Credit union
Encyclopedia
A credit union is a cooperative
financial institution
that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit
at competitive rates, and providing other financial services to its members. Many credit unions exist to further community development
or sustainable international development
on a local level, and could be considered community development financial institution
s.
Worldwide, credit union systems vary significantly in terms of total system assets and average institution asset size, ranging from volunteer operations with a handful of members to institutions with several billion dollars in assets and hundreds of thousands of members.
The World Council of Credit Unions
(WOCCU) defines a credit unions as a not-for-profit cooperative institution. In practice however, legal arrangements vary by jurisdiction. For example, in Canada
, credit unions are regulated as for-profit institutions, and view their mandate as earning a reasonable profit to enhance services to members and ensure stable growth.
This difference in viewpoints reflects credit unions' unusual organizational structure, which attempts to solve the principal–agent problem by ensuring that the owners and the users of the institution are the same people. In any case, credit unions generally cannot accept donations and must be able to prosper in a competitive market economy.
n countries they are called "savings and credit cooperative organizations" (SACCOs), "to emphasize savings before credit." In Spanish-speaking countries, they are often called cooperativas de ahorro y crédito, but in Mexico
they are typically called a caja popular. French terms for "credit union" include caisse populaire and banque populaire. Afghan
credit unions are called "Islamic investment and finance cooperatives" (IIFCs) and comply with Islamic banking
practices.
s and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union and they elect their board of directors in a democratic one-person-one-vote system regardless of the amount of money invested in the credit union.
A credit union's policies governing interest rate
s and other matters are set by a volunteer Board of Directors elected by and from the membership itself. Credit unions offer many of the same financial services as banks, often using a different terminology; common services include: share accounts (savings account
s), share draft accounts (checking accounts), credit card
s, share term certificates (certificates of deposit), and online banking
.
Normally, only a member of a credit union may deposit
money
with the credit union, or borrow
money from it. As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health. In the microfinance
context, "[c]redit unions provide a broader range of loan and savings products at a much cheaper cost [to their members] than do most microfinance institutions".
Based on data from the World Council of Credit Unions
, at the end of 2010 there were 52,945 credit unions in 100 countries around the world. Collectively they served 188 million members and oversaw US $1.5 trillion in assets. Note that the World Council does not include data from co-operative banks
, so that, for example, some nations generally seen as the pioneers of credit unionism, such as Germany
, France
, the Netherlands
and Italy
, are not included in their data. The European Association of Co-operative Banks
reported 38 million members in those four countries at the end of 2010.
The nations with the most credit union activity are highly diverse. According to the World Council, the nations with the greatest number of credit union members were the United States
(92 million), India
(20 million), Canada
(11 million), South Korea
(5.6 million), Kenya
and Brazil
each with (3.9 million), Thailand
(3.6 million), Australia
3.4 million, Ireland
(3.0 million), and Mexico
with (2.6 million).
The countries with the highest percentage of credit union members in the economically active population were Barbados
(72%), Ireland
(71%), St. Lucia (67%), Belize
(65%), Grenada
(59%), Trinidad & Tobago and Jamaica
with (54%), Canada
(46%), Antigua & Barbuda (45%), and the United States
with (44%). Several African and Latin American countries also have high credit union membership rates, as does Australia. The average percentage for all countries considered in the report is 7.5%
Modern credit union history dates to 1852, when Franz Hermann Schulze-Delitzsch
consolidated the learning from two pilot projects, one in Eilenburg
and the other in Delitzsch
in Germany
into what are generally recognized as the first credit unions in the world. He went on to develop a highly successful urban credit union system.
In 1864, Friedrich Wilhelm Raiffeisen
founded the first rural credit union in Heddesdorf (now part of Neuwied
) in Germany. Although Schulze-Delitzsch can claim chronological precedence, Raiffeisen is often viewed as more important today. Rural communities in Germany faced a far more severe shortage of financial institutions than the cities. They were viewed as unbankable because of very small, seasonal flows of cash and very limited human resources. The organizational methods Raiffeisen refined there, which levered what is today called social capital
, have become a hallmark of the global credit union identity.
By the time of Raiffeisen's death in 1888, credit unions had spread to Italy
, France
, the Netherlands, England and Austria
, among other nations. The Raiffeisen name is still used by Raiffeisenbank, the largest banking group in Austria (with subsidiaries throughout Central and Eastern Europe), Rabobank
(Netherlands) and similarly named agricultural credit unions in Germany.
The first credit union in North America, the Caisse Populaire de Lévis
in Quebec
, Canada, began operations on January 23, 1901 with a ten cent deposit. Founder Alphonse Desjardins
, a reporter in the Canadian parliament, was moved to take up his mission in 1897 when he learned of a Montrealer who had been ordered by the court to pay nearly $5,000 in interest on a loan of $150 from a moneylender. Drawing extensively on European precedents, Desjardins developed a unique parish-based model for Quebec: the caisse populaire.
In the United States, St. Mary's Bank Credit Union of Manchester, New Hampshire
holds the distinction as the first credit union. Assisted by a personal visit from Desjardins, St. Mary's was founded by French-speaking immigrants to Manchester from Quebec
on November 24, 1908. America's Credit Union Museum
now occupies the location of the home from which St. Mary's Bank Credit Union first operated.
Pierre Jay
, then-Massachusetts Commissioner of Banks, and Edward Filene
, a Boston
ian merchant, were central in establishing enabling legislation in Massachusetts in 1909. The Woman's Educational and Industrial Union, credited with many social service initiatives, heard of this cooperative financial model and wrote to DesJardins. He provided them with the data they needed, and on November 23, 1910, they created Industrial Credit Union, the first non-faith-based or community credit union, established for all people in the greater Boston community. St. Mary's Credit Union (not to be confused with St. Mary's Bank Credit Union) was established in Marlborough
in 1913. Serving any resident of the Commonwealth of Massachusetts, St. Mary's Credit Union is the oldest state-wide Credit Union nationally.
Filene also created the Credit Union National Extension Bureau
, the forerunner of the Credit Union National Association
, which was formed as a confederation of state leagues at a meeting in Estes Park, Colorado
, in 1934. Attendees at the meeting included Dora Maxwell
who would go on to help establish hundreds of credit unions and programs for the poor and Louise McCarren Herring
, whose work to form credit unions and ensure their safe operation earned the title of "Mother of Credit Unions" in the United States.
