What is a Cooperative Financial Institution (CFI)?

A cooperative financial institution (CFI) is a type of financial institution it is the umbrella term for deposit taking financial co-operatives that are owned and controlled by its members. CFIs are created to serve the financial needs of their members, rather than to make a profit for a small
group of people, they financially benefit all their members.

CFIs include credit unions, savings and credit cooperatives (SACCOs), financial services cooperatives (FSCs), and financial cooperatives (FCs). These terms are often used interchangeable.

CFIs are guided by the principles of cooperation, democracy, and social responsibility. They offer a variety of financial services to their members, including savings and fixed deposit accounts, loans, and investment products. CFIs are committed to providing fair and affordable financial services to their members and to reinvesting profits back into the community.

Additionally, CFIs typically have lower fees than for-profit banks. Because CFIs are member-owned, they are also more likely to invest in their local communities. For example, a CFI might offer small business loans or support community development projects. Ultimately, CFIs exist to promote economic opportunity and stability within their communities.

Because they are member-owned, CFIs are not driven by the profit motive. Instead, they focus on meeting the needs of their members and supporting the well-being of their communities. This focus on service, rather than profit, is what sets CFIs apart from for-profit banks and other financial institutions. 

Around the globe CFIs continue to inspire great loyalty and confidence. As literature demonstrates, credit unions are the only financial services institutions that weathered the 2007/2008 economic crisis and did not receive any bailout from government. This saw a quick rise in membership,
member deposits, as CFIs were perceived to give people a measure of control over their financial destinies.

More-over, the people-centred actions of CFIs, driven by volunteers and employees dedicated to serving their peers – a more satisfying purpose than earning money for a select few – are fundamental to the CFI difference.

Such CFIs offer many of the same products and services as commercial banks, however they differ in a number of ways:

They are owned by their members;
The board of directors is elected by the members who function as unpaid volunteers;
Typically have fewer and lower fees than those of banks;
The surplus goes back to members in the form of dividend or patronage proportion;
Interaction between co-operatives financial institution is co-operative not competitive.

A group of shareholders from Isikhungo Sabantu Financial Services Cooperative (IS FSC) CFI under the IS FSC branded gazebo


• A financial co-operative wholly owned by its members;
• A co-operative with open and voluntary membership to all within an accepted common bond of association;
• A co-operative that provides financial services to its members;
• An institution that encourages savings in order to provide responsible credit and other services to its members at a fair rate – whose surplus may be distributed amongst its members or towards improving services required by members;
• A democratically owned institution with each member enjoying equal rights to vote (one member one vote);
• A member-centric institution driven by service to its members to improve the economic and social well-being of all members;
• An institution that encourages economic participation by all members towards building a safe and sound institution to ensure continued service to its members;
• About people helping themselves, pull their resources together in order to serve its members;
• Governed by co-operative principles (please refer to later article) whose
• ideals and beliefs seek to bring about social justice and solidarity for the greater good of the communities within which they operate.


• A company owned by a few shareholders and/or founding members;
• An institution that provides its services to clients irrespective of whether they are joined by a common bond or not;
• A pyramid scheme;
• An institution that promotes or encourages reckless lending practices in order to maximise on profit for its directors;
• Speculating with members funds;
• A profit driven institution, for the benefit of a few individuals;
• Driven by raising capital from the markets at the risk of losing it all to external funders.

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