Published in The Credit Union Times
By, Stuart R. Levine

Over the years, I have seen the mission and values of the credit union industry expressed in the service brought to its members. I find that looking at the roots of an institution can remind us of its mission and values and connect us to those who have gone before us in service. The history, mission and values that lead to the establishment of the American industry inform us today.

The first credit unions were founded on the ideals of self-help, self-responsibility, democracy, equality and solidarity. They were imbued with honesty, openness, social responsibility and caring for others. The same values that credit unions bring to their members today.

Modern credit unions first took root in Germany in 1847 to assist farmers and small craft businesses that were in dire financial straits when failed harvests and famines occurred. These businesses had no access to bank services; they were reliant upon private moneylenders.

In response, two Germans separately and independently took action. In 1847, Hermann Schulze-Delitzsch founded the first “raw materials association” for carpenters and shoemakers and the first “thrift and loan association,” essentially the first credit union, in 1850. Also in 1847, Friedrich Wilhelm Raiffeisen created the first aid association in Weyerbusch for the rural population. In 1864 he founded Heddesorf Credit Union to help German farmers purchase livestock, equipment, seeds and other farming needs.

These German credit unions’ values included democratic governance, with each member having one vote, regardless of a member’s deposit size, and a member-elected board of directors.  Essentially, this is the same governance model that is employed today. From the German roots, credit unions quickly began to spread across Europe and jumped to India and to North America.

Alphonse Desjardins founded the first credit union in North America, the Caisse Populaire de Lévis in 1901 in Quebec, Canada, with a 10-cent deposit. Desjardins wanted to provide affordable credit to working class families, who were at the mercy of loan sharks that charged outrageous interest. In 1908, Desjardins helped found the first credit union in the United States, St. Mary’s Cooperative Credit Association in Manchester, N.H.

The American movement, however, really started in Massachusetts, when Pierre Jay, a banker and grandson of John Jay, the first Chief Justice of the Supreme Court, and Edward Albert Filene pushed the enabling legislation in Massachusetts.

The Massachusetts Credit Union Act became law in 1909.  It served as a basis for other state credit union laws and the Federal Credit Union Act of 1934.

Filene personally displayed the values underpinning the credit union industry. He is known for building the Filene’s department store chain, but moreover, he was an enlightened employer believing that his employees determined his success more than any other factor. He took care of his workers, mostly women, offering them free health care, hourly breaks and meals.

Filene encountered rural cooperative banks, many started by women in 1907 while traveling in Calcutta, India. He realized that these types of cooperatives could help ordinary American workers access loans without falling victim to usury, and allow them to save for the future.

In 1920, Filene hired Roy F. Bergengren, who had been a poverty lawyer, to manage the Massachusetts Credit Union Association, where his promotion of credit unions led to 19 new ones within a year.

Given this success, Filene founded the Credit Union National Extension Bureau in 1921 and hired Bergengren to run it.  Its ambitious mission was to create effective credit union laws in all states and at the federal level.  Filene contributed over $1 million to this effort.

Bergengren traveled the country appearing before state legislators and recruiting volunteer organizers. In his passionate speeches, he would state: “The real job of a credit union is to prove, in modest measure, the practicality of the brotherhood of man.”

When Bergengren began his efforts in 1921 there were only 199 U.S. credit unions. By 1925, 15 states had passed credit union laws, and 419 credit unions were serving 108,000 members. By 1930, 32 states had adopted legislation with a total 1,100 credit unions, and by 1935, 39 states had passed enabling legislation and 3,372 credit unions were serving 641,800 members.

The effort culminated with Franklin Roosevelt signing the Federal Credit Union Act on June 26, 1934, creating the national system to charter and to supervise federal credit unions.

Credit unions have been a shining example of quality service, fair prices, community outreach and ethical dealing. These are the values that benefit our communities now and have since the industry’s inception in Germany 165 years ago.