Hands Around The Globe
The International Credit Union Movement
Ian MacPherson 1999
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The international credit union movement has a long and deep history. It can be seen, to
some extent, as emanating from those informal mutual-aid traditions that, in many parts of
the world, go back as far as anyone can remember. More narrowly, it can be seen as an
important descendant of the community co-operative banking tradition that started in
Europe in the middle of the 19th Century. From yet another perspective, it is a
movement with a thousand beginnings, one for each of the local, regional and national
movements that today make up the international credit union family.
Alan Parry, President of the World Council of Credit Unions, 1999
Traditional Responses to
Mutual-aid and wealth-sharing organisations are called different names in different
parts of the world. In China they are lin-hui; in Ethiopia, ekub and neklondi;
in Benin, ndjonu; in Egypt, gameya; in Sudan, sanduk; in Liberia
through to Zaire, esusu or osusu, sometimes cha and adish; in
South India, nidhis; in other parts of India they are referred to as chitty
or chit or chit funds. In Belize, they are syndicate; in Sri Lanka, cheetu;
in Lesotho and Cameroon, djanngi; in Jamaica, partner; in Tanzania, upatu;
in Uganda, kwegatta or chilemba (sometimes spelled chilimba), a name
also used in Malawi, Zambia and Zimbabwe; in Pakistan, bisi; in Thailand, len
chaer or bia huey; in Ireland, meitheal; in Japan, mujin, hootoku
and ko; in Nepal dhikuri; in the Philippines, paluwagan; and in
French-speaking Africa, Malaysia and Singapore tontine or kootu, the latter
a name also used by Tamil peoples. In Scotland, reciprocal loan groups were called menages,
and in England, slates. Some West African people call them sou sou, as they
do in Trinidad; in Indonesia they are called arisan uang (mapalus in North
Sulawesi); in Mexico and Puerto Rica, cundina or tanda; in Antigua, box;
in Guinea, boxi. Bahamians use the name asue; Koreans call them kei,kae or kye;
People have used these informal savings and lending associations for centuries to help
each other through difficult times, to educate children or to finance special occasions
such as weddings or funerals. They work in somewhat different ways around the globe, but
in their most common form, individuals who join the organisation make regular deposits to
the person responsible. Contributors can then borrow from the accumulated pool, typically
on a rotating basis, for such purposes as the purchase of consumer goods, the payment of
medical expenses or the construction of housing. For the most part, these organisations
meet the needs of their members or participants well, but, in their traditional forms,
they are also unregulated and transitory: typically, they last for only one season and are
used only when other ways to avoid disaster cannot be found. During the last 150 years
more formal and regulated structures in the form of credit unions have emerged across the
Why are Credit Unions organised? How are they created? How do they generally develop?
What are the common patterns in their development? What are their priorities? Do those
priorities change as they grow? What are the trends they tend to follow as they develop
There are no easy answers to these questions. The history of the international credit
union movement can be viewed from at least three broad perspectives that are not so much
competing frameworks as overlapping yet distinctive ways of understanding where credit
unions fit into the sweep of history. Those three perspectives are:
Credit Unions An
Credit unions can be seen as a form of organisation that is more culturally empowering
than it is culturally bound. This perspective emphasises the capacity of the credit union
(and co-operative) form of organisation to adapt to local circumstances and to be shaped
by them. It means that credit unions are essentially representative of local conditions:
that they are a flexible form of organisation animated by the needs, ambitions and
cultures of people around the world.
From this viewpoint credit unions become a malleable kind of institution that absorbs,
with unerring accuracy, that main trends in a steadily growing number of countries and
societies; it is more a matter of diversity than it is a North American or European
phenomenon writ large. This somewhat ahistorical perspective, most readily found outside
North America, encourages the pride that people in other countries have in their own
movements and helps to explain some of the unavoidable tensions within the international
movement. It also reflects in both obvious and subtle ways indigenous traditions of mutual
aid and self-help.
