Kauaʻi Federal Credit Union: Doughnut Design Case

01 | Brief Summary and Key Facts

Kauaʻi Federal Credit Union (Kaua‘i FCU) is a democratically owned and governed credit union with $190 million in deposits (which has increased by 75% over the last 6 years) and 7,800 members. Kaua‘i FCU reinvests all profits back into the community. There are many ways to be eligible for membership for anyone who wants to be a part of the credit union. It focuses its activities on the island of Kaua‘i, where it is based and is certified by the U.S. Treasury as the islandʻs first and only CDFI (Community Development Financial Institution) credit union.

• Location: Hawaii, USA
• Founded: 1947
• Size: $190m in deposits, 7,800 members
• Sector: Financial services
• Legal form: Financial co-operative (credit union)
• Website: https://kauaicreditunion.org/
• Main products/services: Retail and business banking (deposit taking and lending), commercial mortgage lending, investment advice and services

Highlight of their unique approach

For Kaua’i FCU, creating green lending products is a strategic priority. The credit union uses a social impact lending matrix to ensure that planetary boundaries factor into the way it assesses the businesses to whom it makes loans.

Highlight of their unique design

Cooperatively owned by the local members, it aligns with the indigenous value system and land management practices as the pathway to prosperity (ahupuaʻa system, ecological wealth, generational abundance). Kaua‘i FCU reinvests all profits back into the community.

02 | Founding story

The institution was founded in 1947 as a credit union for public sector employees working for the government of Hawaii and the county of Kaua‘i.

03 | Regenerative & Distributive Strategies and Actions 

Kaua‘i FCU provides loans for a broad range of people, organisations and businesses across the Kaua‘i community. Its approach is shaped by the local indigenous value system and land management practices. It particularly focuses on providing affordable loans to marginalised groups and local businesses that generate social and ecological benefits on the island. It regularly makes decisions based on where it can have a positive impact on local communities. For instance,  it opened a local community-owned branch on the north shore of the island where there was a lack of financial services.

Social impact 

Kaua‘i FCU invests in initiatives and products to address marginalisation across the island, targeting families identified as Asset Limited, Income Constrained, Employed (ALICE). In 2022, of the 493,567 households in Hawai‘i, 215,152 — 44% — were below the ALICE threshold

In 2023, 54% of loans were to people of color and indigenous communities, 59% of loans were to low-income and moderate income people, and 50% of loans were to women. Kauaʻi FCU participated in - and won -  the Filene Research Institualicete’s Racial Economic Equity Incubator. Through that program, it provided innovative and climate-forward financing products to address the inequitable distribution of homeownership for Native Hawaiian and local people. The products included a Down Payment Bridge product, Cesspool to Septic Conversion loans, and direct member technical assistance for local government grant programs. By identifying the barriers for Kauai’s most marginalized populations, Kauai FCU was able to find the right partners (private and public) to create an ecosystem of solutions that tackle homeownership, workforce development, climate adaptation (for waste water management improvements), and more. In 2024, Kauai FCU  led a $10 million USDA backed local farm-to-table restaurant construction loan, investing $2.8 million in the project and bringing in a consortium of lenders to participate, marking the credit union’s largest ever community-based lending initiative to foster food systems innovation. 

Ecological impact

Kaua‘i FCU has created an incubator, Kauai Commons, to help businesses embed biomimicry initiatives across the Kaua‘i community. Focused on indigenous wisdom, a reverence for nature, and a recognition of people and place, the founding incubator is set to help half a dozen local businesses and start-ups create a regenerative, entrepreneurial,  Kauai-based business model. Kaua‘i FCU hosts the Racial Economic Equity (REE) Incubator and Kauai Commons out of its economic resilience center,  a cooperative community space. The center provides agile offerings and services for all people on the island with a deep connection to place. It exists to collectively build economic, social, and health well-being, with issues and solutions identified and implemented by the local community.

Aligning to Kauai FCU’s mission of “strengthening the social fabric of Kauai,” a strategic priority is creating green lending products and applying a social impact matrix to ensure that planetary boundaries factor in the way it assesses priority initiatives to pursue.  There are many other ways that Kaua‘i FCU pursues its broader social and ecological purpose, including the deployment of over $46 million in relief to keep local businesses afloat and local people housed during COVID, in partnership with Aloha United Way and the County of Kauai. 

04 | How the Deep Design Enables Strategy and Action

Kaua‘i FCU is designed around cooperative principles, with a one-member one-vote model of ownership and governance at its core. This allows it to set priorities based on the perspective of the broader community and culture of the island of Kaua‘i, rather than a smaller group of individuals with significant shareholdings. Kaua‘i FCU’s strategy and board are voted on by the 7,800 members, allowing it to pursue strategies and invest in products, services and initiatives that don’t deliver maximum financial returns, but do have significant impact on the local community. 

For instance, it is able to offer unique financial products, such as loans at a lower than market rate, for businesses that may be declined at other financial institutions because of their risk profile, return rate, or other considerations. Kaua‘i FCU values relational capital, knowing its members more intimately, providing innovative collateral or bridge financing opportunities, and more. Kaua‘i FCU also leverages capital from governmental and private grants to create holistic programs that couple their core business (increasing access to capital to marginalized communities) with appropriate financial education, counseling, and other technical assistance. These efforts would be considered too expensive and  expendable by most financial institutions. 

Well capitalized for its size, Kauaʻi FCU grew its asset base by 75% from 2018 to 2024 and it redeploys member deposits back into the community as loans at a rate 100% higher than its Hawaii peers of similar size. (Source: Callahan & Associates)

05 | Reflections and Lessons for Other Businesses

It is a unique combination of attributes and principles that allow Kaua‘i FCU to have the level of impact that it does. Some of the key and transferable aspects of its model include:

• Cooperative ownership, which puts the focus on closing the wealth gap, and is leveraged in matching grant programs with other credit unions.
• Place-based solutions, driven by local values and indigenous knowledge, align with county and state climate change mitigation and renewable energy goals (i.e. a legislated 100% renewable energy portfolio standard (RPS) by 2045 with Kauai generating 59% of its energy from renewable sources).

A combined focus on social and ecological issues, which supports cross-cutting economic development initiatives, such as regenerative tourism and agriculture.

This case study was researched and written by Erinch Sahan of DEAL and Yvonne Hunter, with contributions from Mason Chock, Hazelmae Overturf and other colleagues from Kaua'i FCU.