Financial mutuals are self help organisations that generally engage in deposit taking and lending to their members, and include building societies, credit unions and a number of friendly societies. In Australia, they are commonly referred to as Non Bank Lenders.

Australian financial mutuals are subject to the same rules, regulations and legal standards as banks. They are Authorised Deposit-Taking Institutions regulated under the Banking Act by the Australian Prudential Regulation Authority (APRA), and are incorporated under the federal Corporations Act. (Non financial co-operatives are incorporated under state co-operatives legislation.)

While today's building societies, credit unions and a number of friendly societies offer similiar services, their original purpose differed markedly. Friendly societies began in Australia in the 1830's as social and welfare organisations. Building societies first appeared in Australia in the 1840's, and until recent times, where primarily small regional home lenders. Credit unions appeared after World War 2 offering consumer banking services.

Since financial deregulation in the 1980's, the number of financial mutuals in Australia has progressively decreased, either through mergers with each other or demutualising and converting to a bank. Today, there are around 170 financial mutuals left in Australia.

Building societies
Credit unions
Co-operative housing societies
Friendly societies

BUILDING SOCIETIES

Building societies offer a range of financial services to the housing finance market. They operate in much the same manner as banks in that their members enjoy integrated financial services such as home loans, saving accounts, cheque accounts, credit card access and financial planning and investment services.

Building societies have their roots in the self-help movement which evolved in England towards the end of 18th century. They first appeared in Australia in the late 1840's and for the next 100 years, were relatively small regional financial institutions. From 1950 - 1970, the high demand for home ownership saw a rapid expansion of the number of building societies, peaking at 178 in 1975. Since the deregulation of the banking industry in the 1980's, many building societies have converted to banks or merged. There are 14 building societies left in Australia as at December 2007.

Further information:   Abacus Australian Mutuals

CREDIT UNIONS

A credit union is a savings and loan co-operative consisting of a group of people who have agreed to help each other by regularly saving together and lending these savings to one another at the lowest possible rate of interest. Credit union members are not motivated to make profits, but by the desire to improve the financial well-being of themselves and fellow members.

There were 139 credit unions operating throughout Australia at December 2007. Together they hold more than $40 billion in assets, providing community banking services to more than three-and-a-half million Australians.

Further information:   Abacus Australian Mutuals

CO-OPERATIVE HOUSING SOCIETIES

Co-operative housing societies first appeared in New South Wales in 1935 and were then known as terminating building societies. The aim of a co-operative housing society is to provide housing finance to low and middle income home buyers.

Prior to 1956, housing societies secured funds from banks and insurance companies who saw such lending as socially desirable and a worthwhile form of long term investment. In 1956, co-operative housing societies were given access to Commonwealth/State Housing Agreement funds to lend to low income families as part of the federal government's housing policy. The societies on-lend funds from government sources and financial institutions to members of the societies.

Further information:   Co-operative Housing Societies Association of NSW

FRIENDLY SOCIETIES

Friendly societies have existed in Australia since 1836. They had their origins in the English industrial revolution in the 19th century, when factory workers and labourers banded together to pool regular contributions into a central fund to insure their families and themselves against poverty as a result of illness and death.

In Australia, friendly societies were primarily formed to provide welfare services to their members including medical services, sick pay, and funds for those who have fallen on hard times. They often provided the only organised social activities available in the early years of colonisation. As friendly societies grew, their services became more diverse. Over the years, friendly societies initiated pensions for the aged and permanently disabled, unemployment cover, and allowances for travel in search of work.

With the emergence of government supported welfare such as pensions, unemployment and sickness benefits, many friendly societies modified their role to provide other services to their members, such as superannuation, investments, retirement villages, travel services and holiday facilities.

As at December 2007, there were 24 friendly societies registered with APRA, with some among the most successful financial institutions in Australia. In addition, there are a number of friendly societies that do not offer financial products or life insurance and are not registered with APRA.