The Traditions of Banking
The history of credit unionism can be situated within the tradition of community-based
co-operative banking with roots customarily traced back to Germany in the middle of the 19th
century. From this perspective, credit unions are part of an international co-operative
movement that has typically found its strongest supporters in countries experiencing rapid
modernisation, particularly societies being transformed by industrialisation.
For over 150 years this kind of co-operative endeavour has grown steadily, albeit in
somewhat different forms around the globe. Its success is a remarkable testimony to the
efficacy of the co-operative approach to economic and social organisation, the capacity of
democracy (no matter how imperfectly practised) to operate in the marketplace, and the
ability of human beings to work together. The contemporary extent of this wide and diverse
kind of human activity suggests that credit unionists should reflect upon how associations
with this wider and historic family might be fostered and expanded; much of their future
may be inherent in their past.
The North American Background
The third perspective emphasises the North American background of the movement, a story
that emerges primarily from the United States and, to a lesser extent, Canada. Following
the pioneering work of Alphonse and Dorimene Desjardins in Quebec at the turn of the 20th
century, the movement spread to the United States where it gained remarkable strength,
initially serving the needs of working people and then other groups in society. Beginning
in the 1930s the movement spread to English-speaking Canada, which developed a
movement similar to the one that had emerged in the United States.
From an international perspective, the experiences and values of northern North America
essentially shaped the three movements. They were individually and collectively taken
outward from the two countries to many other parts of the world; in particular, the
experiences and leadership of the American movement did much to shape the movement around
The global expansion of credit unions, therefore, can be seen as an aspect of the rise
of North American society in the 20th century. Inevitably, it transmitted the
values and assumptions of that society even if, in some ways, it was critical of aspects
of life in the United States and Canada. In the curious way in which many co-operative
experiments are both critics and proponents of the societies in which they function, the
credit union movement carried much that was good but also much that was questionable from
the North American homelands.
This perspective on credit unions is most naturally held by North American credit
unionists, who are justifiably proud of what their movement has accomplished. They have
been anxious to share that experience and the lessons derived from it with
the rest of the world. At the same time, they have been insensitive to the different ways
in which credit unionism has been absorbed into other societies.
There is merit in remembering all three perspectives, even if they sometimes create
different understandings of what happened. As in the case of so much historical enquiry,
the best views are not found on only one mountaintop; rather they are found in trying to
make the best sense of what several perspectives reveal. The results of that kind of
enquiry can be awkward and less definitive than some would like, but they may provide a
more acceptable explanation for what has occurred.
Credit unions can be understood by thinking about how they operate within five spheres
of activities. The first, the way in which they relate to their members, is a complex and
changing sphere of activity, related to the size of the credit union, its stage of
development, the technology it employs, the nature of its management, and the amount of
resources it has available at any given time.
In their origins, most credit unions had a remarkably clear idea of membership: they
were ordinary people, for many years captured perfectly by the symbol of the
little man under the umbrella, protected from the rain of hard times, sickness and
financial distress by his credit union. As much as it represented protection, however,
the credit union idea also meant an affirmation of the capacity of ordinary people
to control and thus to shape, their own destiny.
In the original configuration of this idea, best associated with the work of Edward
Filene, Roy Bergengren and Moses Coady, the focus of credit union activity was the working
class, both urban and rural. The message to the members of that class made several points:
|thrift would ultimately permit more prosperity than could readily be appreciated;|
|the study of economics and the operation of credit unions was a significant form of
|the credit union movement was a form of education as much as a tool for economic
betterment; and people working together locally, regionally and internationally could
create a fairer world.|
As the years went by, the focus on the working class became somewhat blurred,
particularly in the more economically developed countries. The movement reached out to
many different kinds of people and some groups for example, those in the public
service and teaching had achieved economic stability, if not high financial status.
As a result, emancipation became narrower and more nuanced and credit unions sought out
more financial products that would help members better understand and manage their
own economic affairs. It was an important and often difficult transition.
