Credit Unions

8 Key excerpts on "Credit Unions"

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  Seduced and Betrayed

  Exposing the Contemporary Microfinance Phenomenon

  • Milford Bateman, Kate Maclean, Milford Bateman, Kate Maclean(Authors)
  • 2017(Publication Date)
  • University of New Mexico Press Published in Association with School for Advanced Research Press

    (Publisher)

  They originated during the early to mid-1800s in Europe, notably in Germany and Austria, with the general objective of cre-ating a local financial structure to support and benefit the rural and urban poor. Credit Unions provide access to affordable financial services and loans, as well as opportunities for savings and investment, because their mission is to best serve their members. The philosophy behind Credit Unions is that people should be able to pool their money and make low-cost loans to each other for a variety of productive purposes, but also for simple consumption purposes (Birchall 1994). Any returns generated by such activities will be distributed to members of the credit union through lower interest rates on loans and higher interest rates on savings products. Membership in most Credit Unions was meant to remain affordable to all, with any initial membership fee paid off over a period of time thanks to the financial benefits accruing to members. In addition, Credit Unions were initially required to consist of people who shared a “com-mon bond,” such as affiliation with a church, employer, union, neighborhood, or other community. This bond was important in creating and strengthening the relations of solidarity and mutual support that join individuals within par-ticular communities of interest (Gordon Nembhard 2013). Finally, Credit Unions were set up, and continue today, to deliver low-cost financial services, affordable Banking on the Difference 239 loans, financial literacy, and home-ownership education, particularly to under-served and marginalized communities.1 The gradual growth of Credit Unions across the world has sometimes been hindered by world events, such as wars and financial crises. Nonetheless, they became very important local financial institutions in North America and in many developing countries, such as Africa and Southeast Asia (Birchall 1994, 174).

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  The Routledge Companion to Consumer Behavior

  • Michael R. Solomon, Tina M. Lowrey, Michael R. Solomon, Tina M. Lowrey(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  To date, there has not been a well-articulated connection drawn between the new incarnation of the access economy, and the generations-old credit union movement. However, Credit Unions better represent the “sharing” sensibility of the new way of thinking about possessions than do any other traditional financial institutions, and their members feel a strong sense of trust in them. Many Credit Unions offer unique financial instruments that may allow the sharing economy viewpoint to extend to financial instruments and products. As Credit Unions progress into the arena of shared and collaborative financial instruments, the core mission of Credit Unions aligns with members in a shared sense of vision and community.

  Credit Unions Participate in a Co-Created Community with their Members, and Focus on Relationships, Trust, and Personal Service

  Credit Unions are a co-created community of members and financial institution. According to our research, they create relationships, they engender trust, and they provide outstanding service. This makes sense, because they are already members helping members, in a collaborative financial consumption community. They have been at the forefront of social movements from their foundation in the 1800s, to funding loans for poor communities, to the place of refuge for consumers escaping large bank policies with which they disagreed on Bank Transfer Day. Credit Unions are now poised to be at the forefront of what might be the most important social movement in their history—the sharing economy (Cahan 2015). If they can develop shared financial instruments that enable consumers to increase their dive into collaborative and shared ownership and community finance, Credit Unions themselves could become their own financial social movement. The share economy is the next frontier for consumers, and financing these shared communities may well be the next frontier of the financial industry, with Credit Unions leading the charge.

  References

  Akaka, M. A., S. Vargo and H. J. Schau (2015), “The Context of Experience,” Journal of Services Marketing, 26(2): 206–223.

  Bardhi, B. and G. M. Eckhardt (2012), “Access-based Consumption: The Case of Car Sharing,” Journal of Consumer Research

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  Financial Exclusion

  • S. Carbó, E. Gardner, Philip Molyneux(Authors)
  • 2015(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  CUs are essentially ‘self help’ groups, mutual financial co-operatives that provide convenient and accessible savings and loans products to their members. Although long regarded as the poor relation of the UK financial services industry, the CUs (with total members of around 375,000) came under a new regulatory regime administered by the FSA in the summer of 2002 (on 2 July). Not only did this require the CUs to keep a tighter control on their financial positions, it also allowed them to borrow funds from a wider range of sources. Government sees CUs as an important place for savings, a source of low-cost credit for low income groups and they also provide a first rung on the ladder of financial services for young people (Helen Liddell, Treasury economic secretary quoted in The Guardian – Jones [1998]). CUs in this context encourage small savings and can be a stepping-stone to these kinds of financial services (FSA, 2000, para 7.13). The FSA (2000, para 7.20) points out, however, that a major gap in our knowledge is the extent to which CUs are used by people who would otherwise be financially excluded. HM Treasury PAT 14 (1999) enthusiastically supported the development of the CU movement. They (Melani Johnson, MP) recommended: We want to see a new central services organisation (CSO) set up to develop Credit Unions in Britain. This is a vital link to provide effect- ive impetus to credit union growth, with due emphasis on Credit Unions serving deprived communities. While details of CSO struc- ture and finance have yet to be worked out, I want to see the current momentum accelerated. I am confident that the credit union move- ment will respond to the opportunities and work with banks in developing a detailed business plan. 68 Financial Exclusion The FSA (2000, paras 7.14 and 7.15) point out, though, that despite the work of a small number of progressive CUs, they have been slow to develop in Britain.