In the same year, Congress passed the Federal Credit Union Act
, which permitted credit unions to be organized anywhere in the United States. The legislation allowed credit unions to incorporate under either state or federal law, a system of dual chartering
that persists today.
(i.e. "surplus") to be able to continue to serve their members. According to WOCCU, a credit union's revenue
s (from loans and investments) need to exceed its operating expenses and dividend
s (interest paid on deposits) in order to maintain capital and solvency and "credit unions use excess earnings to offer members more affordable loans, a higher return on savings, lower fees or new products and services".
WOCCU's position is deeply rooted in global credit union history. F.W. Raiffeisen, the founder of the global movement, wrote in 1870 that credit unions "are, according to paragraph eleven of the German law of cooperatives, "merchants" as defined by the common code of commerce. They accordingly form a sort of commercial business enterprise of which the owners are the [Credit] Unions' members".
of Lenexa, Kansas
, which serves as a central clearing house
for other corporate credit unions and holds approximately $45.3 billion in assets.
is both a trade association
for credit unions worldwide and a development agency. WOCCU's mission is to "assist its members and potential members to organize, expand, improve and integrate credit unions and related institutions as effective instruments for the economic and social development of all people".
Credit unions in the United States have traditionally used a state/national trade association relationship that aligns credit unions with state "Credit Union Leagues" followed by national affiliation with the Credit Union National Association
(CUNA) of Madison, Wisconsin
. Federal credit unions may also be members of the National Association of Federal Credit Unions (NAFCU).
Credit unions with a specific focus on serving low- and moderate income people and communities, most of which are typically low-income designated by the National Credit Union Administration (NCUA), often join the New York, New York-based National Federation of Community Development Credit Unions (Federation), a national trade association providing investments, technical assistance, education and training and advocacy for community development credit unions (CDCUs) nationwide.
The Credit Union Executives Society (CUES), based in Madison, Wisconsin
, provides professional development and resources to thousands of credit union executives and directors worldwide. It partners with world-renowned universities to offer graduate-level executive education specifically for credit union leaders.
The biggest UK credit union trade association is the Association of British Credit Unions Limited, more commonly known as Association of British Credit Unions, ABCUL. A significant number of credit unions are affiliated to ACE Credit Union Services (ACECUS) or UK Credit Unions (UKCU). Many Scottish credit unions are represented by the Scottish League of Credit Unions (SLCU) which has headquarters in Glasgow
; however the majority of larger credit unions choose ABCUL.
Credit Union Central of Canada
is the trade association for Canada's credit unions outside Quebec. The Desjardins Group represents Quebec's credit unions. Structurally, it blends the functions of a trade association and a more European-style cooperative bank
.
Credit Unions often form cooperatives among themselves to provide services to members. A Credit Union Service Organization (CUSO) is generally a for-profit subsidiary of one or more credit unions formed for this purpose. For example, CO-OP Financial Services
, the largest credit union owned interbank network
in the US, provides an ATM network and shared branching services to credit unions. Other examples of cooperatives among credit unions include credit counseling services as well as insurance and investment services.
In New Zealand, most credit unions are affiliated to the New Zealand Association of Credit Unions.
have a long history. Identical or similar institutions to the present-day credit union were known as mutual societies within the United Kingdom.
Institutions known as mutual societies grew out of the friendly society
movement of the 18th century, with the first mutual insurer, Equitable Life, being founded in 1762. The emergence of mutual assurance was linked with the Industrial Revolution
and the need to provide for impoverished workers beyond the outmoded Elizabethan
Poor Law
s, as people congregated in the cities and lived in conditions of squalor and poverty. The principle of mutuality goes back to this epoch, when the sophisticated financial institutions taken for granted today, did not exist.
The only method of improving the quality of ordinary people’s lives was through the development of co-operative and mutual societies, as formalised under the Friendly Societies Act 1819. Mutual institutions thus predated the welfare state
and were formed to meet the needs of a burgeoning working class
, consisting mainly of rural and immigrant workers. As a practical expression, this communitarian self-help
movement allowed small regular individual contributions to be pooled for mutual collective benefit, obtaining the same economies of scope and scale necessary in providing collective insurance and banking products, to mitigate enduring social exclusion
. Initially funding was required for housing, consumer durables and emergency insurance provision, at a time when commercial banks were still exclusively commercial lenders.
Building societies were formed as small temporary societies by worker co-operatives, pooling resources to build local houses and subsequently allocating them among members by drawing lots. Once all members were housed, these organisations were typically wound up, although some became permanent societies in an effort to promote wider home ownership, as exemplified by the Leeds Permanent Building Society
, see. Surplus funds were then pooled, providing an opportunity for low-income families to earn interest on small deposits, with proceeds typically invested in residential mortgages
and liquid government securities.
The traditional intermediation function of mutual societies was to promote thrift among the working classes and thereby provide access to low cost home loans. This ethos has become obscured in the recent battle for customers, and only the very real threat of extinction has occasioned any renewed vigour in proclaiming the original mutuality message. Mutual societies continue to perform vital social functions, often serving on the boards of local community groups, as well as regularly making sizeable local charitable donations. Indeed, the mutual legacy of social benefaction, although quite substantial, risks only being missed by the present generation once such institutions ultimately cease to exist. With the conversion of most of the larger remaining mutual societies into proprietary companies, the bulk of the UK savings assets will have shifted away from their traditional providers into the mainstream UK financial sector. This change is occurring even as the traditional barriers between banks, building societies and insurance companies are disappearing. The spate of conversions is leading to a polarisation into two camps: the converters and the remaining mutuals.
Credit unions in the United Kingdom have been regulated by the Financial Services Authority
since July 2002. They are classified in two types: type 1 are the smaller credit unions while type 2 are larger. From November 2006 many type 2 credit unions began offering their members debit card
accounts so that they could withdraw cash from any Link ATM
.
In August 2010 the FSA will enact the CU-LRO (Credit Union - Legislative Reform Order) and widen access and modernise the powers of individual credit unions.