Credit unions have deep and abiding connections to the communities in which they exist,
based upon bonds of association, which can be either closed or open. Closed
bonds refer to credit unions with membership restricted to those who work in a specific
organisation (private company or government department) or who belong to a specific church
or ethnic community. By their nature, these bonds promote a notion of community of
like-minded people who share a considerable portion of their lives in one way or other. As
a result, the webs holding their credit unions together can be strong and intricate,
especially since they are reinforced by the need to understand their members well in order
to extend credit.
The community credit union, with the looser bonds of open association, is based on
geography, often at a neighbourhood level when it begins. As they grow, such credit unions
tend to serve people in a town, even a city, and the role of community becomes less
clearly focussed, though not necessarily less important. Community credit unions rely for
their success upon vibrant communities, and, as social institutions, they usually
recognise a responsibility to enhance the lives of those who live within them.
Credit unions are organised under regulations provided by state, provincial or federal
governments. From the earliest period in American credit union history, credit unionists
have placed great emphasis on the importance of good legislation for at least four
|it defines the governance structure of credit unions;|
|it stipulates many of the relationships between credit unions and government officials;|
|it normally establishes the fiduciary responsibilities of directors; and |
|it often affects the taxation position credit unions enjoy.|
More subtly, credit unions are potential providers of all kinds of services, and many
consider them agents of economic and social change. Thus they have a need to be at least
well informed about government policies, and they need to be heard as governments and
their citizens seek to shape the future. They should not be simply organisations destined
to act as niche players in locations and circumstances that the really important financial
institutions leave unattended.
The fourth sphere of activity involves the ways in which credit unions associate with
each other at local, national and international levels. This has always been, and will
always be, a difficult issue for organisations built upon the principle of member control
and traditions of local responsibility. Without exception, every national movement has to
struggle regularly with the most effective way in which to organise its affairs. They have
to cope with differences caused by widely varying sizes of institutions, competing
managerial groups, cultural differences and, occasionally, political disagreements.
Similarly, national movements often found it challenging to work out appropriate
structures for continental or regional associations. Although desirable for both
philosophical and business reasons, unity requires continuous deliberation and conformity
with the general purposes of credit unions at the local level.
The continual search for better management practice is a pressing priority for credit
unions in all stages of their development; without careful attention to it, they will not
survive. In the early stages, the emphasis is on educating volunteer leaders so that they
can carry out their responsibilities in running financial institutions. The emphasis then
turns to training secretary-treasurers or managers and, subsequently, to the integration
of a series of financial specialists, such as accountants and professional lenders.
Management is always a vital sphere because it is central to how the contending
interests within a credit union are balanced. There will always be different priorities
for those who are essentially savers and those who are primarily borrowers. There will
always be a tension between democratic impulses and the need for efficiency, between
individual and community priorities, and between present needs and future requirements.
Accommodating these different interests becomes a perpetual challenge for credit unions,
and their success in meeting it is the true, best test of their efficacy as credit unions.
The management sphere is particularly complex, because it requires not only absorbing
the best practices followed by managers in private industry but also finding the
best ways to apply credit union/co-operative principles and methods. Nor is it a matter
simply for employed managers: it demands the attention of the elected leaders who, in ways
distinctive to co-operative structures, have their own responsibilities and
accountabilities. It also should reach out to members of credit unions they too
have their stewardship responsibilities.
Put another way, the sphere of management is particularly challenging because it is the
sphere within which the activities of the other spheres typically become concentrated on a
daily basis. Its further complexities can be seen when one realises that credit unions
typically are dominated by cultures that continually struggle within organisational
practices and structures, cultures that change as credit unions go through different
stages of development.
In addition to the three perspectives from which the history of the international
movement can be seen and the five spheres of activities in which they typically operate,
there are also three kinds of institutional cultures that typify the historical
development of credit unions. It is important to note, however, that there is no necessary
progression from one culture to another: individuals, credit unions and credit union
movements can choose their culture as long as the consequences of that decision are
clear, affordable and acceptable.
