Credit unions or savings co-operatives are non-profit, democratic institutions aimed at helping members who own and control them.
The co-operatives are owned and governed by their members who have a common bond, such as the same employer, church, labour union, social fraternity or community.
Generally, members agree to save money in the co-operative and to make loans to each other at reasonable interest rates. The members are the owners and decide how to use their money for the benefit of each other.
The advantages:
* Interest rates on both savings and loans are generally better than rates given by banks;
* They encourage members to save and achieve financial goals;
* They educate members to handle money prudently, teaching them to keep track of finances, to budget and to get out of debt; and
* Established, profitable co-operatives may pay dividends on shares to their members.
Savings and credit co-operatives first appeared in Germany in the 1870s. The idea moved to North America in 1900, with European immigration. Canada, the United States, Australia and Ireland have the most established movements. In many regions of these countries, savings and credit co-operatives are much larger than the commercial banks.
In Africa, 28 countries have established credit unions. In 1993, the Savings and Credit Co-operative League of South Africa (Saccol) was established as a national association, to help with the development of savings and credit co-operatives, through training and technical services, as well as by accepting deposits from and making loans to members.
The league is owned and controlled by its member co-operatives who elect its board and committees. The South African Reserve Bank recognises the league as the representative of savings and credit co-operatives in South Africa. Provided co-operatives abide by the rules of the league, they are exempt from the Banks Act regulations.
South Africa is also a member of the African Confederation of Savings and Credit Co-operatives, which, together with 86 countries and seven regions worldwide, makes up the World Council of Credit Unions. There are more than 65 000 savings and credit co-operatives worldwide, with a membership of more than 90 million people.