In October 2008 the Financial Services Compensation Scheme
guaranteed
the first 50,000 pounds
of each saver's deposits in credit unions, in line with the guarantee for UK banks and building societies.
Credit unions in the UK now offer a wide range of services to their members; from direct debit
s to payroll deductions, from being able to send standing order
s from their accounts to paying members bills to providing cheaper insurance facilities. Life insurance is usually included with membership (subject to pre-existing medical conditions and other exclusions). Death benefits vary between unions, but commonly include lump sum payments, writing off of outstanding loans and doubling of savings.
Credit unions offer savers considerably more protection than commercial "savings clubs", as was demonstrated by the 2006 collapse of the Christmas hamper club Farepak.
In June 2008, the Treasury announced plans to encourage the growth of credit unions by broadening the common bond and removing outdated restriction. The changes are intended to significantly reduce the influence of door step lenders and loan shark
s.
Canada
has the highest per-capita use of credit unions in North America, with more than a third of the population enrolled in one. They are popular in Quebec
, where they are known as caisses populaires (people's banks).
As of December 31, 2010, the Caisses Populaires Desjardins federated 451 member caisses with CAD$ 172.3 billion in assets and 5.8 million retail members, making it the sixth largest financial institution in Canada.
Credit Union Central of Canada
federates most credit unions in the English-speaking provinces. As of the end of 2009, the 10 affiliated systems operated 419 credit unions controlling CAD $122 billion in assets from 5.1 million retail members.
In British Columbia, 46 credit unions with assets of $48 billion, serve 1.7 million people.
In Alberta, 46 independent credit unions, with 215 branches, serve more than 640,000 members. In Saskatchewan, 65 credit unions have 497,000 members and $12.2 billion in assets. Manitoba's 41 credit unions have 566,000 members with $17.5 billion in assets. In Ontario, 136 credit unions have 1.2 million members with $19.2 billion in assets.
Major Canadian credit unions include Vancity
(Vancouver), Coast Capital Savings
(Surrey), Envision Financial
(Langley), Servus Credit Union
(Edmonton), First Calgary Savings
, Conexus Credit Union
(Saskatchewan), Meridian Credit Union
(Ontario), Libro Financial Group
(London, Ontario) and Credit Union Atlantic
(Halifax).
, as of 2005 credit unions have 86 million members, which is 43% of the economically active population. U.S. credit unions are not-for-profit, cooperative, tax-exempt organizations.
U.S. credit unions can be chartered by either the federal government ("federal credit unions") or by a state. The states of Delaware, South Dakota, and Wyoming do not regulate credit unions at the state level; in those states, a credit union must obtain a federal charter to operate. All federal credit unions and 95% of state-chartered credit unions have "share insurance" (deposit insurance) of at least $250,000 per member through the National Credit Union Share Insurance Fund
(NCUSIF). This deposit insurance is backed by the full faith and credit of the United States government and is administered by the National Credit Union Administration
. As of December 2006, the NCUSIF had a higher insurance fund capital ratio than the fund for the Federal Deposit Insurance Corporation
(FDIC). U.S. credit unions also typically have higher equity capital ratios than U.S. banks.
As of October 2011, the largest American credit union was Navy Federal Credit Union
, serving U.S. Department of Defense
employees, contractors, and families of servicepeople, with over $45 billion USD
in assets and over 3.4 million members.
Industry trade organizations include the American Credit Union Mortgage Association.
Cooperative banking
Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world....
financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
at competitive rates, and providing other financial services to its members. Many credit unions exist to further community development
Community development
Community development is a broad term applied to the practices and academic disciplines of civic leaders, activists, involved citizens and professionals to improve various aspects of local communities....
or sustainable international development
International development
International development or global development is a concept that lacks a universally accepted definition, but it is most used in a holistic and multi-disciplinary context of human development — the development of greater quality of life for humans...
on a local level, and could be considered community development financial institution
Community development financial institution
Community development financial institutions are financial institutions which provide credit and financial services to underserved markets and populations, primarily in the USA but also in the UK...
s.
Worldwide, credit union systems vary significantly in terms of total system assets and average institution asset size, ranging from volunteer operations with a handful of members to institutions with several billion dollars in assets and hundreds of thousands of members.
The World Council of Credit Unions
World Council of Credit Unions
The World Council of Credit Unions is an international trade association and development agency for credit unions headquartered in Madison, Wisconsin. Members of the WOCCU include regional and national credit union associations, cooperative associations and business service organizations in 97...
(WOCCU) defines a credit unions as a not-for-profit cooperative institution. In practice however, legal arrangements vary by jurisdiction. For example, in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, credit unions are regulated as for-profit institutions, and view their mandate as earning a reasonable profit to enhance services to members and ensure stable growth.
This difference in viewpoints reflects credit unions' unusual organizational structure, which attempts to solve the principal–agent problem by ensuring that the owners and the users of the institution are the same people. In any case, credit unions generally cannot accept donations and must be able to prosper in a competitive market economy.
Other names
In some places, credit unions are called by other names; for example, in many AfricaAfrica
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
n countries they are called "savings and credit cooperative organizations" (SACCOs), "to emphasize savings before credit." In Spanish-speaking countries, they are often called cooperativas de ahorro y crédito, but in Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
they are typically called a caja popular. French terms for "credit union" include caisse populaire and banque populaire. Afghan
Afghanistan
Afghanistan , officially the Islamic Republic of Afghanistan, is a landlocked country located in the centre of Asia, forming South Asia, Central Asia and the Middle East. With a population of about 29 million, it has an area of , making it the 42nd most populous and 41st largest nation in the world...
credit unions are called "Islamic investment and finance cooperatives" (IIFCs) and comply with Islamic banking
Islamic banking
Islamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
practices.
Differences from other financial institutions
Credit unions differ from bankBank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union and they elect their board of directors in a democratic one-person-one-vote system regardless of the amount of money invested in the credit union.
A credit union's policies governing interest rate
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
s and other matters are set by a volunteer Board of Directors elected by and from the membership itself. Credit unions offer many of the same financial services as banks, often using a different terminology; common services include: share accounts (savings account
Savings account
Savings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return...
s), share draft accounts (checking accounts), credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
s, share term certificates (certificates of deposit), and online banking
Online banking
Online banking allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.-Features:...