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  Unmaking Goliath

  Community Control in the Face of Global Capital

  • James DeFilippis(Author)
  • 2004(Publication Date)
  • Routledge

    (Publisher)

  Fourth, the connections between local currencies or CDCUs and the places they are in can be relatively thin. Local currencies are place-defined, in that they can only be used in geographically delineated areas, but that does not necessarily mean that there are strong connections between the currencies and the places. And the connections of CDCUs to places are often even more tenuous. There are three sets of relationships that determine the connections between CDCUs and, to some extent, local currencies, and the places they are within. First, are the relationships between the CDCU or local currency and the sponsoring organization (in the case of Bethex, Bethany Church), and between the sponsoring organization and the other actors that constitute that place. Bethex was a credit union that, because it was kicked out by its sponsoring organization, manifested the mobility that is theoretically possible within this model. This mobility admittedly was very localized, and at no point did the credit union leave the South Bronx. Simply put, there remained some degree of local dependence, as Bethex could not relocate extralocally and remain Bethex. Second, the membership of Credit Unions is not place-bound, but membership is permanent, unless the member chooses to formally withdraw from the credit union. So as a credit union ages, its membership may, or may not, remain in the same place as the credit union. This is especially true for Credit Unions located in urban areas with high turnovers of residents and/or large immigrant populations, which can be very mobile. Third, collective ownership does not necessarily yield capital immobility or place dependence, as the loan portfolio of Credit Unions also does not need to be place-bound. Loans are made to members who have already relocated geographically, and members can use their loans for individual investments in places far removed from the credit union (e.g., to buy or repair a house in the Dominican Republic—the other side of global flows of capital investment are those associated with the transnational flows of labor). Granted this is a form of capital mobility that operates under a different motivation than for-profit investment capital seeking a “spatial fix” to improve the returns on its investment. But it remains a form of capital mobility nonetheless.

  Fourth, this situation is further compounded by the individualized character of Credit Unions or the transactions in local currencies. The focus of a credit union is its membership, not its locality, and although these are intimately connected, they are clearly not synonymous—and, as was discussed in chapter 1

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  Social Capital in the City

  Community and Civic Life in Philadelphia

  • Richardson Dilworth(Author)
  • 2010(Publication Date)
  • Temple University Press

    (Publisher)

  The release explained, ‘‘A long list of purposes for which loans are being made includes medical and hospital expenses, the purchase of food, clothing, furniture, and household necessities, and other ‘provident and productive’ purposes.’’ Another use of the small loans was to pay off high-interest debts that had been taken on from less scrupulous sources. 12 Credit unionism attracted support from a wide variety of political actors who saw it as a way to capitalize on preexisting stocks of social capital. In a 1934 op-ed piece in the New York Herald Tribune, Eleanor Roosevelt extolled Credit Unions and wrote, ‘‘[The credit union] seems to be one way in which a poor man can borrow money on his character and it is becoming increasingly popular in this country.’’ Mrs. Roosevelt argued that ‘‘the fundamental reason for the soundness of any credit union is that its members shall know each other, since character is the only security required for loans.’’ In other words, communities could leverage so-cial capital to build financial institutions. She also noted that ‘‘the overhead cost of operating a credit union is practically non-existent because industries frequently provide space, light, and heat for administrative purposes and officers and direc-tors serve without compensation.’’ 13 Mrs. Roosevelt had an expansive notion of community, suggesting that any group of people , whether living in a community or with a common interest or contact, might further the development of Credit Unions to their mutual profit and advantage. This development would afford many a reasonably profitable and ap-parently safe form of investment as well as freedom from anxiety in time of emer-gency. 14 Nevertheless, common employment in an economic enterprise remained the most likely source of a credit union throughout the 1930s in Philadelphia be-cause it provided the necessary institutional base and the sufficient social envi-ronment.

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  Co-operative Banking Networks in Europe

  Models and Performance

  • Federica Poli(Author)
  • 2019(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  2011 ).

