IRC

RURAL CREDIT IN NORTH CAROLINA

by Gabriel Kirkpatrick, CUNA Archivist

For the farmer who needed credit in the rural South in the early years of this century, the alternatives were dismal. Few banks would even consider making agricultural loans, and those who did charged extremely high interest rates. Rural credit was fertile ground for the loan sharks, and year after year, farmers turned over their crops to help pay exorbitant interest charges on loans made to keep their farms operating. Should a crop fail, the chances of a farmer extricating himself and his family from a loan shark’s clutches were virtually non-existent.

In 1910, that situation began to change. Through the efforts of the Southern Commercial Congress, convened in Nashville, Tennessee in 1910, the need for agricultural credit became an issue of national interest. President William H. Taft responded to the need by enlisting the assistance of American diplomats to collect information on European agricultural credit. Myron T. Herrick, American ambassador to France, sent Taft a lengthy report on cooperative credit associations in Germany, Belgium and Italy and proposed that the United States consider establishing similar societies in rural districts. He pointed out that the Massachusetts Credit Union Act already enabled the organization of credit unions and urged the president to encourage other states to pass similar legislation.

On December 7, 1912, Taft called a White House Governors’ Conference at which legislation for forming rural credit societies was discussed. Taft also appointed a Committee to Investigate Rural Credit in Europe and chose 100 delegates to conduct the study. Among the delegates was John Sprunt Hill of North Carolina. With other members of the committee, he studied rural credit societies in seven European countries where the Raiffeissen societies seemed to him to be most significant. He was particularly impressed with Raiffeisen’s effort to alleviate the farmers’ plight during the famine years in the late 1840s through cooperation. Hill returned to North Carolina convinced that farmers in that state could benefit immensely from credit unions.

Hill wrote most of the McRae Credit Union Bill which was submitted to the state legislature in 1915 and passed by unanimous vote in the General Assembly on March 6. The legislature recommended that the State Credit Union Division be placed under the Department of Agriculture and even appropriated funds to pay expenses of someone to establish rural credit unions in the state.

Hill was excited about organizing credit unions. His first effort occurred in Lowe’s Grove, a rural community in Durham County. On December 9, 1915, he spoke to farmers meeting at the Farm Life School and urged them to consider forming a credit union. Next, he went to Mecklenberg County to deliver his compelling message:

"The first step in bringing back into a state of cultivation the millions of farmlands in North Carolina is organized credit for the farmers. The first step in bringing back some of the comforts and pleasures of life is organized credit. The first step in lifting the oppression of the usurer from the neck of our country folk is organized credit."

On January 20, 1916, farmers in Lowe’s Grove formed the first credit union in the state. This first success opened the way to the organization of credit unions in Durham and Mecklenberg Counties, and within a few years, in the other counties in rural North Carolina.

“Credit union membership is a certificate of character,” declared Hill, “and a badge of honor. Let a person stay in a credit union for ten years, and it changes his whole philosophy of life -- it is a modern miracle. Credit unions are the soundest financial institutions in the world.”

Education became a vital key to reaching both rural and urban groups about credit unions. It sometimes seemed a slow process, but a strong foundation was being laid. By 1920, 43 credit unions had been organized in North Carolina, and about half of them had failed. Nonetheless, their presence was making significant changes in rural credits in the state. The self-help principles of credit unions led farmers and others in North Carolina to try other cooperative enterprises, including supply stores and group fire insurance. It is important to note that nearly as many rural credit unions were formed by African Americans as were formed by groups of white farmers in the state, and many of the African-American credit unions also encouraged joint purchasing cooperatives.

Credit unionism spread to the urban areas of North Carolina as well. Hubert M. Rhodes, an employee at the Raleigh post office, organized the first postal credit union in the state. Rhodes became one of the credit union’s officers and eventually served as one of the founders of the North Carolina Credit Union League and one of the original directors of CUNA. Roy Bergengren found Rhodes’ services invaluable in spreading the credit union word throughout the Southeast.

The problem of educating and training credit union directors in the state continued to plague the leaders. John Sprunt Hill decided to finance the organization of the North Carolina Credit Union Association. He hired Harriet M. Berry as secretary, and with the cooperation of the State Department of Agriculture, the Association began providing assistance to credit unions in 1924. Harriet Berry eventually became a “field secretary,” stumping the state to organize and speak on credit unions.

The work of the Association and the efforts of organizers like Hill, Berry and Rhodes culminated in the formation of the North Carolina Credit Union League on September 22, 1934. Rural and urban areas of the state alike had finally found a significant alternative to the loan shark. “The strength of a credit union is like that of a twisted rope,” said John Sprunt Hill in 1915, “. . . many times stronger than the small threads that compose it.”

Copyright © 2009 - Credit Union National Association, Inc.