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A savings and loan association is a financial institution which specializes in accepting savings deposits and making mortgage loans. The term is mainly used in the United States; similar institutions in the United Kingdom and some Commonwealth countries are called building societies. more...

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They are often mutually held (often called mutual savings banks), meaning that the depositors and borrowers are members with voting rights and have the ability to direct the financial and managerial goals of the organization. It is possible for a savings and loan to be stock-based and even publicly traded. This means, however, that it truly no longer is an association and depositors and borrowers no longer have any managerial control.

Early history of the savings and loan association

At the beginning of the 19th century, banking was still something only done by those that had assets or wealth that needed safekeeping. The first savings bank in the United States, the Philadelphia Savings Fund Society, was established on December 20, 1816, and by the 1830s such institutions had become widespread. Savings and loans accepted deposits and used those deposits, along with other capital that was in their possession, to make loans. What was revolutionary was that the management of the savings and loan was determined by those that held deposits and in some instances had loans. The amount of influence in the management of the organization was determined based on the amount on deposit with the institution.

The overriding goal of the savings and loan association was to encourage savings and investment by common people and to give them access to a financial intermediary that otherwise had not been open to them in the past. The savings and loan was also there to provide loans for the purchase of large ticket items, usually homes, for worthy and responsible borrowers. The early savings and loans were in the business of "neighbors helping neighbors".

In the United Kingdom, the first savings bank was founded in 1810 by the Reverend Henry Duncan, Doctor of Divinity, the minister of Ruthwell Church in Dumfriesshire, Scotland. It is home to the Savings Bank Museum, in which there are records relating to the history of the savings bank movement in Great Britain, as well as family memorabilia relating to Henry Duncan and other prominent people of the surrounding area. However the main type of institution similar to U.S. savings and loan associations in the United Kingdom is not the savings bank, but the building society and had existed since the 1770s.

The savings and loan in the early 20th century (in the U.S.)

The savings and loan association became a strong force in the early 20th century through assisting people with home ownership, through mortgage lending, and further assisting their members with basic saving and investing outlets, typically through passbook savings accounts and term certificates of deposit.

Read more at Wikipedia.org