  2 Conceptualization of Co-operative Banking

  The International Co-operative Alliance (ICA) defines a co-operative as “an autonomous association of persons (natural and/or legal persons) united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise”. Businesses run by a co-operative are owned and managed by and for their members. In an acknowledged context of a variety of legal forms, the co-operative has a precise identity clearly distinguishing it from investor-driven (capitalistic) companies: it is made up of people, it is democratically controlled via non-capitalistic criteria (i.e. one member, one vote vs. one share, one vote), and it is not devoted to the enrichment of its founders and participants, but to the satisfaction of needs other than the pure return on capital5 (needs which, moreover, may also pertain, to a certain extent, to non-members or the community) (Cooperatives Europe et al. 2010 ). Co-operatives are primarily groups of persons or legal entities with operating principles that are different from those of other economic agents. These include the principles of democratic structure and control and the distribution of the net profit for the financial year on an equitable basis.6 The introduction of a European legal form for co-operatives, based on common principles but taking their specific features into account, was the driver for the introduction in 2003 of Regulation 1435/2003 on the Statute for European Co-operative Society (Societas Cooperativa Europaea—SCE ). In the context of the constant effort to harmonize the European legislative framework, the SCE Regulation also has an essential symbolic and political value. Unequivocally, it testifies to the fact that the capitalistic legal form of organization is not the only one available and that other legal forms may be chosen by economic agents to run businesses at both national and cross-border levels in the European territory (Cooperatives Europe et al. 2010

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  Financial Cooperatives and Local Development

  • Silvio Goglio, Yiorgos Alexopoulos, Silvio Goglio, Yiorgos Alexopoulos(Authors)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  et al. 2003, 10). In the case of many Credit Unions, for example, withdrawals of savings are often prohibited or limited when a member’s loan balance is higher than the savings balance. Savings cannot be withdrawn until the loan is repaid, a mechanism regarded by many Credit Unions as helpful for people who otherwise would not have been able to do so.

  Figure 9.1 shows that the savings products offered by Credit Unions are characterized by more deposit-side than withdrawal-side features. As argued by the manager of Bristol Credit Union, the main incentive that Credit Unions provide for saving is ‘to make it easy’.13

  The connection between savings and other financial products

  Alongside the incentives to save provided by product design, two-thirds of our survey’s respondents said that they offered complementary services to support savings. For example, almost half of Credit Unions offer saving alongside (or following) loan repayment. As Blake and de Jong (2008, 94) observe, ‘Credit Unions have a strong model here, because they encourage borrowers to save as they repay their loan, and continue saving once the loan is paid off ’. Consequently, a strengthening of the saving habit occurs and members are likely to need to borrow less in the future.

  In our survey, several Credit Unions offer additional services at preferential rate for savers, such as good savings records as criteria for assessing borrowing at lower interest rates. Research carried out by Collard and Smith (2006) shows that among the main reasons for saving within a credit union, the ability ‘to borrow’ was the second most common, mentioned by 39 per cent of the members (n

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  Mhlakaza in the Changing Southern Africa

  The Memoirs of Dr V A Mhlakaza

  • A. Mhlakaza(Author)
  • 2021(Publication Date)
  • Langaa RPCIG

    (Publisher)

  Cooperative credit unionism per se deserves a bit of explanation. Historically, Credit Unions are said to have their origin in Germany, around 1850, with the religiously motivated Wilhem Frederich Raiffeisen, recognised by many as the founder. Credit Unions, using Raiffeisen’s model, were founded on cooperative principles, of 134 democratic control (one man, one vote), common bond among members (be it geographical or occupational), political and religious neutrality, and with low interest rates. The purpose of Credit Unions founded by Raiffeisen was to protect small farmers from usury, as was practised by merciless landlords of the time. Similar people’s banks were established by another German, named Schulze Delitzsch, a rival contemporary of Raiffeisen. Somehow the idea of Credit Unions crossed into the USA and Canada, where it developed, expanded and consolidated into a powerful socio-economic movement. Every credit union member is expected to save regularly so that a common fund is created, then borrow wisely and repay faithfully. Credit worthiness of a member is determined by fellow members through their democratically elected credit committee. That was what we learned to do in our Phoqoane CU and we began to see assets growing gradually from hundreds of Rands to thousands and ten thousands. One popular slogan among Credit Unions in Lesotho, and in our Samaria area, was: ‘Not for charity, not for profit, but for service’. That was fascinating and exposed the underlying understanding of self-help among members. The formation of the Phoqoane CU centred on my own village community of Ha Sephula, better known as Samaria by the people of Lesotho, and registered as a legal entity in April 1965, wasn’t at all a matter of “On your marks! Get set! Ready! Go!” It was the outcome of a continuous, well-planned and meticulously executed non-formal education activity.

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