Mutual society

A Mutual Society is an organisation set up and owned by its members and, theoretically, run for their benefit. Building societies, friendly societies and some life insurers are examples of mutual societies.

These societies trace their roots back to the end of the eighteenth century. Typically, a group of people would get together and between them save up to buy their own homes. Every so often, there'd be a ballot and the winner would be lent the funds from the kitty to make their purchase - in other words - they'd be given a mortgage. The savings process would continue and in due course all of the members would be lent funds and on repayment the societes would be wound up.

But then from the mid 1850's there was a change. Permanent socieites began to emerge. They had the same functions as the older societies but didn't wind themselves up when their members had been satisfied. Instead they looked for new members.

In the modern day, these societies vary from being small regional groupings to national personal finance retailers. They have boards of directors which can look and behave much like those running a public companies with shareholders.

As far as building societies go, in recent years, Abbey National, Alliance & Leicester, Cheltenham & Gloucester, the Halifax, Northern Rock and Woolwich, have chosen to convert from mutual organisations into banks.

See Also Credit Unions

Last Updated: November 2007 © Moneyextra.com

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