1.2 Credit Unions | Crédit Agricole, France

Credit unions and coöperative banks also have a long history dedicated to the welfare of their member accountholders. They too share in a form of democratic governance and mutualism⁵³: typically, any account holder may become a member, will receive shares, and will have one vote regardless of the number of shares they have.⁵⁴ The ownership rights thus stem only from membership, not from the number of shares, which lowers the potential for takeovers. The bank’s equity consists of those shares. The ambition of these unions is to promote the well-being of their members, rather than to maximize profit, since the business is not run for profit.⁵⁵

Historically, there have been different models of coöperative banking, including coöperative banks, credit unions, and building societies.⁵⁶ Coöperative banks started as a result of social movements during the 1850s, especially in Germany, and evolved along different lines.⁵⁷ One model, known as the Schulze-Delitzsch model of coöperative credit or a “People’s Bank,” uses a general assembly as its main body for governance, allows for the election of executives and control entities, and pays members dividends derived from operating profits.⁵⁸ A second model, the Raiffeisen model, was adapted from the first model for more rural conditions and aimed to “render social co-living more harmonious.”⁵⁹ Both models took on the form of “credit unions” in the United States and Canada. Building societies in the United Kingdom were initially meant to be “terminating”—in the sense that they would serve to finance housing among a group of members, but then dissolve; but these societies grew to be permanent with additional services offered to customers. In the United States, “building societies” took on the form of “savings and loans.” Today, savings and loans hold about $209 billion in assets and supplement the larger credit union sector.⁶⁰

In the United States, credit unions developed in the early twentieth century, with federal laws enabling their formation in 1934. They thrived in part by surviving the Great Depression and the financial crises of the 1980s, and they now have over 100 million members.⁶¹ By contrast to European credit unions, those in the United States tend to only do business with members and are focused on consumer lending.⁶²

One of the reasons that coöperative banking is so robust is that it often works hand-in-hand with coöperative enterprises. International Raiffeisen Union estimates that over 900,000 coöperatives with over 500 million members in over 100 countries are working using coöperative banking principles.⁶³ Rabobank in the Netherlands, for instance, the largest agricultural bank in the world, reaches 50% of Dutch citizens and is rated the world’s third safest bank (as per 2009).⁶⁴

The potential of credit unions is illustrated well by the Crédit Agricole Group in France, one of the country’s leading banking institution. The Crédit Agricole Group is composed of 39 regional coöperative banks that together serve over 21 million customers and 9.3 million member-clients.⁶⁵ This represented, in 2018, 23.3% of French household deposits or total assets of 1.7 trillion Euros.⁶⁶

Crédit Agricole began in 1885, as a local initiative, with the creation of the Société de Crédit Agricole de l’arrondissement de Poligny.⁶⁷ The year before, the French government had passed the Act of 1884, legalizing farming coöperatives as authorized professional associations in response to farmers having trouble accessing credit. A decade later, the Act of November 1894 allowed the creation of local agricultural banks by members of farm coöperatives. These ultimately “formed the foundation of the institutional ‘pyramid’ created by Crédit Agricole.”⁶⁸ The next layer, regional banks, were authorized by an Act in 1899 that helped enable the Banque de France to supply funds to farmer coöperatives. In the aftermath of World War I, another piece of legislation, the Act of August 1920, created the “Caisse Nationale de Crédit Agricole” (CNCA) (renamed as such in 1926) to act as a central clearing organization for the regional banks. Crédit Agricole became self-financing in 1963 after creating a dense nationwide network and raising funds though notes and long-term bonds.⁶⁹ In 1988, Crédit Agricole Regional Banks bought the CNCA and transformed the entity into a limited liability company, completely independent of the state. More recently, the CNCA (the central clearing house) was listed on the stock exchange in 2001, resulting in a hybrid entity now that accompanies the 39 fully coöperative banks.⁷⁰

Today, after the public listing of the CNCA, the Crédit Agricole Group is a complex organization, but one that is essentially run by the 39 regional coöperatives that have the majority stake in the total enterprise.⁷¹ This hybrid model, in which the regional coöperatives own 54% of the entity, allows for the raising of some capital, while maintaining the credit union’s ethical values as a coöperative. Crédit Agricole, for instance, has vowed not to sell its members’ data and to “not operate in countries that do not exchange fiscal information to avoid tax evasion.”⁷²

Credit unions differ from speculative banks and offer “real benefit for members who are represented in governance structures.”⁷³ As member-owned, they can care less about profits and more about maintaining market share—which is reflected in the fact that mutual banks maintain three-fifths of the banking market in France.⁷⁴