.
Normally, only a member of a credit union may deposit
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
with the credit union, or borrow
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
money from it. As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health. In the microfinance
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
context, "[c]redit unions provide a broader range of loan and savings products at a much cheaper cost [to their members] than do most microfinance institutions".
Global dispersion
World Council of Credit Unions
The World Council of Credit Unions is an international trade association and development agency for credit unions headquartered in Madison, Wisconsin. Members of the WOCCU include regional and national credit union associations, cooperative associations and business service organizations in 97...
, at the end of 2010 there were 52,945 credit unions in 100 countries around the world. Collectively they served 188 million members and oversaw US $1.5 trillion in assets. Note that the World Council does not include data from co-operative banks
Cooperative banking
Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world....
, so that, for example, some nations generally seen as the pioneers of credit unionism, such as Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, are not included in their data. The European Association of Co-operative Banks
European Association of Co-operative Banks
The European Association of Co-operative Banks is the supranational body for co-operative banks, with member national governing bodies in 23 countries and an associate member in Switzerland....
reported 38 million members in those four countries at the end of 2010.
The nations with the most credit union activity are highly diverse. According to the World Council, the nations with the greatest number of credit union members were the United States
Cuna
Cuna can refer to:* CUNA, Credit Union National Association* Kuna , of Panama and Colombia* Kuna language, spoken by the Kuna people* Cuna , a genus of bivalve mollusc...
(92 million), India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
(20 million), Canada
Credit Union Central of Canada
Credit Union Central of Canada is the national cooperative federation for credit unions in Canada, outside Quebec. The Toronto-based organization provides federal government relations, media relations, represents the industry in many associations and organizes several conferences each year.As of...
(11 million), South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
(5.6 million), Kenya
Kenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
and Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
each with (3.9 million), Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
(3.6 million), Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
3.4 million, Ireland
Irish League of Credit Unions
The Irish League of Credit Unions is a trade association for credit unions in Ireland. It operates in both the Republic of Ireland and Northern Ireland...
(3.0 million), and Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
with (2.6 million).
The countries with the highest percentage of credit union members in the economically active population were Barbados
Barbados
Barbados is an island country in the Lesser Antilles. It is in length and as much as in width, amounting to . It is situated in the western area of the North Atlantic and 100 kilometres east of the Windward Islands and the Caribbean Sea; therein, it is about east of the islands of Saint...
(72%), Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
(71%), St. Lucia (67%), Belize
Belize
Belize is a constitutional monarchy and the northernmost country in Central America. Belize has a diverse society, comprising many cultures and languages. Even though Kriol and Spanish are spoken among the population, Belize is the only country in Central America where English is the official...
(65%), Grenada
Grenada
Grenada is an island country and Commonwealth Realm consisting of the island of Grenada and six smaller islands at the southern end of the Grenadines in the southeastern Caribbean Sea...
(59%), Trinidad & Tobago and Jamaica
Jamaica
Jamaica is an island nation of the Greater Antilles, in length, up to in width and 10,990 square kilometres in area. It is situated in the Caribbean Sea, about south of Cuba, and west of Hispaniola, the island harbouring the nation-states Haiti and the Dominican Republic...
with (54%), Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
(46%), Antigua & Barbuda (45%), and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
with (44%). Several African and Latin American countries also have high credit union membership rates, as does Australia. The average percentage for all countries considered in the report is 7.5%
History
Franz Hermann Schulze-Delitzsch
Franz Hermann Schulze-Delitzsch was a German economist. He was responsible for the organizing of the world's first credit unions.-History:Schulze-Delitzsch was born at Delitzsch, in Prussian Saxony...
consolidated the learning from two pilot projects, one in Eilenburg
Eilenburg
Eilenburg is a town in Germany. It lies in the district of Nordsachsen in the Free State of Saxony, approximately 20 km northeast of the city of Leipzig.- Geography :...
and the other in Delitzsch
Delitzsch
Delitzsch is a large district and also an important regional center in Saxony. With over 26,300 inhabitants Delitzsch is the largest city in the northern district of Saxony...
in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
into what are generally recognized as the first credit unions in the world. He went on to develop a highly successful urban credit union system.
In 1864, Friedrich Wilhelm Raiffeisen
Friedrich Wilhelm Raiffeisen
Friedrich Wilhelm Raiffeisen was a German mayor and cooperative pioneer. Several credit union systems and cooperative banks have been named after Raiffeisen, who pioneered rural credit unions.- Life :...
founded the first rural credit union in Heddesdorf (now part of Neuwied
Neuwied
Neuwied is a town in the north of the German state of Rhineland-Palatinate, capital of the District of Neuwied. Neuwied lies on the right bank of the Rhine, 12 km northwest of Koblenz, on the railway from Frankfurt am Main to Cologne...
) in Germany. Although Schulze-Delitzsch can claim chronological precedence, Raiffeisen is often viewed as more important today. Rural communities in Germany faced a far more severe shortage of financial institutions than the cities. They were viewed as unbankable because of very small, seasonal flows of cash and very limited human resources. The organizational methods Raiffeisen refined there, which levered what is today called social capital
Social capital
Social capital is a sociological concept, which refers to connections within and between social networks. The concept of social capital highlights the value of social relations and the role of cooperation and confidence to get collective or economic results. The term social capital is frequently...
, have become a hallmark of the global credit union identity.
By the time of Raiffeisen's death in 1888, credit unions had spread to Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, the Netherlands, England and Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
, among other nations. The Raiffeisen name is still used by Raiffeisenbank, the largest banking group in Austria (with subsidiaries throughout Central and Eastern Europe), Rabobank
Rabobank
Rabobank is a financial services provider with offices worldwide. Their main location is in the Netherlands. They are a global leader in Food and Agri financing and in sustainability-oriented banking...
(Netherlands) and similarly named agricultural credit unions in Germany.
The first credit union in North America, the Caisse Populaire de Lévis
Levis
-People:*François de Gaston, Chevalier de Lévis , French soldier best known for his command in Canada in 1760*George Levis , American college basketball player and coach*Georges Lévis , French adult comic artist-Places:Canada...
in Quebec
Quebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
, Canada, began operations on January 23, 1901 with a ten cent deposit. Founder Alphonse Desjardins
Alphonse Desjardins (co-operator)
Gabriel-Alphonse Desjardins , born in Lévis, Quebec, was the co-founder of the Caisses Populaires Desjardins , a forerunner of North American credit unions and community banks.- Early life :...
