International Credit Union Day, What is a Credit Union?
The credit union idea was developed when there was that wealthy master and those poor people, when poverty and slavery were a thing. The typical story was that a poor farmers with a little land and house would borrow from the rich master who charged huge amount of interests that they know the poor may not be able to afford, then they take over their little farm and house, making them their slaves. I'm sure that is not a new story to you.
The credit union ideology was formed on that base, the farmers put together what they could in a saving pot and when a saving member needed extra money they either took out from their savings or borrowed from the credit union.
Today, credit unions' job hasn't changed. In UK, the role of credit unions are limited to saving and borrowing, we are bond to specific geographical areas and serve smaller communities. In the US, for example, credit unions are helping people buying houses with mortgages and even support businesses. They grew fastest in the world and I think we should learn from them.
Understanding how important to have a credit union for our economy will change how we look at money. The basic ideology of the credit union is that community financing themselves and avoiding paying too much, unnecessarily, to payday lenders with 100s or 1000s of APR%.
Why credit unions are cheaper? They are not-for-profit, which means our income is only the interest we collect, there are no other fees; such as admin fees, early repayment penalties, etc. The interest collected is enough to cover operational expenses, but also able to pay dividends so far (depends on the performance of that financial year). It means, more loans we give out, more interest we get paid, more money is made. That money is the community money, the members' money who are saving together to create the credit union. It's your and my money with no CEO to tell us what to do with it!
Imagine if credit unions are able to support more in our community? Like providing mortgages schemes for its members. That is possible if we all shift our mind set from relying on profit based saving to community building saving. Because the bigger the credit unions are, the more control we have over our community and louder our voice will be.
Happy International Day to all credit unions!