how a loan participation note works
to meet the needs of local borrowers and increase loan income many community banks use loan participation agreements in which one or more banks share in the ownership of a loan community banks have also formed lending consortia one example is the community investment corporation of north carolina cicnc an affordable housing loan consortium that provides long term permanent financing for the development of low and moderate income multifamily and elderly housing throughout north and south carolina one of the purposes of loan participation notes is to help meet the needs of borrowers within a local community several other institutions have also sprung up for similar reasons credit unions are one such example a credit union is a financial cooperative that is created owned and operated by their participants while some credit unions can be large and national in scale such as the navy federal credit union nfcu others are smaller in scope cooperative principles of credit unions include voluntary membership democratic organization economic participation of all members autonomy education and training for members cooperation and community involvement credit unions and banks generally offer the same services including accepting deposits originating loans for individuals or small businesses and offering financial products such as credit and debit cards and certificates of deposit cds key structural differences exist in terms of how a commercial bank and credit union use their profits however while traditional banks function to generate profits for their shareholders many credit unions operate as not for profit organizations putting excess funds into concrete projects that will better serve their community of de facto owners i e members example of an lpnfor example angel v castro a pioneer in the latin american credit union movement was recently recognized for his efforts by the national credit union foundation castro believed that the traditional u s model of consumer credit based poverty reduction would not fit the needs of the people in the communities he worked with in ecuador he focused on organizing credit unions that extended access to credit for its members specifically for agriculture and other endeavors 