History: The Birth of Cooperative Finance in the South

lowesgrovecreditunion_1916

Courtesy: Open Durham.

In January 1916, exactly 100 years ago, about two dozen farmers chipped in a combined $101 to create and open the Lowe’s Grove Credit Union. Located along a dusty crossroads in what was at that time a rural part of southern Durham County in North Carolina, the credit union marked a sea change in the way farmers and hard-working people in the South would receive credit.

At the time, farmers labored under what was called the crop-lien system. A common feature of Southern agriculture in the post Civil War era, crop-lien was one of the few (if not only) means of credit available to family farmers.

Farmers would receive a line of credit from a local merchant and provide the following harvest as collateral on the debt. Keep in mind that most farmers at this time would not have owned their own land, would not have been able to read or write and would have had few assets beyond their farming skills and willingness to work hard.

Given these limitations, sometimes exorbitant interest rates charged by the merchants and the whims of Mother Nature, it was no surprise that the crop-lien system was a legally-sanctioned form of exploitation. As a result, more than a few farmers lived beyond their means and ended up losing all they had. (You can read more about the crop-lien system here in an excerpt from the book Whitaker’s Reminiscences, Incidents and Anecdotes. This book was written in 1905 by Rev. R.H. Whitaker of Raleigh)

Lowe’s Grove holds the distinction as the South’s first credit union. The Lowe’s Grove concept began to spread in the Tar Heel State so that by 1918 African-American farmers in Rowan County were organizing the first-of-its-kind credit union in the U.S. (Read more about Piedmont Credit Union here in a first-person account written in 1920 by credit union founder Thomas Patterson.)

The emerging credit union movement gave farmers and others an opportunity to save money and borrow when they needed to at a reasonable interest rate. Many of these early credit union pioneers also used the cooperative model to purchase food and other essential day-to-day items. The efforts of these credit unions and co-ops, combined with an industrializing economy in the South and other forces, gradually led to the end of the crop-lien system and a fairer means of allocating credit.

Lowe’s Grove would eventually liquidate in the 1940s. But its place in history and the change that it brought to the farmers and other hard-working people in the Carolinas remains firmly entrenched.

The site of the credit union is located in what is today the Research Triangle Park. The original building, like the credit union, is lost to time, but Lowe’s Grove is memorialized in a highway marker.

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