The Populist Culture
The first kind of culture first, because chronologically it tends to be first
can be referred to as populist. The term populist fits because it
refers to credit unions with deep commitments to the practice of direct democracy: the
kind of democracy historically associated with Athens, the democracy in which all citizens
are directly involved in all key decisions. An inevitable corollary of that emphasis is a
general suspicion of delegated democracy and domination by professionals.
Characteristically, populist credit unions evince an abiding commitment to their
communities, however that might be defined by geography, association or employment.
That emphasis means a strong commitment to the social dimensions of credit unions: support
for education, sponsoring of entertainment, concern for youth, and care of the
unfortunate. As for growth, the standard response from credit unions dominated by this
culture is the creation of new credit unions, usually serving small numbers of members.
The vitality of a populist institutional culture typically depends upon small groups of
enthusiasts who create the credit unions, attract the support of government, and develop
associations and institutions (typically leagues) geared essentially to the promotion and
support of new credit unions. They are deeply committed individuals, often greatly
influenced by religious or political beliefs that make them willing to undergo great
sacrifices for the movement.
In most instances, work within populist credit unions is exciting and invigorating,
particularly for those engaged from the beginning of the formative period. The challenges
and sacrifices inevitable in mobilising people, creating enthusiasm, struggling against
adversity, and meeting the specific and pressing needs of particularly deserving members
create the traditions which often later sustain the movement.
Credit unions steeped in the populist culture almost invariably emphasis their capacity
to emancipate the little man from the bondage of economic deprivation; it is an
emphasis that adds an abiding emotional dimension to the movement. It creates a powerful
vision that is not necessarily just a passing phase: several credit union movements, most
notably in Ireland, Sri Lanka and the Philippines, retained their populist perspectives
even when their movements became large and sophisticated. Smaller closed-bond credit
unions, even in the most market sensitive environments, frequently retain a deep sense of
member ownership and responsibility; they often rely extensively upon volunteer labour.
The Managerial Culture
The second kind of applies to credit unions in which managerial issues dominate the
operations and purposes of the organisation. Almost invariably, credit unions reflecting
this culture place increased emphasis on the managerial sphere of their activities. In
fact, unless the members, elected leaders and managers are careful, credit unions caught
up in managerial pre-occupations can ignore their commitments to help members, as opposed
to turning them into customers to be manipulated they can forget the communities
that once gave the organisation meaning and focus.
The emergence of strong managerial groups in credit unions also tends to create issues
around leadership, resource allocation and voting structures within central organisations,
such as leagues and centrals, issues that often prove to be particularly divisive, even
debilitating. Ultimately, too, the increased emphasis on the managerial sphere challenges
original assumptions about democracy and requires innovative thought and action that
conform with the basic values upon which credit unions, like all co-operatives, should be
The Structuralist Culture
The third kind of culture refers to credit union organisations that are strongly
committed to the growing integration of credit unions within state, provincial, national,
regional and international structures. While this goal is always present within credit
union movements, it is a culture that frequently competes with the values of populist and
managerial cultures; indeed, those struggles underlie many of the continuing tensions and
issues in movements across the globe.
The problem of how best to create a culture that fosters the national, regional and
international integration of credit unions has bedevilled leaders for generations. The
issue in the past has generally been how to create structures that are cost effective,
will meet the needs of different kinds of credit unions, and can enlist the support of
leaders who often do not work together easily.
The issue, as the 21st century approaches, is how best to construct an
international movement, enlisting the support of similar organisations, so that financial
services based on democratic control can survive in an age when technology and capital
concentrate power, even more than in the past, in the hands of the few.
There are at least three stages through which credit union movements typically develop.
