The History of Credit Unions

By Leeds Credit Union

International Credit Union Day (ICU Day) takes place annually on the third Thursday of October, with the next installment scheduled for October 21st, 2021. First established in 1948, ICU Day's aim is to make more people aware of the work carried out by credit unions around the world and the benefits they deliver.

But when, where and why was the first credit union established? And what do credit unions really do? Let's take a look.

What is a credit union?

A credit union is essentially a bank which is controlled by its members and operates on a not-for-profit basis. This means that, unlike commercial banks which are either privately owned or publicly traded, credit unions typically offer their members lower rates on loans, fewer - and lower - fees and higher annual percentage yields on their savings products.

Like commercial banks, credit unions offer financial services to its customers, such as access to loans, savings accounts and expert advice. Credit unions vary in size and can have anything from a handful of members to hundreds of thousands of them. There are more than 230 million credit union members worldwide, with approximately 1.3 million in the UK alone.

Unlike commercial banks, credit unions don't pay a fixed rate of interest on savings balances, allowing them to distribute any profits to members as an annual dividend or as a rebate of loan interest already paid. As a result, credit unions are regarded as being community oriented and prioritising people over profit.

How did they first come about?

The first credit union - known as The Household Association - was founded in Slovakia in 1845 to provide cheaper loans to its members. Joining a credit union was very different in the 19th century, with prospective members only being permitted to join if they agreed to live a 'moral life' and plant two trees in a public place every year!

Despite only existing for six years - until 1851 - The Household Association proved hugely popular and was credited with helping 'rescue people in Slovakia from evil and misery'.

In 1852, the credit union baton was passed to Franz Hermann Schulze-Delitzsch, an economist and politician from Germany, who established two credit unions in the Saxony region. By 1859, Schulze-Delitzsch had opened more than 200 credit unions across Germany. Satisfied with the rapid progress, in 1867 he turned his hand to enshrining legislation in the German constitution which ensured struggling tradesmen in the country would always have access to capital through credit unions.

At the time of his death in 1883, there were more than 3,500 credit union branches in Germany, while the system was also becoming established in Russia, Italy, Belgium and Austria. By 1888, credit unions had spread further still, to countries including England, France and the Netherlands. Schulze-Delitzsch's work was considered so important, it even received a mention in Leo Tolstoy's classic novel, Anna Karenina.

What about Leeds Credit Union?

We're glad you asked! 

Leeds Credit Union was established in Leeds in 1987 as the Leeds Council Employees Credit Union, where we offered savings and loans to local authority staff. We opened our doors to everyone living or working in the local authority area in 1997.

Leeds Credit Union has six branches across Leeds and two more in Wakefield - an area we've covered since 2014 - as well as two 'Your Loan Shop' outlets. Our services are also available to individuals living or working in Harrogate, as well as staff of certain other employers and housing associations.

Since 2009, we've been established as the UK's largest credit union with more than 35,000 members, having merged with several smaller local credit unions, the most recent of which was in September 2021. We've also partnered with Leeds City Council to tackle empty homes and, by offering lower interest rates than many other lenders, we've saved our members millions of pounds over the years.

Join the UK's biggest credit union today

At Leeds Credit Union, we're committed to helping our members become as financially stable as possible. To find out if you're eligible to join, click here.