainstream financial institutions—banks, community development loan funds, and credit unions—thus have an important role in meeting the financial needs of Native communities. They can bridge the banking and credit gaps in critical ways, each with distinct characteristics. First Nations Development Institute, a national Native non-profit focused on strengthening Native economies, described the comparative advantage of Native institutions versus non-Native institutions as stemming from their being “…a locally controlled, community responsive resource for credit and other financial services to support asset-based development in Native communities.”

Native financial institutions are increasingly providing more financial services to Native communities across the country, albeit in different ways. Among the three mainstream options, Native credit unions fill a financial services niche between Native-serving community development loan funds and Native-owned banks. Unlike community development loan funds, credit unions (like banks) conform to the federal regulations required to offer checking and savings accounts, a core mainstream financial service important for addressing financial access needs. Unlike banks, whose responsibilities to profit-seeking shareholders implicitly put a high priority on attracting and serving affluent customers, credit unions are owned and governed by their membership and operate under a service mission that includes low-income and under-served consumers. In addition, credit unions require fewer resources to establish and operate than banks, though more than loan funds. These characteristics position Native credit unions as the middle path for addressing the financial access needs of Native communities, between the more limited Native-serving loan funds and the more resource-intensive and profit-oriented Native-owned banks. However, to expand their capacity and services in Native communities, Native credit unions also require long-term investment and development support. Sponsorship and capacity building for existing and new Native credit unions come from a variety of sources: tribes, federal agencies, philanthropic organizations, and social investors. Both the public and the private sector are showing signs of becoming more responsive to the needs of community-centered financial institutions, like Native credit unions, with the goal of increasing access to financial services for the individuals and communities they serve.


Article by Nikki Pieratos (Bois Forte Chippewa), Center for Indian Country Development, Federal Reserve Bank of Minneapolis. Nikki Pieratos is the former CEO of Northern Eagle Federal Credit Union, chartered in 2013 to serve the Bois Forte Chippewa community in northern Minnesota. The author thanks present and former Native credit union leadership and financial services industry experts for sharing their insight during interviews from March 2018 through December 2018.

The views expressed herein are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.

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