, a reporter in the Canadian parliament, was moved to take up his mission in 1897 when he learned of a Montrealer who had been ordered by the court to pay nearly $5,000 in interest on a loan of $150 from a moneylender. Drawing extensively on European precedents, Desjardins developed a unique parish-based model for Quebec: the caisse populaire.
In the United States, St. Mary's Bank Credit Union of Manchester, New Hampshire
Manchester, New Hampshire
Manchester is the largest city in the U.S. state of New Hampshire, the tenth largest city in New England, and the largest city in northern New England, an area comprising the states of Maine, New Hampshire, and Vermont. It is in Hillsborough County along the banks of the Merrimack River, which...
holds the distinction as the first credit union. Assisted by a personal visit from Desjardins, St. Mary's was founded by French-speaking immigrants to Manchester from Quebec
Quebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
on November 24, 1908. America's Credit Union Museum
America's Credit Union Museum
America's Credit Union Museum is located in Manchester, New Hampshire, on the site of the first credit union founded in the United States. The museum, at 418-420 Notre Dame Avenue, is housed at the original location for St. Mary’s Cooperative Credit Association, renamed in 1925 to La Caisse...
now occupies the location of the home from which St. Mary's Bank Credit Union first operated.
Pierre Jay
Pierre Jay
Pierre Jay was the first chairman of the Federal Reserve Bank of New York.He graduated from Yale University in 1892, and was a member of Skull and Bones, one of the best known of the secret societies based at Yale University...
, then-Massachusetts Commissioner of Banks, and Edward Filene
Edward Filene
Edward Albert Filene was an American businessman, social entrepreneur and philanthropist...
, a Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
ian merchant, were central in establishing enabling legislation in Massachusetts in 1909. The Woman's Educational and Industrial Union, credited with many social service initiatives, heard of this cooperative financial model and wrote to DesJardins. He provided them with the data they needed, and on November 23, 1910, they created Industrial Credit Union, the first non-faith-based or community credit union, established for all people in the greater Boston community. St. Mary's Credit Union (not to be confused with St. Mary's Bank Credit Union) was established in Marlborough
Marlborough, Massachusetts
Marlborough is a city in Middlesex County, Massachusetts, United States. The population was 38,499 at the 2010 census. Marlborough became a prosperous industrial town in the 19th century and made the transition to high technology industry in the late 20th century after the construction of the...
in 1913. Serving any resident of the Commonwealth of Massachusetts, St. Mary's Credit Union is the oldest state-wide Credit Union nationally.
Filene also created the Credit Union National Extension Bureau
Credit Union National Extension Bureau
The Credit Union National Extension Bureau was the organization that advocated for and fostered credit unions in the United States from 1921 until 1934. CUNEB laid the foundation for the Credit Union National Association and the Federal Credit Union Act...
, the forerunner of the Credit Union National Association
Credit Union National Association
The Credit Union National Association, commonly known as CUNA , is a national trade association for both state- and federally-chartered credit unions located in the United States. CUNA provides member credit unions with trade association services, such as lobbying, professional development, and...
, which was formed as a confederation of state leagues at a meeting in Estes Park, Colorado
Estes Park, Colorado
Estes Park is a town in Larimer County, Colorado, United States. A popular summer resort and the location of the headquarters for Rocky Mountain National Park, Estes Park lies along the Big Thompson River. Estes Park had a population of 5,858 at the 2010 census...
, in 1934. Attendees at the meeting included Dora Maxwell
Dora Maxwell
Dora Maxwell was an early credit union pioneer in New York state. Despite having to deal with intimidating bankers, she secured charters for hundreds of credit unions throughout the United States...
who would go on to help establish hundreds of credit unions and programs for the poor and Louise McCarren Herring
Louise McCarren Herring
Louise McCarren Herring , an Ohio native, is recognized as one of the pioneer leaders of the not-for-profit cooperative credit union movement in the United States...
, whose work to form credit unions and ensure their safe operation earned the title of "Mother of Credit Unions" in the United States.
In the same year, Congress passed the Federal Credit Union Act
Federal Credit Union Act
The Federal Credit Union Act is an Act of Congress enacted in 1934. The purpose of the law was to make credit available and promote thrift through a national system of nonprofit, cooperative credit unions...
, which permitted credit unions to be organized anywhere in the United States. The legislation allowed credit unions to incorporate under either state or federal law, a system of dual chartering
Dual chartering
Dual chartering refers to the system by which credit unions in the United States can be chartered under either of two governmental authorities; by either the federal government or by the state government...
that persists today.
Not-for-profit status and the need for a surplus
In the credit union context, "not-for-profit" should not be confused with "non-profit" charities or similar organizations. Credit unions are "not-for-profit" because they operate to serve their members rather than to maximize profits. But unlike non-profit organizations, credit unions do not rely on donations, and are financial institutions that must turn what is, in economic terms, a small profitProfit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
(i.e. "surplus") to be able to continue to serve their members. According to WOCCU, a credit union's revenue
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
s (from loans and investments) need to exceed its operating expenses and dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s (interest paid on deposits) in order to maintain capital and solvency and "credit unions use excess earnings to offer members more affordable loans, a higher return on savings, lower fees or new products and services".
WOCCU's position is deeply rooted in global credit union history. F.W. Raiffeisen, the founder of the global movement, wrote in 1870 that credit unions "are, according to paragraph eleven of the German law of cooperatives, "merchants" as defined by the common code of commerce. They accordingly form a sort of commercial business enterprise of which the owners are the [Credit] Unions' members".
Corporate credit unions
Most credit unions provide service only to individual consumers. By contrast, corporate credit unions (also known as central credit unions in Canada) provide service to credit unions, with operational support, funds clearing tasks, and product and service delivery. The largest corporate credit union in the United States is U.S. Central Credit UnionU.S. Central Credit Union
U.S. Central Federal Credit Union is the largest corporate credit union in the United States. Unlike consumer driven credit unions , U.S. Central provides its services only to other corporate credit unions, in effect acting as the "corporate credit union's credit union". The organization was...
of Lenexa, Kansas
Lenexa, Kansas
Lenexa is a city in the central part of Johnson County, located in northeast Kansas, in the central United States of America. As of the 2010 census, the city population was 48,190. As a satellite city of Kansas City, Kansas, Lenexa is included in the Kansas City Metropolitan Area...
