CREDIT UNIONS Meaning and
Definition
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Credit unions are member-owned financial cooperatives that offer a variety of banking services to their members. These institutions are not-for-profit organizations and are focused on serving the needs of their members rather than generating profits for shareholders. Credit unions are different from traditional banks and other financial institutions in that they are owned and governed by their members, who have equal voting rights regardless of the amount of money they have invested.
Members of credit unions share a common bond, often based on their employment, place of worship, or geographic location. By pooling their resources, credit union members can provide affordable financial products and services to each other. These services may include savings accounts, checking accounts, loans, credit cards, and other financial products.
Credit unions are known for their personalized service and a strong sense of community. Since they are owned by their members, decisions are made in the best interest of the members rather than external shareholders. They strive to provide competitive interest rates on loans and savings, lower fees, and higher dividends on savings accounts.
Credit unions are regulated by government entities such as the National Credit Union Administration (NCUA) in the United States, ensuring that they operate in a safe and sound manner and offer consumer protections. They are an essential part of the financial industry, providing an alternative to traditional banking and promoting financial inclusion.
Etymology of CREDIT UNIONS
The word "credit union" has its origins in Latin and English. The term "credit" comes from the Latin word "creditum", which means "loan" or "trust". The word "union" is derived from the Old French term "union" and the Latin word "unio", both meaning "unity" or "joining together".
In the context of finance, the concept of credit unions emerged in the mid-19th century. Friedrich Wilhelm Raiffeisen, a German mayor and cooperative pioneer, is often regarded as the founder of the modern credit union movement. He established the "first practical credit institution" in 1864, based on the principles of self-help, mutual aid, and collective responsibility.
The term "credit union" became widely used to describe financial cooperatives that followed a similar model, offering financial services to their members while promoting thrift, mutual assistance, and community development.
