Credit Union History Steeped in Cooperation

Credit unions began forming in Germany during the mid-19th century. Due to famine and crop failure, Herman Schulze-Delitzsch organized a cooperatively owned bakery & mill so local citizens could buy bread at discounted prices. The operation was so successful that, in 1850, he applied the same idea to the financial sector and created what he called the people’s bank.

Another German named Friedrich Raiffeisen established the Heddesdorf Credit Union in 1864 to give nearby farmers livestock and farming equipment purchasing opportunities. Raiffeisen based the group on philosophies of self-governance, stating that once you defeat dependency, you can fight poverty.

Expansion

This idea of credit associations extended across the Atlantic Ocean and took root in Quebec, Canada at the beginning of the 20th century. A man named Alphonse Desjardins was tired of loan sharks taking advantage of those in need, so he founded the first credit union in North America to make financing affordable for poorer families.

The first U.S. credit union was organized in New Hampshire in 1909. During the 1920s, not-for-profit financial cooperatives became more popular, because these institutions could offer smaller loans to people for things like appliances—the type of lending larger banks wouldn’t address at all.

Regulation

As the concept grew in the 1930s, the government implemented the Federal Credit Union Act to supervise the various cooperative financial institutions that were now spread across the nation. And as membership increased to over 6,000,000 in the 1960s, the National Credit Union Administration (NCUA) and the National Credit Union Share Insurance Fund (NCUSIF) came about to regulate the industry and protect members.

From the beginning, such cooperatives were founded on the principle of democratic governance, with all members having a say, regardless of deposit size. Members would elect a board of directors, who volunteered their time to help guide the credit union. And with a membership of more than 230 million, we still follow those practices today in 109 countries worldwide.