Credit unions say they will finally become more competitive with banks and other financial institutions under long-awaited reforms set to come before Parliament.
The proposed changes will cut their costs, allow them to lend directly to businesses, and assume the rights of a corporation.
The changes are included in a bill in the name of National MP Stuart Smith, which was pulled from the ballot last week.
Credit unions perform many of the same functions as financial institutions such as providing loans, insurance and eftpos cards.
But they are owned by their members, who all have the same voting power within the organisation, and are not-for-profit rather than shareholder-driven.
Smith said credit unions played an important role in New Zealand.
"These changes will allow the industry to service their members in a way that will keep them up with their competition in a modern world."
Co-op Money chief operating officer Jonathan Lee, whose organisation represents 12 credit unions, said the institutions have been disadvantage by outdated laws which created an uneven playing field.
"Currently credit unions don't have a corporate form, so all the assets of a credit union have to be held in trusts," Lee said.
"Unlike a company that can hold assets like plants and equipment and buildings, the credit union itself can't own any assets or hold any money received by its members."
Smith's bill will allow credit unions to become incorporated, removing the need for them to have internal trustees to hold any assets.
Lee said this would not change credit unions' fundamental approach of being membership-focused.
"They are still mutual organisations. Each member still has one vote, irrespective of how much money you have with that credit union. They will still have a purpose to provide for financial literacy and to promote savings."
Credit unions would not become listed companies or take on greater risk as a result of the changes, he said.
"All those things that define a credit union, around people helping people and being member-owned, none of those things change."
At present, credit unions have also been limited in who they can lend to. They can give loans to individuals or trusts, but not directly to businesses.
NZ Credit Union general manager Rob Collins said this created big problems for credit unions and led to lost business.
"We are made up of only natural persons, so anyone who is self-employed can't take out a loan for a work van or a computer.
"If Jo Bloggs plumber comes in and wants to buy a work van, we can't lend to them. We can only lend to Jo Bloggs.
"And accountants don't like that arrangement. They would prefer the loan was in the name of the business for tax purposes."
The bill would change that by permitting unions to provide financing directly to small-to-medium enterprises which were owned or closely associate with members.
The bill is highly likely to progress. It has already received the backing of the Act Party.
Act leader David Seymour said he delighted with the changes.
They would bring credit unions into the 21st century, he said, and allow co-op banking sector to compete against other financial institutions "without one hand tied behind its back".