Discussion Paper

Tracing the History of Community Development Credit Unions

Abstract: When the Community Reinvestment Act was passed in the late 1970s, Congress tasked the 12 Federal Reserve Banks with ensuring that supervised financial institutions meet the credit needs of the communities they serve. Community development financial institutions (CDFIs) are mission-driven lenders that help provide credit in underserved areas. As we gather information on CDFIs through the 2025 Federal Reserve CDFI Survey, we want to examine the roots of community development finance and the evolution of CDFIs. This post focuses on the history of one type of CDFI: community development credit unions (CDCUs). Credit unions, broadly, are cooperative financial institutions — one member, one vote — that provide both financial and depository services to their members. Credit unions in North America have origins in both mutual aid organizations and the Cooperative Movement in Europe. Mutual aid organizations have long-standing roots in West African societies and were originally organized to provide burial funds and welfare for widows and orphans. This tradition continued for Africans who were enslaved and transported to North America, and some of the earliest mutual aid and benefit organizations in the United States were founded within Black communities in the late 18th century. The Free African Society (1778 in Philadelphia, Pa., and 1780 in Newport, R.I.) and Free African Union Society (1787 in Boston, Mass.) were the first on record and served as "quasi-financial organizations" for free Black communities who were otherwise unbanked. The Cooperative Movement in the financial sector first appeared as "people's banks" in Germany and soon took hold in the United States.

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Regional Matters

Publication Date: 2025-05-08