Future Business Leaders of America (FBLA) Agribusiness Practice Test

What type of organization is a credit union?

1. A for-profit bank

2. A cooperative association that makes loans to members

3. A government agency that regulates banks

4. A financial institution focused solely on investments

The correct answer is: A cooperative association that makes loans to members

A credit union is correctly identified as a cooperative association that makes loans to members. This means that credit unions are member-owned organizations, which distinguishes them from for-profit banks. Members of a credit union typically share a common bond, such as working for the same employer or living in the same community, and they pool their resources to provide financial services, including loans, to one another at competitive rates. The cooperative model emphasizes service over profit, meaning that any earnings generated by the credit union are returned to its members in the form of lower loan rates, higher interest on savings accounts, or improvements in services. This community-oriented structure aims to meet the financial needs of its members rather than maximize profits for shareholders, which is characteristic of for-profit banks. By contrast, options that refer to a for-profit bank, a government regulatory agency, or a financial institution focused solely on investments do not accurately reflect the nature and purpose of a credit union. The defining feature of credit unions lies in their cooperative nature and commitment to serving their members, emphasizing community and member benefit over profit-making.