History of credit unions
These credit unions would be recognizable today, since they adhered to the basic aspects of the co-operative identity: that is, they were "based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity.Unlike many of his contemporaries, Schulze-Delitzsch recognized that the functions of retail lending and purchasing business inputs were best kept separate in the interests of sound cooperative management."[6] Schulze focused much of his attention on developing federations or trade associations to help protect the brand of these small organizations, ensure their stability and link them to the global banking system.The small size of the credit unions, combined with extremely low educational endowments among the people, presented important management challenges.An early credit union historian describes the impact this way: It is quite true, as Dr. Johnson unkindly reminded Goldsmith, that it takes 240 poor men’s pence to make one capitalist’s sovereign.Every spring, every wire of the composite machine takes a personal interest in the collective doings, watching the other parts, guarding against loss and waste, correcting the slightest irregularity.A villager who chose not to repay a loan could face social disgrace, sanctions in church and/or severe economic consequences like losses of opportunities to work.[11] Bonds of association were an important innovation in microfinance, anticipating the solidarity lending methodology later made famous by Grameen Bank in Bangladesh.By respecting the principles of democratic control and subsidiarity credit union leaders were able to achieve vast economies of scale without surrendering local autonomy.The first credit union in North America, the Caisse populaire de Lévis in Quebec, Canada, began operations on Jan. 23, 1901, with a ten cent deposit.Founder Alphonse Desjardins, a reporter in the Canadian parliament, was moved to take up his mission in 1897 when he learned of a Montrealer who had been ordered by the court to pay nearly $5,000 in interest on a loan of $150 from a moneylender.Pierre Jay, a central banker and Edward Filene, a Bostonian merchant and philanthropist, were instrumental in establishing enabling legislation in Massachusetts in 1908.Filene's philanthropy, combined with the practical implementation efforts of his associate Roy Bergengren were critical to the emergence of credit unions across the United States.In addition to the traditional information and enforcement advantages resulting from the fact that members shared the same workplace, the employer-based bond permitted credit unions to use future paychecks as collateral.In 1932 Bergengren, at the invitation of Canadian priest and adult educator Moses Coady, drafted a model credit union law for the English-speaking province of Nova Scotia.
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