Status of Credit Unions 1925
THE CREDIT UNION—”E PLURIBUS UNUM BANKING’
COOPERATIVE banking for the man of small means is being developed in this country by the credit union, which does for the small borrower for miscellaneous needs what the Building and Loan Association does for the home-builder. Credit unions have existed in Europe for three-quarters of a century. In this country they have existed for fifteen years in one or two States. At present there are said to be laws providing for the incorporation of credit unions in twenty-two States. The fact that bills providing for such incorporation are before the legislatures of twelve States and may possibly be brought before five more, brings a number of financial writers to consider the significance of this form of banking. There are now, according to the New York Trust Company’s Index, about four hundred credit unions with total assets of about $20,000,000. And this does not include a large number of associations which do a similar business but are not incorporated as such. The growth of credit unions, we are told, has been most marked in Massachusetts and New York. In Massachusetts there are 92 credit unions, with 55,000 members and $7,000,000 in assets. New York has 114 credit unions with about 80,000 members and $10,000,000 in assets. In general, adds The Index, American credit unions are of two types, urban and rural. As Mr. George T. Hughes points out in one of his Consolidated Press articles on investment, the credit union does not serve the general public—-The credit union is entirely cooperative and is organized within and loaned to a specified and limited group. To be a member of a credit union, one must own a share; to be a borrower, one must be a member, while all the profits go to the members themselves and none to outsiders. The credit union always begins on a very small scale, and the only resources it ever has is the money its members save. In this way the credit union becomes a great encouragement of thrift. Its members work out their own salvation, and the safety of the plan depends in great measure upon the personal acquaintance which the union officers have with their member borrowers. In addition they have the support which comes from supervision by the State Banking Department.
“E Pluribus Unum Banking” is what Roy F. Bergengren calls the credit union in a Survey article. As he states it:
The credit union is primarily concerned with these things: with thrift which recognizes small savings and makes of the business of saving a good habit; with credit which specializes in such small problems of credit that it can eventually not only eliminate usury but bring to the many the benefits of an intelligent use of credit; with education that recognizes the necessity that, in a democracy, the masses of the people should know something about the management and control of money.
It seems that the original credit union in North America, organized at Levis, in the Province of Quebec, has operated for twenty-four years without a bad loan. It started with assets of $26, and now has nearly a million and a half. Similarly the Skandia Credit Union of Worcester, Massachusetts has built up nearly a million dollars worth of assets in eight years. Mr. Bergengren adds to the information we have already given by noting that in the organization of credit unions—
Shares have a small par value—generally five dollars—payable in cash or in weekly instalments, the instalment unit being generally twenty-five cents; the emphasis is on serving the small saver and making saving habitual. Loans are made for provident purposes. The test is—does the loan promise to be of benefit to the borrower? Loans are repayable in weekly instalments, and interest rates are low. Twenty per cent. of the net earnings are annually appropriated to a reserve fund.
In Massachusetts there are credit unions of postal workers, State and municipal employees, employees of factories, mills, department stores, neighborhood and community groups, members of church parishes, and many more. The credit unions of the State are leagued in a voluntary association. Mr. Bergengren tells of a small credit union composed entirely of women, in a Jewish section of Cambridge. It has seventy members and assets of $4,400. “The women are for the most part housewives, and their business is the business of keeping house; the money they have accumulated for the most part out of their household allowances.” The treasurer’s office is also her kitchen, and there the examiners come from the State Banking Department to examine her books.
The first rural credit-union law was enacted by North Carolina in 1915. The original Lowe’s Grove Credit Union of North Carolina started with less than $350 capital. The farmers in the group soon organized a cooperative buying society in connection with their credit union. In seven years, we are told, they have cooperatively bought supplies totaling over a quarter of a million dollars, with a saving of more than $30,000. It seems that “while the assets of the credit union have never exceeded $5,000, loans in addition have been made totaling over $70,000, at rates of interest which have never exceeded six per cent.” According to Mr. Bergengren, “extension courses in agriculture conducted in the credit union building by instructors from the State University, a library of agricultural books, and many other similar activities, have followed in natural sequence. Here, he adds, is “a hint of the possibilities of an improved agricultural system as applied to the small farmer—a system more worthy of a democracy than one which overburdens farms with usurious mortgages.”
Source: The Literary Digest for October 10, 1925
Related posts:
- Credit and the Federal Reserve Part 2
- World War 1 War Debts 1925
- Credit and the Federal Reserve Part 3
- Credit and the Federal Reserve Part 1
- Introduction of Personal Loans Part 3
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