, which serves as a central clearing house
Clearing house (finance)
A clearing house is a financial institution that provides clearing and settlement services for financial and commodities derivatives and securities transactions...
for other corporate credit unions and holds approximately $45.3 billion in assets.
Leagues and associations
The World Council of Credit UnionsWorld Council of Credit Unions
The World Council of Credit Unions is an international trade association and development agency for credit unions headquartered in Madison, Wisconsin. Members of the WOCCU include regional and national credit union associations, cooperative associations and business service organizations in 97...
is both a trade association
Trade association
A trade association, also known as an industry trade group, business association or sector association, is an organization founded and funded by businesses that operate in a specific industry...
for credit unions worldwide and a development agency. WOCCU's mission is to "assist its members and potential members to organize, expand, improve and integrate credit unions and related institutions as effective instruments for the economic and social development of all people".
Credit unions in the United States have traditionally used a state/national trade association relationship that aligns credit unions with state "Credit Union Leagues" followed by national affiliation with the Credit Union National Association
Credit Union National Association
The Credit Union National Association, commonly known as CUNA , is a national trade association for both state- and federally-chartered credit unions located in the United States. CUNA provides member credit unions with trade association services, such as lobbying, professional development, and...
(CUNA) of Madison, Wisconsin
Madison, Wisconsin
Madison is the capital of the U.S. state of Wisconsin and the county seat of Dane County. It is also home to the University of Wisconsin–Madison....
. Federal credit unions may also be members of the National Association of Federal Credit Unions (NAFCU).
Credit unions with a specific focus on serving low- and moderate income people and communities, most of which are typically low-income designated by the National Credit Union Administration (NCUA), often join the New York, New York-based National Federation of Community Development Credit Unions (Federation), a national trade association providing investments, technical assistance, education and training and advocacy for community development credit unions (CDCUs) nationwide.
The Credit Union Executives Society (CUES), based in Madison, Wisconsin
Madison, Wisconsin
Madison is the capital of the U.S. state of Wisconsin and the county seat of Dane County. It is also home to the University of Wisconsin–Madison....
, provides professional development and resources to thousands of credit union executives and directors worldwide. It partners with world-renowned universities to offer graduate-level executive education specifically for credit union leaders.
The biggest UK credit union trade association is the Association of British Credit Unions Limited, more commonly known as Association of British Credit Unions, ABCUL. A significant number of credit unions are affiliated to ACE Credit Union Services (ACECUS) or UK Credit Unions (UKCU). Many Scottish credit unions are represented by the Scottish League of Credit Unions (SLCU) which has headquarters in Glasgow
Glasgow
Glasgow is the largest city in Scotland and third most populous in the United Kingdom. The city is situated on the River Clyde in the country's west central lowlands...
; however the majority of larger credit unions choose ABCUL.
Credit Union Central of Canada
Credit Union Central of Canada
Credit Union Central of Canada is the national cooperative federation for credit unions in Canada, outside Quebec. The Toronto-based organization provides federal government relations, media relations, represents the industry in many associations and organizes several conferences each year.As of...
is the trade association for Canada's credit unions outside Quebec. The Desjardins Group represents Quebec's credit unions. Structurally, it blends the functions of a trade association and a more European-style cooperative bank
Cooperative banking
Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world....
.
Credit Unions often form cooperatives among themselves to provide services to members. A Credit Union Service Organization (CUSO) is generally a for-profit subsidiary of one or more credit unions formed for this purpose. For example, CO-OP Financial Services
CO-OP Financial Services
CO-OP Financial Services, formerly known as CO-OP Network, is an interbank network connecting the ATMs of credit unions in the United States, with locations also in Canada and certain United States Navy bases overseas...
, the largest credit union owned interbank network
Interbank network
An interbank network, also known as an ATM consortium or ATM network, is a computer network that connects the ATMs of different banks and permits these ATMs to interact with the ATM cards of non-native banks....
in the US, provides an ATM network and shared branching services to credit unions. Other examples of cooperatives among credit unions include credit counseling services as well as insurance and investment services.
In New Zealand, most credit unions are affiliated to the New Zealand Association of Credit Unions.
United Kingdom
Credit unions in the United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
have a long history. Identical or similar institutions to the present-day credit union were known as mutual societies within the United Kingdom.
Institutions known as mutual societies grew out of the friendly society
Friendly society
A friendly society is a mutual association for insurance, pensions or savings and loan-like purposes, or cooperative banking. It is a mutual organization or benefit society composed of a body of people who join together for a common financial or social purpose...
movement of the 18th century, with the first mutual insurer, Equitable Life, being founded in 1762. The emergence of mutual assurance was linked with the Industrial Revolution
Industrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...
and the need to provide for impoverished workers beyond the outmoded Elizabethan
Elizabeth I of England
Elizabeth I was queen regnant of England and Ireland from 17 November 1558 until her death. Sometimes called The Virgin Queen, Gloriana, or Good Queen Bess, Elizabeth was the fifth and last monarch of the Tudor dynasty...
Poor Law
Poor Law
The English Poor Laws were a system of poor relief which existed in England and Wales that developed out of late-medieval and Tudor-era laws before being codified in 1587–98...
s, as people congregated in the cities and lived in conditions of squalor and poverty. The principle of mutuality goes back to this epoch, when the sophisticated financial institutions taken for granted today, did not exist.
The only method of improving the quality of ordinary people’s lives was through the development of co-operative and mutual societies, as formalised under the Friendly Societies Act 1819. Mutual institutions thus predated the welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...
and were formed to meet the needs of a burgeoning working class
Working class
Working class is a term used in the social sciences and in ordinary conversation to describe those employed in lower tier jobs , often extending to those in unemployment or otherwise possessing below-average incomes...
