Credit unions: a revolution– importance and impact
Although credit unions do not advertise much, and you have to become a member to use their products and services, they are growing so fast that their presence is everywhere. Today, Credit Unions are one of the most important organizations that humans being have ever created to survive from their financial problems. They target both young and old people, civil and military, men and women, and handicapped. Operating solely to meet the needs of their members rather than make profits, credit unions are empowering communities, churches, and employee groups to spread their collective wealth as people see fit. It is no surprise, then, that the credit union motto: “Not for profit, but for services,” resonates more loudly than ever before.
The first cooperative was organized in 1844 by a group of workers in Rochdale, England; that same year in Germany, Victor Aime Huber developed some of the early European cooperative theories, and Wilhelm Raiffeisen created the first true credit unions in Germany in 1852 and 1864(United States-NCUA 1). According to Barbara A. Good Credit Unions date back to mid-nineteenth century Germany, and the concept migrated to the United States in the early 1900s (2). To join one of them, you have to become a member by sharing a common bond with other members because Credit Unions serve only their members. Once upon a time, members had to be closely connected in some way, either by where they worked, where they lived, or where they worshiped. Although Bank Lobbyists oppose to the expansion of the Credit Unions as financial cooperative institutions, they have become popular (a revolution). With their existence, they bring changes to the banking industry, and they should continue to exist as they are from the beginning.
Credit unions, known as cooperatives, are born from the idea that people in the same community, same workplace, and having the same interests as well as the same difficulties regroup themselves. They put their money together, and they return it as loan to the members of the group. Barbara A. Good reports that “the Massachusetts law defined a credit union as a cooperative association formed for the purpose of promoting thrift among its members and adopted the principle of member deposits financing member loans” (2). The idea that credit unions are financial institutions encourages its members to save regularly and can facilitate the borrowing of money at lower interest rates than those normally charged by other financial institutions.
The rapid growth of tax-exempt credit unions at the expense of taxable depository institutions will increase in the size of the tax subsidy and may stifle the future growth of the community banks. From the beginning, Credit Unions (CU) are not-for-profit organizations and members-owned, and because of that, any profit the organization earns beyond operating costs is returned to the members in the form of better interest rates, low or no fees, improved and expanded services and facilities on saving and lower rates on loans (Sharma, Sharma, and Jana 19). That is why the CU can often offer higher rates on savings and lower rates on loans than banks can. Consequently, their members are satisfied with access to the services that they are provided, which leads to an excessive growth of Credit unions in numbers, as well as in assets. Tokle and Tokle states in a study of the influence of credit unions and Savings and Loan Competition on Bank Deposit Rates in Idaho and Montana that :
Examining the effect that credit union competition may have on banks is of more interest today than back in 1971 because in addition to credit union assets and liabilities becoming more like banks, there has been rapid growth of credit unions since then. For example, from 1970 to 1996, bank total assets grew by 123% in real terms, while credit union total assets grew by 344% . Thus, credit union membership is more common today...
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