Credit unions are a growing and important part of the global financial system. The history of the credit union movement is summarized and the characteristics making credit unions different from banks are presented. Boards of directors of these organizations are also different and need to be better understood, particularly given the state of the financial services industry worldwide. The research is reviewed on board member involvement generally and on credit unions in particular. Some of the research opportunities proposed herein include: differences between credit union boards and for profit boards; board member background and competence; board involvement in planning and environmental scanning relative to credit union performance; and board involvement and orientation toward social responsibility and ethics. Scholarly investigation of the topics presented would improve understanding of these boards and suggest ways to enhance their effectiveness.
Credit Union Movement
A credit union today is a cooperative form of business which provides financial services and products as would a traditional bank. Various kinds of cooperatives first developed in Western Europe in the early nineteenth century. These developments were in response to the changing economic system, particularly the decline of feudalism, and related societal changes. As the industrial revolution took hold in towns and villages, the protections that the guild system offered from competition began to diminish with the advent of factory produced goods. In response to these changes and pressures farmers, shopkeepers, skilled craftsmen, and small producers began to engage in cooperative economic endeavors and organizations (Moody & Fite, 1984).
To fill borrowers' needs, money lenders and banking have been in existence since ancient times. The first practical people's bank or cooperative credit society or loan union, as they were variously called, was created in Germany by Herman Schulze-Delitzsck. Loans were made for business rather than consumer purposes, and were made on the basis of the person's character rather than their collateral. The other prominent figure in the peoples' bank movement was Friedrick Wilhem Raaffeisen. He created people's banks for farmers to help them buy seed, livestock, farm machinery, and land. (Moody & Fite, 1984). By the 1880's these cooperative credit societies had spread throughout Europe.
The credit union movement was begun in the U.S. by Edward Albert Filene, a Boston Massachusetts department store owner. In 1909 the first state law defining and enabling credit unions was passed in New Hampshire and the second, with Filene's support, was passed nine days later in Massachusetts. Each U.S. state by 1910 had its first credit union (Moody & Fite, 1984). Filene also founded a credit union and later an agency which would go on to support the entire credit union movement.
By 1932 there were 1700 credit unions and most states had passed enabling legislation for state chartered credit unions. The Federal Credit Union Act was enacted in 1934 which would allow for federally charted credit unions. Later that year the Credit Union National Association (CUNA) was established to support credit unions and promote the movement in the U.S. as their umbrella trade association. In 1970 the World Council of Credit Unions (WOCCU) was formed to provide guidance and support to credit unions around the globe.
The WOCCU is the global trade and development association for credit unions which promotes the creation and sustainability of credit unions worldwide. The mission is to improve people's lives through access to high quality and affordable financial services. It advocates for the global credit union system before international organizations and national governments for enabling legislation and protective regulation. Technical assistance programs exist to provide techniques and technology to enhance credit unions' financial performance, management, and outreach. …