, consisting mainly of rural and immigrant workers. As a practical expression, this communitarian self-help
Self-help
Self-help, or self-improvement, is a self-guided improvement—economically, intellectually, or emotionally—often with a substantial psychological basis. There are many different self-help movements and each has its own focus, techniques, associated beliefs, proponents and in some cases, leaders...
movement allowed small regular individual contributions to be pooled for mutual collective benefit, obtaining the same economies of scope and scale necessary in providing collective insurance and banking products, to mitigate enduring social exclusion
Social exclusion
Social exclusion is a concept used in many parts of the world to characterise contemporary forms of social disadvantage. Dr. Lynn Todman, director of the Institute on Social Exclusion at the Adler School of Professional Psychology, suggests that social exclusion refers to processes in which...
. Initially funding was required for housing, consumer durables and emergency insurance provision, at a time when commercial banks were still exclusively commercial lenders.
Building societies were formed as small temporary societies by worker co-operatives, pooling resources to build local houses and subsequently allocating them among members by drawing lots. Once all members were housed, these organisations were typically wound up, although some became permanent societies in an effort to promote wider home ownership, as exemplified by the Leeds Permanent Building Society
Leeds Permanent Building Society
The Leeds Permanent Building Society was a building society founded in Leeds, England in 1846 and was commonly known in a shortened form as The Leeds...
, see. Surplus funds were then pooled, providing an opportunity for low-income families to earn interest on small deposits, with proceeds typically invested in residential mortgages
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
and liquid government securities.
The traditional intermediation function of mutual societies was to promote thrift among the working classes and thereby provide access to low cost home loans. This ethos has become obscured in the recent battle for customers, and only the very real threat of extinction has occasioned any renewed vigour in proclaiming the original mutuality message. Mutual societies continue to perform vital social functions, often serving on the boards of local community groups, as well as regularly making sizeable local charitable donations. Indeed, the mutual legacy of social benefaction, although quite substantial, risks only being missed by the present generation once such institutions ultimately cease to exist. With the conversion of most of the larger remaining mutual societies into proprietary companies, the bulk of the UK savings assets will have shifted away from their traditional providers into the mainstream UK financial sector. This change is occurring even as the traditional barriers between banks, building societies and insurance companies are disappearing. The spate of conversions is leading to a polarisation into two camps: the converters and the remaining mutuals.
Credit unions in the United Kingdom have been regulated by the Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
since July 2002. They are classified in two types: type 1 are the smaller credit unions while type 2 are larger. From November 2006 many type 2 credit unions began offering their members debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
accounts so that they could withdraw cash from any Link ATM
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
.
In August 2010 the FSA will enact the CU-LRO (Credit Union - Legislative Reform Order) and widen access and modernise the powers of individual credit unions.
In October 2008 the Financial Services Compensation Scheme
Financial Services Compensation Scheme
The Financial Services Compensation Scheme is a "statutory fund of last resort" in the United Kingdom, set up under the Financial Services and Markets Act 2000 to compensate customers of "authorised financial services firms" in the event of their insolvency. It consolidated previous compensation...
guaranteed
Deposit insurance
Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due...
the first 50,000 pounds
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
of each saver's deposits in credit unions, in line with the guarantee for UK banks and building societies.
Credit unions in the UK now offer a wide range of services to their members; from direct debit
Direct debit
A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary...
s to payroll deductions, from being able to send standing order
Standing order (banking)
A Standing Order is an instruction a bank account holder gives to their bank to pay a set amount at regular intervals to another account. The instruction is sometimes known as a banker's order....
s from their accounts to paying members bills to providing cheaper insurance facilities. Life insurance is usually included with membership (subject to pre-existing medical conditions and other exclusions). Death benefits vary between unions, but commonly include lump sum payments, writing off of outstanding loans and doubling of savings.
Credit unions offer savers considerably more protection than commercial "savings clubs", as was demonstrated by the 2006 collapse of the Christmas hamper club Farepak.
In June 2008, the Treasury announced plans to encourage the growth of credit unions by broadening the common bond and removing outdated restriction. The changes are intended to significantly reduce the influence of door step lenders and loan shark
Loan shark
A loan shark is a person or body that offers unsecured loans at illegally high interest rates to individuals, often enforcing repayment by blackmail or threats of violence....
s.
Ireland
In June 2010, the Irish League of Credit Unions put forward plans to modernize the credit union system.Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
has the highest per-capita use of credit unions in North America, with more than a third of the population enrolled in one. They are popular in Quebec
Quebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
, where they are known as caisses populaires (people's banks).
As of December 31, 2010, the Caisses Populaires Desjardins federated 451 member caisses with CAD$ 172.3 billion in assets and 5.8 million retail members, making it the sixth largest financial institution in Canada.
Credit Union Central of Canada
Credit Union Central of Canada
Credit Union Central of Canada is the national cooperative federation for credit unions in Canada, outside Quebec. The Toronto-based organization provides federal government relations, media relations, represents the industry in many associations and organizes several conferences each year.As of...
federates most credit unions in the English-speaking provinces. As of the end of 2009, the 10 affiliated systems operated 419 credit unions controlling CAD $122 billion in assets from 5.1 million retail members.
In British Columbia, 46 credit unions with assets of $48 billion, serve 1.7 million people.
In Alberta, 46 independent credit unions, with 215 branches, serve more than 640,000 members. In Saskatchewan, 65 credit unions have 497,000 members and $12.2 billion in assets. Manitoba's 41 credit unions have 566,000 members with $17.5 billion in assets. In Ontario, 136 credit unions have 1.2 million members with $19.2 billion in assets.
Major Canadian credit unions include Vancity
Vancity
Vancouver City Savings Credit Union, commonly referred to as Vancity, is a member-owned financial institution in Vancouver, British Columbia and the largest English-speaking credit union in Canada...
(Vancouver), Coast Capital Savings
Coast Capital Savings
Coast Capital Savings is a credit union based in Surrey, British Columbia, and is the third largest credit union in Canada outside of Quebec. As of 2010, the credit union had $12.3 billion in assets under administration and 454,000 members...
(Surrey), Envision Financial
Envision Financial
Envision Financial, a division of First West Credit Union, is a member-owned financial institution based in British Columbia, Canada. Founded in 1946, Envision Financial was established in 2001 through a merger between Lower Mainland-based Delta Credit Union, whose roots were in the fishing...