The Formative Stage
During the earliest stages of their development, credit unions have to rely upon the
support of patrons, other institutions, government departments or funding agencies;
despite common mythologies, they are rarely able exclusively to pull themselves up by
their own bootstraps. They also have to utilise networks provided by such institutions
and groups as churches, farmer organisations, other co-operatives, trade unions and
The organising networks provide the means whereby movements reach out to communities of
people already drawn together for a purpose. They can also provide leaders with legitimacy
in communities and among their peers; legitimacy is essential in the development of any
financial institution, but especially one built on common bonds.
In time, through, these networks can inhibit development once credit unions are up and
running. In many instances, the leaders provided by the networks may have a very specific
set of goals, and they can also tend to be paternalistic, depending upon their motivation.
The result is that the necessary managerial and technical changes may be inhibited by the founders:
revered individuals who have made great contributions but who, as they age and the
institution they helped found develops, may hold back necessary change and new generations
During the formative stages, credit unions do have a limited set of needs that can be
met by central organisations. They require education and training programmes, public
education or promotion, lobbying of government to secure good legislation, some
inter-lending activities, the provision of insurance services and the procurement of
inexpensive supplies. Typically, therefore, credit unions with populist cultures tend to
very common within movements in the formative stage of development.
The National Stage
The second stage of development occurs as credit union movements from state, provincial
and national organisations. It is the result of increasing sophistication among a
significant number of credit unions. The existing state, provincial and national
institutions are required to undertake more activities related to the expanding economic
activities of the credit unions; typically, these new or enhanced activities are related
to changing technological requirements, more complicated and riskier lending practices,
new financial products, enhanced marketing programmes, and higher degrees of
This transition usually brings about periods of intense debate over such issues of
funding formulae, control systems, the roles of members and volunteers, relationships
among different sizes and types of credit unions and, a frequent by-product of all the
others, managerial competence. On occasion it can lead to serious fragmentation: the
creation of rival groups of credit unions, and credit unionists. To some extent, the
debate can be seen as the result of differences of opinion between credit unions steeped
in populist cultures and those exhibiting the characteristics of managerial cultures.
The second stage of credit union development, however, is a particularly creative
stage. Normally, it is the time when credit unions reach out to larger constituencies,
provide more services to their members, and begin to have a significant impact on the
The International Stage
It is a paradox but an understandable one that international
organisations, which may be seen as the top of the hierarchy, have the most difficulty in
gaining authority and influence. A simple explanation is that credit unions, like other
co-operatives, have a primary commitment to local communities and groups: they delegate
sparingly and question authority regularly.
Thus, although internationalism has been evident in the history of credit unionism from
its beginnings, and a universal view is deeply entrenched in credit union
co-operative thought, the road toward a strong international presence has been long, slow
and arduous. In fact, it is a stage that arguably is just beginning; in an age when the
concept of globalisation has a particular resonance, it will surely reshape the credit
A Peoples Movement
Three different perspectives, five spheres of activity, three institutional cultures,
three stages of development such are the warp and woof of credit union history. The
colours and patterns, however, flow from the efforts and convictions of people struggling
to control their economic destiny. The details and texture of the history result from the
specific realities that pre-occupy ordinary people; not even in credit unions whose size
and sophistication may delude their leaders into thinking they do not have to listen to
their members can that connection be completely severed.
In the final analysis, credit unions are a movement of and for the
people, or they have little reason for being. Amid all the perspectives, spheres
of activity, institutional cultures and stages of development, there must be a continuity
of values and purpose. There is a set of responsibilities and a particular kind of dignity
that emanate from that simple fact.
This paper is an edited version of the introductory chapter to Ian MacPhersons
splendid history of the international credit movement.
- Hands Around the Globe A History of the International Credit Union Movement
and the Role and Development of the World Council of Credit Unions, Inc.
- Horsdal and Schubart Publishers Ltd, Victoria, BC, Canada, 1999
- ISBN 0 920663 67 2
For a details on how to purchase a copy of the book and/or obtain further information
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