Credit unions are defined as not-for-profit cooperative institutions. It
is owned and controlled by its members and operated for the purpose of
providing credit at reasonable rates, sponsoring thrift and providing
other financial services to its members. Many credit unions exist to
further community development or sustainable international development
on a local level.
Credit unions usually have smaller assets in comparison to a
conventional bank. A bank is owned by stockholders but a credit union is
more of its democratic sister which is managed by its members and a
Board of Directors. Credit unions have unusual organizational
composition. They attempt to decipher the principal-agent problem by
ensuring that the owners and the users of the institution are the same
people. This brings in more transparency, control and better usage of
funds.
As credit union are not meant to gain profits and are owned by the
members they usually have a tradition of providing better interest rates
to their members. If you believe in re-investment then you can reinvest
your money to gain further cumulative profits.
Though a credit union sounds exciting and brings all thoughts fostering
profitable growth in funds, getting into one is not a cake walk. A
credit union is regulated under the law that it has to restrict it
members to certain demographic regions. A credit union can comprise of
people working for a same company or it may be restricted to a specific
organization. But on a positive side, a credit union usually provides a
lifetime membership to the members even after a member ceases all
qualifications of being one.History and development of credit unions
in Australia
Credit unions have been a proud tradition of the growing economy of
Australia. Self-help is the best help, this phrase served as the
foundation stone of the union and credit unions were born with values,
traditions and practices as thriving forces. October, 1946 in Australia
witnessed the birth of the first credit union, under the leadership of
Kevin Yates who officially introduced Universal Credit Union to all its
members. Slowly the Australians realised the potential of these unions
and with the dawn of 1950s, approximately 50 such credit unions were
registered in New South Wales.
Credit unions reaped benefits for Australia economy and played a
significant role in 1960 by being the first to process payroll
deductions for its members. They have now been awarded the same
regulatory status as banks in the country reporting under the same
regulator.
The credit unions are now under the regulation of the Australian
Prudential Regulation Authority (APRA), regulated under the Federal
Banking Act. In 2000, credit unions moved to full Corporations Act
coverage under Federal Law.
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