(Langley), Servus Credit Union
Servus Credit Union
Servus Credit Union is a member-owned, community-based financial institution based in Edmonton, Alberta, and is currently the third largest credit union in Canada and the largest credit union in Alberta....
(Edmonton), First Calgary Savings
First Calgary Savings
First Calgary Financial is a member-owned financial institution based out of Calgary, Alberta, Canada. The organization was established in 1987 through the merger of seven open-bond credit unions, as well as two additional credit union purchases...
, Conexus Credit Union
Conexus Credit Union
Conexus Credit Union is a credit union based in Regina, Saskatchewan, and at the end of 2010 was the largest credit union in Saskatchewan and the sixth largest credit union in Canada. Conexus has 46 branches in Saskatchewan. , the credit union has $4.4 billion in total funds managed and...
(Saskatchewan), Meridian Credit Union
Meridian Credit Union
Meridian Credit Union is a Canadian credit union. It was formed April 1, 2005, following the merger of NIAGARA Credit Union and HEPCOE Credit Union....
(Ontario), Libro Financial Group
Libro Financial Group
Libro Financial Group, Libro, or Libro Credit Union Limited, is a co-operative financial institution. Libro's direction comes from its customers, who are referred to as owners...
(London, Ontario) and Credit Union Atlantic
Credit Union Atlantic
Credit Union Atlantic is a Canadian credit union that, with 17,200 customers, is the largest credit union in Nova Scotia. There are a total of seven branches and one business lending centre, all located in the Halifax Regional Municipality. It is a customer-owned financial institution, governed by...
(Halifax).
United States
In the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, as of 2005 credit unions have 86 million members, which is 43% of the economically active population. U.S. credit unions are not-for-profit, cooperative, tax-exempt organizations.
U.S. credit unions can be chartered by either the federal government ("federal credit unions") or by a state. The states of Delaware, South Dakota, and Wyoming do not regulate credit unions at the state level; in those states, a credit union must obtain a federal charter to operate. All federal credit unions and 95% of state-chartered credit unions have "share insurance" (deposit insurance) of at least $250,000 per member through the National Credit Union Share Insurance Fund
National Credit Union Share Insurance Fund
The National Credit Union Share Insurance Fund is administered by the National Credit Union Administration for the purpose of providing deposit insurance to protect deposits of credit union members at insured institutions in the United States. It was created in 1970 shortly after the creation of...
(NCUSIF). This deposit insurance is backed by the full faith and credit of the United States government and is administered by the National Credit Union Administration
National Credit Union Administration
The National Credit Union Administration is the United States independent federal agency that supervises and charters federal credit unions...
. As of December 2006, the NCUSIF had a higher insurance fund capital ratio than the fund for the Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
(FDIC). U.S. credit unions also typically have higher equity capital ratios than U.S. banks.
As of October 2011, the largest American credit union was Navy Federal Credit Union
Navy Federal Credit Union
Navy Federal Credit Union is a credit union headquartered in Vienna, Virginia, chartered and regulated under the authority of the National Credit Union Administration of the U.S. federal government. Navy Federal is the largest natural member credit union in the world, both in asset size and in...
, serving U.S. Department of Defense
United States Department of Defense
The United States Department of Defense is the U.S...
employees, contractors, and families of servicepeople, with over $45 billion USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
in assets and over 3.4 million members.
Industry trade organizations include the American Credit Union Mortgage Association.
See also
- Bond of associationBond of associationThe bond of association or common bond is the social connection among the members of credit unions and co-operative banks. Common bonds substitute for collateral in the early stages of financial system development...
- CooperativeCooperativeA cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
- Democratic member control (cooperatives)
- Friedrich Wilhelm RaiffeisenFriedrich Wilhelm RaiffeisenFriedrich Wilhelm Raiffeisen was a German mayor and cooperative pioneer. Several credit union systems and cooperative banks have been named after Raiffeisen, who pioneered rural credit unions.- Life :...
- History of credit unions
- World Council of Credit UnionsWorld Council of Credit UnionsThe World Council of Credit Unions is an international trade association and development agency for credit unions headquartered in Madison, Wisconsin. Members of the WOCCU include regional and national credit union associations, cooperative associations and business service organizations in 97...
- Consumers' cooperativeConsumers' cooperativeConsumer cooperatives are enterprises owned by consumers and managed democratically which aim at fulfilling the needs and aspirations of their members. They operate within the market system, independently of the state, as a form of mutual aid, oriented toward service rather than pecuniary profit...
Further reading
- Ian MacPhersonIan MacPherson (historian)Dr. Ian MacPherson is a Canadian historian, and a supporter of the co-operative movement.-Education:MacPherson received his B.A. from the University of Windsor in 1960. After working as a high school teacher for four years, he returned to school, earning his M.A. and Ph.D...
. Hands Around the Globe: A History of the International Credit Union Movement and the Role and Development of the World Council of Credit Unions, Inc. Horsdal & Schubart Publishers Ltd, 1999. - F.W. RaiffeisenFriedrich Wilhelm RaiffeisenFriedrich Wilhelm Raiffeisen was a German mayor and cooperative pioneer. Several credit union systems and cooperative banks have been named after Raiffeisen, who pioneered rural credit unions.- Life :...
. The Credit Unions. Trans. by Konrad Engelmann. The Raiffeisen Printing and Publishing Company, Neuwid on the Rhine, Germany, 1970. - Fountain, Wendell. The Credit Union World. AuthorHouse, Bloomington, Indiana, 2007. ISBN 978-1-4259-7006-2
External links
- Credit Union Database - all credit unions in USA
- World Council of Credit Unions trade association for credit unions
- Association of Asian Confederations of Credit Unions regional federation representing 21 national federations in Asia with 35 million retail members
- Association of British Credit Unions Limited - the largest trade body representing credit unions in the UK
- National Association of Credit Union Workers - a staff association for all UK credit union workers regardless of trade body affiliation
- National Federation of Community Development Credit Unions - a trade body representing more than 240 community development credit unions (CDCUs) across the United States.
- Scottish League of Credit Unions - a trade body representing credit unions in Scotland
- ACE Credit Union Services - a trade body representing many smaller credit unions in the UK
- UK Credit Unions - a trade body representing many smaller credit unions in the UK