Credit unions may not immediately come to mind when thinking about history. But the truth is, credit unions have played an important role in shaping financial identity through the ages. Credit unions have always helped others in tough times, whether through support during wars or other modern-day relief efforts.
Join us today, October 16, as we celebrate International Credit Union Day and look back at the role that credit unions have played in shaping history.
The first credit unions in the world were established in Germany in the mid-1800s. Hermann Schulze-Delitzsch, a lawyer, created the first “people’s bank,” where shopkeepers and city workers were able to find economic relief from loan sharks at the time. Credit unions are formed through a common bond (employment, location, etc.), and this principle could be seen even at this time in history.
America’s first credit union was established in New Hampshire in 1909, known as St. Mary’s Cooperative Credit Association. St. Mary’s brought together textile workers and still exists today. From here, the credit union movement was formed in America, and others began to form throughout the country.
The Great Depression took place from 1929 through 1939 and was a time when many citizens experienced unemployment and severe poverty as a result of economic failings throughout the world. Credit unions were a light through a very dark tunnel at this time, providing relief and economic support to members and small businesses that had nowhere else to turn.
Many look to this period of time as significant for the American Credit Union Movement. Members pooled their money together to support others who were struggling most throughout the Great Depression. This coming together captures the heart of the credit union movement and can still be seen in credit unions throughout the world today.
Credit unions were also a major part of the war effort through their sale of war bonds. Members would supply funds through these bonds to the government, where it would then go on to help fund military operations. After a certain time, the member could then redeem the bond and receive back their investment, plus accrued interest.
According to the National Credit Union Association, credit unions sold 12 million war bonds throughout World War II. At the time, this amounted to $4.4 million, which would equate to more than $5.7 billion today!
Credit unions are much more than just financial institutions for members—they are a way for members to realize and fulfill their goals, such as homeownership. Throughout history, many African Americans and other minority groups fell victim to predatory lending practices and discrimination. Many banks and governments used redlining, which marked off certain neighborhoods where minority groups couldn’t move into, as a way of denying customers mortgages and other loans based on their ethnicity.
African Americans have been served by credit unions since the 1920s. These financial institutions allowed African Americans to buy homes and establish lines of credit, as they were likely to be denied elsewhere. The African American community is still an incredibly strong part of the credit union movement, especially with the development of the African American Credit Union Coalition (AACUC) in 1999.
The “people helping people” philosophy that guides credit unions worldwide is one that hasn’t changed. In 2008, many Americans fell victim to a housing crisis, caused by several factors like subprime mortgages (borrowing to lenders with poor credit history) and predatory lending practices. As a result, an economic recession was triggered, with many Americans losing their jobs and businesses filing for bankruptcy.
As has been shown throughout history, credit unions took action to help their membership. In late 2008, the NCUA created the Credit Union System Investment Program, which helped credit unions throughout the country withstand the ongoing financial crisis. At this time, NCUA deposit insurance coverage was also increased to $250,000 per member.
The Worldwide Foundation for Credit Unions was established with the goal of “addressing global issues through cooperative finance.” Some global efforts that this organization and others tied to credit unions have performed include:
Our own President & CEO at American Heritage, Bruce K. Foulke, traveled to Ukraine in late 2022 to visit healthcare facilities and provide much-needed equipment and gear such as ambulances and generators. Advisory support was also given to the Polish credit union relief and assistance program. You can read more about this here.