Finance in an Age of Austerity

Finance in an Age of Austerity

The Power of Customer-owned Banks

Johnston Birchall

This is a book in search of an alternative to the discredited investor-owned banks that have brought the rich countries into crisis and the world economy into a long period of austerity. It finds customer-owned banks – credit unions, co-operative banks, building societies – have hardly been affected by the crisis and continue to operate according to their organisational DNA: low-risk, close to the customer, underpinned by real savings, and still lending to SMEs to protect jobs and local economies. They are big business – in some countries with over 40% of the market – but networked in smaller, democratic societies whose origins go back to 1850s Germany.

Chapter 3: The evolution of credit unions

Johnston Birchall

Subjects: business and management, corporate governance, social entrepreneurship, development studies, social entrepreneurship, economics and finance, corporate governance, money and banking, politics and public policy, social entrepreneurship


There is a particularly acute collective action problem in relation to cooperative banks. They are costly to set up, requiring much dedicated time and effort, the learning of new skills and the building up of trust among large numbers of people. It also helps to have rich supporters who can invest the start-up capital. As in Europe, so in America, it took specialist promotion by individuals who were strongly motivated and well connected, such as Alphonse Desjardins in French-speaking Canada and Edward Filene in the USA.

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