The Finance Owl

Banks – Loans – Mortgages – Money



Credit unions are financial cooperative organizations that are owned and managed by their members. Their primary purposes are to encourage shrewd financial management and to provide affordable credit and other financial services to its members. Credit unions emphasize the importance of local community development, in line with how credit unions began their life.

The Birth of Credit Unions

It is widely accepted that the first credit union was formed in Germany around the year 1852. A man named Franz Hermann Schulze-Delitzsch, who had experimented with small cooperative-like financial organizations, initiated the first formal urban credit union. His model was very successful and in 1864, a fellow German named Friedrich Wilhelm Raiffeisen created a rural credit union using the blueprint of Schulze-Delitzsch’s urban model. It is in fact Raiffeisen’s rural model that helped to promote the success of credit unions.

Rural communities often did not have access to the financial institutions that were available to their city counterparts. Consequently, as they were viewed as a less profitable investment for banks and such like, they often found it difficult to raise finance. Raiffeisen’s rural credit unions promoted the idea of “social capital”, which appealed to people in rural areas as it gave them an opportunity to interact with a financial organization in a way that was truly revolutionary. By the late 19th Century the popularity of credit unions had spread throughout Europe and into North America.

Credit Union Organizations Versus Financial Institutions

Credit unions are quite different from financial organizations such as banks as it is the actual members (i.e. account holders) of the credit union itself who own the organization: in fact it is the the members who decide upon the candidates for the board of directors through a democratic voting system.

Most credit unions offer services comparable to checking and savings accounts, shares certificates, online banking, credit cards and loans. However, in order to take advantage of these services you must be (or become) a member of the credit union itself.

Ostensibly, credit unions provide many of the same types of financial services as banking and other financial organizations but owing to their commitment to providing more affordable and ethical services to their members, they often do so at a lower cost.

Benefits to Members

Credit union members will generally find it much easier to make a successful application for a loan or credit card from their credit union, rather than from a banking organization. As a result, people who have a poor credit history (or no credit history at all) can take advantage of this benefit in order to raise credit, which in turn helps to build their credit history.

Credit Union Organizations Throughout the World

Today the credit union/cooperative financial organization model is prevalent in many countries: the World Council of Credit Unions currently estimates that credit unions can be found in over 100 countries. The following countries have established credit union organizations: