International Credit Union Day 2021: What are credit unions and how they are important to the economy

The International Credit Union Day is marked on the third Thursday of October annually. This year, the day will be observed on 21 October to create awareness about the importance of credit unions and other financial cooperatives as well as the work they are performing. This year will mark the 73rd International Credit Union Day, according to the World Council of Credit Unions (WOCCU). The theme of the celebrations this year is “Building financial health for a brighter tomorrow". What are credit unions and why they are important? Credit unions are member-owned organisations that offer many of the same services as a bank. The unions offer attractive interest rates on loans and credit cards to their members. The fees and rates are designed to benefit members, who each get a say in how the union is run. The profits of the credit unions are channelled back to the members in the form of higher rates on saving accounts, lower fees, and interest rate discounts. The unions enable members to have an alternative to national banks on terms that are profitable to them. In India, cooperative banks perform many of the functions of credit unions. The country has around 1,935 credit unions with 91,077,299 members, according to data by the WOCCU. Importance of credit unions: Cooperative banks give significant financial support to the country’s rural sector. The concept of providing loans to members has also been an intrinsic part of Self-Help Groups (SHGs). Cooperative banks in the country have been struggling for the past few years, according to the Times of India. According to data by the Reserve Bank of India, Urban Cooperative Banks (UCB) have seen a sharp decline in deposits and loans. Deposits in UCBs have declined to 3.5 percent in 2019-20 from 6.1 percent in 2018-19. Loans have also fallen to 0.8 percent in 2018-19 from 8 percent in 2019-20. History of credit unions: The concept of credit unions was started from cooperative activities in early 19th century Europe. The Credit Union League of Massachusetts officially celebrated the first holiday for workers and credit union members on 17 January 1927. However, the effort was short-lived and the day was soon forgotten. The first International Credit Union Day was initiated by the Credit Union National Association (CUNA) of the US. Since then, the day has been observed globally with seminars, gatherings, and public involvement around the world.