A Historical Perspective to Australian Credit Unions

The Modern Credit Union is the result of the evolution and adaptation of model cooperative credit societies formed in Germany over 130 years ago. The pioneers in the genesis of these organisations were: Friederich Raiffeisen (1818-1888), Hermann Schulze-Delitzsch (1808-1883) and Wilhelm Haas (1839-1913).

The farmer's liberation and the beginning of industrialisation of the 19th Century gave people in rural areas of Germany a hitherto unknown economic mobility and autonomy. Free trade was beginning to gain a foothold and the feudal system was gradually coming to an end. Economic progress began to have its effects, and with it came growing industrialisation, increasing 'monetarisation' and, as a result, increasing competition.

In many quarters, particularly among small and medium-sized enterprises, people were fighting for survival. Artisans and farmers also needed loans to keep going against the pressure of competition, particularly from the new world where countries like the United States began to export large quantities of farm produce to Europe, and local prices dropped dramatically.

Farmers were generally not considered suitable as customers by the established banks and most often became dependent on private moneylenders. Even where small sums were involved, many small enterprises ran the risk of losing their financial independence.

These conditions generated the birth and development of two parallel Movements in Germany. Credit Unions were developed by Herman Schulze-Delitzsch among the small business proprietors and artisans in urban Germany with the first of his Credit Unions opening in 1850.

While this was happening in the cities and large towns, another German Frederick Raiffeisen1, established the Society for Bread & Grain Supply. He had flour bought with the help of private donations. Bread was baked in a self-built bake-house and distributed on credit to the poorest among the population.

The Bread Society as well as the Aid Society founded in 1849 at Flammersfeld and the Benevolent Society created in 1854 at Heddesdorf were pre-cooperative societies based on the principle of benevolent assistance.

Raiffeisen quickly realised that they brought no lasting benefit, and that people sank back into their old shiftlessness and dependence on the merchant-usurer. He came to the conclusion that, first, the peasant farmers must learn to help themselves and, secondly, that they could never do so until they were free from debt and able to start afresh with some source of capital that was not conditioned on the principles of usury.

Consequently, in 1864, he transformed the Benevolent Society into the Heddesdorf Thrift and Loan Society. This Society is generally believed to be the first rural based Credit Union.

While one Credit Union Group was urban and the other rural each had, as its basis, an almost identical underlying ideology and methodology and they eventually merged into one group. These German movements rapidly crossed international borders.

While small Credit Cooperatives or Mutual Societies have existed in Australia since the middle of the 19th Century, Credit Unions did not appear here until after World War II. Prominent among the early credit cooperatives were the Societies set up by the Antigonish movement. Such Societies were motivated more by a social justice ethic and less commercially oriented than the contemporary Australian Credit Union.

In 1946 a former Member of the Air Force, Kevin Yeats, who had served as a fighter pilot during World War II, returned to Australia with first hand experience of Cooperative Credit organisations operating in Germany, USA and, most particularly, Canada.

Thus it was Yeats who introduced the current Credit Union concept (along Canadian lines), although these first entities were apparently then known as Savings and Loans Cooperatives. The terminology changed to Credit Union in the 1960s.

Although the terminology Credit Union is used to label these organisations in Australia, they in fact have many of the hallmarks of the Raiffeisen and Schulze-Delitzsch Societies of Europe.

The U.S. Credit Unions were based almost entirely around industrial workers' groups whereas, in Australia, there is a more diverse spread. Credit Unions here are based on rural communities, regional & urban residential communities as well as occupational industries. Urban and rural small businesses are also catered for within the Membership Common Bond of a great number of our Credit Unions.

This represented an early hurdle for our Credit Union. While the European Credit Unions lent solely to small business proprietors [farming or city based] the U.S.A Credit Unions lent only for consumer purposes. The Regulators in the Australian States looked to the U.S. and consequently tried to suppress all commercial lending by Australian Credit Unions.