The Dime that Started a Movement: The History and Development of Credit Unions

9 Pages Posted: 10 Jun 2009

See all articles by Gregory Fairchild

Gregory Fairchild

University of Virginia - Darden School of Business

Robert Smith

University of Virginia - Darden School of Business

Abstract

This note provides students a rich background on the history, evolution, and current challenges in the credit union industry, with a particular focus on community-development credit unions. The case mentions key exemplar community-development credit unions and makes limited predictions about the industry's future direction. The case can be used a companion to "Credit Where Credit is Due: The Latino Community Credit Union" (UVA-ENT-0104).

Excerpt

UVA-ENT-0103

Dec. 11, 2008

THE DIME THAT STARTED A MOVEMENT:

THE HISTORY AND DEVELOPMENT OF CREDIT UNIONS

Credit unions are nonprofit financial institutions similar to banks, but they have members instead of customers. Those members share a common background, and secure membership through their deposits and accounts. They deposit funds and draw loans from a common pool. Members have voice in the credit unions' management through boards, and operating profits are reinvested for members' benefit. As a result, credit unions are able to offer their members loans at lower interest rates, higher interest rates on savings accounts, and members pay less in fees than bank customers.

The first credit unions emerged from the social reform movements sweeping Europe in the mid-18th century. In 1844, a group of English weavers formed the Rochdale Society of Equitable Pioneers, offering memberships to raise capital. In Germany, Victor Aime Huber formulated cooperative theories, leading to the foundation of credit societies in 1852 and 1864. Noted Italian economist and philanthropist Luigi Luzzatti paralleled Huber's work in Italy. With the waves of European immigrants to the United States and Canada in the late 19th century, it would not be long before cooperative banking emerged on that side of the Atlantic.

. . .

Keywords: Community development, industry evolution, credit unions, consumer finance

Suggested Citation

Fairchild, Gregory and Smith, Robert, The Dime that Started a Movement: The History and Development of Credit Unions. Darden Case No. UVA-ENT-0103. Available at SSRN: https://ssrn.com/abstract=1417211

Gregory Fairchild (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/faculty/fairchild.htm

Robert Smith

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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