4 minutes
A historical journey through the credit union movement and the evolution of financial inclusion
In a world seemingly dominated by commercial banks and other financial behemoths, credit unions stand as a unique and enduring pillar of financial stability and community empowerment. This year marks the 75th anniversary of International Credit Union Day, recognizing the history of the credit union movement and reflecting on its achievements and the shared member experience. Born from the need for economic solidarity and access to financial services, credit unions serve as a testament to the resilience of cooperative financial institutions.
Emergence in 19th Century Europe
The credit union movement traces its roots to 19th-century Europe, with Friedrich Wilhelm Raiffeisen, a German mayor, as one of its earliest pioneers. Raiffeisen witnessed the poverty and economic hardship faced by farmers in his community and sought a solution. In 1864, he established the first credit union in Anhausen, Germany, which operated under the principles of self-help and mutual assistance.
Around the same time, in 1844, a group of weavers in Rochdale, England, founded the Rochdale Society of Equitable Pioneers, often considered the world's first consumer cooperative. Although not a credit union in the traditional sense, it laid the groundwork for cooperative principles later adopted credit unions.
Adoption in North America
In the early 20th century, the credit union movement reached North America. Canadian journalist Alphonse Desjardins played a pivotal role by establishing the first North American credit union in Lévis, Quebec, in 1901 with an initial deposit of 10 cents. Inspired by European cooperative ideals, Desjardins aimed to provide affordable credit and savings services to working-class individuals, marking a significant turning point in cooperative finance history.
The movement quickly gained momentum in the United States as well, with Massachusetts passing the first credit union act in 1909. Notably, Edward A. Filene, a Boston-based merchant, and Pierre Jay, the first Banking Commissioner of Massachusetts, were instrumental in promoting the idea of credit unions in America, while the St. Mary’s Bank Credit Union in Manchester, New Hampshire, is often recognized as the first U.S. credit union.
Legal Recognition and Growth
As credit unions expanded rapidly, lawmakers recognized the need for a legal framework. In 1934, President Franklin D. Roosevelt signed the Federal Credit Union Act, providing federal oversight and regulation while laying the foundation of the modern credit union system in the United States.
During the Great Depression, credit unions gained popularity as trusted financial institutions offering accessible and affordable financial services. Credit unions' community-focused approach helped people endure the economic crisis, and their commitment to responsible lending practices prevented them from engaging in the risky behavior that led to the collapse of many banks, ultimately increasing visibility and memberships.
Post-War Growth
After World War II, credit unions continued to expand, particularly in the 1950s and 1960s. They reached out to underserved communities and played a vital role in facilitating homeownership through affordable mortgage loans, fulfilling the American dream.
Innovations, Inclusion and Modernization
The late 20th and early 21st centuries brought technological advancements, enabling credit unions to offer online banking services and mobile apps that cater to members’ ever-evolving needs while maintaining their cooperative principles. Striving for efficiency and convenience while serving millions of members worldwide, credit unions are known for offering a wide range of financial services, including savings accounts, loans, credit cards and financial education. Thus, the 2023 ICU Day theme is “Empower your financial future with a credit union.”
Today, credit unions remain committed to their members' financial well-being and community involvement while adapting to stay relevant and meet consumer expectations. De novo credit unions, for example, are now being formed to provide financial services to diverse and underbanked communities, often through the use of fintech. The Global Women's Leadership Network has Sister Societies and members across 88 countries working together to “fortify women's personal and economic empowerment through credit unions” worldwide. And U.S. credit unions are taking steps to strengthen their communities by applying for Community Development Financial Institution certification.
Through their cooperative principles, their role during economic crises from the Great Depression to the Great Recession, and their continued relevance in the modern era through technology, credit unions demonstrate resilience and influence in providing accessible and community-focused financial services.
For a comprehensive historical timeline of the credit union movement in the U.S., visit the National Credit Union Administration’s website. You can learn more about ICU Day from the World Council of Credit Unions.
Gracie Branon is a marketing coordinator at William Mills Agency, the nation’s largest independent public relations firm focusing exclusively on the financial services and technology industries. The agency can be followed on Twitter, Facebook, LinkedIn or its blog.
