A Brief History of Credit Unions

Credit unions have made huge strides and milestones in the over 150 years they’ve been in existence. What are credit unions? These are member-owned and operated financial cooperatives whose function is to promote thrift, provide credit at competitive rates, and offer an array of other financial services to their members.

Credit union systems vary considerably when it comes to asset size – ranging from small-holder cooperatives with a few members to fully-fledged financial institutions that boast assets in excess of hundreds of billions of U.S. dollars. Of more significance, however, is that credit unions work alongside other cooperatives and mutuals that engage in cooperative banking.

Credit Unions: The Background Story

The first credit union emerged in 1852 in Germany. Franz Hermann Schulze-Delitzsch founded it. It’s actually a fellow German, FW Raiffeisen who is credited with starting the credit union revolution. Mr. Raiffeisen established the first rural credit union in Germany in 1864.

You see, big banks had no presence in Germany’s rural areas. That is why Raiffeisen’s social capital approach underscores a significant moment in the history of contemporary credit unions. In fact, his namesake bank – Raiffeisenbank – is the most prominent and the largest banking group in modern Austria, with billions of dollars in assets and members.

Spreading Throughout Europe

Credit unions began making inroads in several parts of Europe even before they had fully consolidated in Germany. By 1864, Belgium saw the first credit union – a brainchild of Léon d’Andrimont in Liège. Luigi Luzzatti followed suit in 1865 by forming the first of the People’s Bank of Milan.

Today’s The Cooperative Bank was established in 1872 as the Cooperative Wholesale Society in London. A network of credit unions was formed as the Groupe Banque Populaire in France in 1878. And 4 years later, Crédit Mutuel was established in Strasbourg.

Also, credit unions spread to rural Italy and parts of Switzerland, Hungary, Austria, the Balkans, and the Netherlands by the 1890s.

Emergence of Credit Unions in Northern America

The first Caisse Populaires (credit unions) in Northern America was founded in Quebec in 1901 with a 10-cent deposit! A reporter established the credit union when a fellow Montreal citizen was charged an outrageous $5,000 in interest on a $150 bank loan.

In the U.S., New Hampshire’s St. Mary’s Bank is credited as the first credit union. A slew of other credit unions mushroomed throughout the United States in the next three decades. Now, more than 4,500 credit unions are operating in 97 countries, serving over 172 million members, and controlling more than $1.1 trillion in assets across the globe.