A Brief History Of Credit Unions

The roots of credit unions are traced originally in Europe but the American version of them only became known during the early twentieth century, taking on the concepts that the European forefathers had been developing for centuries.

CU Roots

During the Renaissance period, intellectual and technological advancements helped strengthen the financial aspect of the guild system. This allowed the growth of capital and wealth of the merchant class and other professionals, and eventually paved a way for the middle class.

In Great Britain and most Europe parts, the guild system of loans was tightly entwined with politics and the Catholic Church. The modern era had been established during the time of Martin Luther and by the late 1700's, the guild era was over. While there are many guilds that still function, successive governments made sure that they had the power over them.

The basic concept of credit union actually developed within the guild system. With the advent of industrialization, power was concentrated in some segments of the population while decreasing economic power in others. Soon, these power shifts inspired Karl Marx and Friedrich Engels, the men behind financial institutions that are commonly known today as credit unions.

During the mid 18th century, experimentation for the concept of credit union was conducted in Germany and Great Britain and became well-refined in 1864. By the turn of the twentieth century, the CUs traveled to North America with Canada as the host for the first and official CU organization on the continent. During the 1920, credit unionism started to flourish within the areas of the United States of America. Since then up to the present, credit unions are considered as one of the best financial institutions one can ever find in a state. As a matter of fact, they are now considered as important and vital in the financial landscape of the modern America as banks, with modern credit unions have centuries of history behind them.

The idea behind credit unions is quite a simple one and one which remains pretty much unchanged from the earliest associations and organizations of this type. Basically, the CU members function as a fiscal collective who gather together to form a non-profit financial organization. Members are required to deposit funds regularly while the credit union makes use of these available funds as loans for needy members. Another fact about CUs is that most of the members of a particular CU come together as a consequence of some sort of similarity, such as a certain profession.

Each of the above mentioned characteristics can be traced back into the history and culture that created those first European associations.

About this Author

This article was written by Dave Cheeseman, who is a regular contributor to financegecko.com. Dave's previous editorial looks at line of credit loans.

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