Union
:si»i£R
Vol. VI—No. 16.
RALEIGH, N. C., APRIL 18, 1912.
One Dollar a Year.
Agricultural Credit in Europe,
Rural Banks in Germany—The Raiffeisen
Sj’stein.
In the first half of the past century the small
farmers and small artisans of Germany, who could
^lot have recourse directly to capitalists or to
^anks, suffered severally at the hands of the usur-
from whom they procured the credit which was
indispensable to the exercise of their business.
I'he seriousness of the situation, rendered more
ncute by the economic transition which was taking
Place and was bringing with it a great and urgent
Peed of credit, was clearly recognized by two men,
'vlio have deserved well not only of Germany but
Pf the whole civilized world, by devising and put
ting into practice the best methods of remedying
the evil. These were Frederick Raiffeisen, burgo-
-i.nster of Weyerbush, and Francis Frederick
Schulze, better known by the name of Schulze-
^^litzsch. The former was the organizer of the
tural co-operative banks, which have spread into
civilized countries; the latter of the urban popu-
hanks.
1'hese two forms of co-operative banks, although
®cihewhat different in their organization, are based
the common fundamental principle of organiz-
'Ps the would-be borrowers themselves in order
^^p't they may obtain by combination the credit fa
cilities which they would have sought individually
ip Vain.
* ♦ ♦
®dch co-oueration has made possible, on the
^Pp hand, the collection amongst the members
ii^cinselves, in the form of shares or of small de-
PPsits, of a considerable amount of capital which
^pfves to supply the credit requirements of their
fell,
tiv
Ptv-members. On the other hand, the co-opera-
P credit societies, being regularly managed and
Pi^ject to rigorous supervision, have been able to
PPocure credit on favorable terms from outside
Sour,
ces of capital.
♦ *
are
'f'Pe credit given by the Raiffeisen Banks, which
izsch
credit,
on
I'm
Ppral in character, and by the Schultze-Deli-
which are mainly urban, is usually personal
Although they occasionally grant loans
mortgage for long periods, they generally con-
i^pmselves to the making of loans for com-
Patively short periods (in the Raiffeisen banks
for one year, with a maximum of three or
years; in the Schulze-Delitzsch banks, three or
P^onths) on personal security or on the secur-
Pf Personal property.
PVer
Ppps on mortgage for long periods are, how-
it ’ .^^'PPfpd by another type of co-operative cred-
of which we shall have occasion to speak
Viz.: the Landschaften and Ritterschaften.
the ^ associations formed by land-owners with
Uj ^^^Pct of obtaining credit for land improve-
oy tbe issue of mortgage bonds.
{Reprinted from Texas Farm Co-Operator,)
We shall describe in this chapter the organiza
tion and working of the Raiffeisen banks.
4:
Section 1.—Organization of the Rural Banks.
The fundamental principles of the Raiffeisen
system are:
(1) Unlimited liability of the members.
(2) A restricted area of operations.
(3) Gratuitous management.
To these principles, which he wished to be al
ways applied with the utmost rigor and without
allowing any exception, Herr Raffeisen added a
body of moral and educational doctrines.
In addition to the rural banks which follow
strictly the Raiffeisen principles, and are combined
in a national federation with headquarters at Neu-
wied (now removed to Berlin), there have also
arisen other organizations which, although adopt
ing the fundamental ideas of Raffeisen, have not
accepted the excessive strictness of his rules and
have treated as superfluous the mystical doctrines
which he had introduced into co-operation. The.
societies of this type, after having long hesitated
between a separate organization and the Schulze-
Delitzsch Federation, were finally collected under
the guidance of William Haas, into a separate na
tional federation which had its headquarters first
at Offenbach and then at Darmstadt.
« «
The former of these federations became affili
ated to the National Federation in 1904, and to in
dicate the rapid development of the rural banks,
we may here state that the number of societies em
braced with the National Federation increased
from 10,786 in 1904, with a membership of 964,-
000 and a total business (incoming and outgoing)
of 2,490,000,000 marks to 12,614 in 1909 with a
membership of 1,163,000 and a total business of
4,456,000,000 marks.
# * *
Certain differences (not, however, very serious)
continue to exist between the pure Raffeisen banks
and the societies established on less strict lines.
We shall have occasion to speak of these differ
ences in outlining, as we now proceed to do, the
leading features of the organization of the Raif
feisen banks. The statements are based upon the
reports of the National Federation and the figures
relate (except where the context otherwise indi
cates) to the year 1909 and to the 12,614 rural
banks embraced within the National Federation in
that year.
♦ * ♦
Menipersliip.—The members are farmers, usual
ly peasant-proprietors. The 12,614 rural banks ex
isting in 1909 numbered in all 1,163,186 mem
bers, that is, an average of ninety-two members
per bank. The number of members per bank va
ries considerably, however, in different regions,
the highest average being in Westphalia, where it
reaches 160 members per bank. The minimum
number required by the legal constitution of the
banks is seven, and some of the recently-formed
banks have exactly this number of members. The
highest number of members contained in any one
bank is 1,400, but this is a very exceptional case.
4c 4:
Inability.—The principle maintained by Raif
feisen was that of the unlimited joint and several
liability of the members. Whilst for other forms
of rural co-operation the system of limited liabil
ity is increasingly adopted, the system of unlimited
liability is still regarded in Germany as the sys
tem best adapted to rural co-opei’ative credit. Of
the banks existing in Germany, 92 per cent are
based upon unlimited liability and about 8 per
cent upon limited liability. A fractional percent
age of the banks were based upon an intermediate
system, known as the system of unlimited liability
to make supplementary payments.
4c 4 4t
Shares.—Raiffeisen commenced by excluding
shares altogether, in order to avoid any danger of
capitalistic speculation and, in fact, up to 1876
none of his banks had shares.
Being obliged in that year to comply with the
Imperial Law which compelled co-operative so
cieties to have foundation capital, he sought to
evade the law as far as possible and fixed , the
shares at a maximum value of 10 marks. The
Darmstadt Federation on the other hand recom
mended comparatively large shares, but in no case
higher than 500 marks. In very few cases, how
ever, does the value of the share exceed 100
marks.
In 1909 the average paid-up capital per member
amounted to 19 marks. -But in this regard also
there are great differences as between regions.
The necessity of forming a foundation capital is, in
fact, not so great in the case of the exclusively ag
ricultural banks, the operations of which are guar
anteed by the lands of the members, as in the
case of banks which can only offer a personal
guarantee.
4t 41 4!
Thus in Rhenish Prussia and Hesse, which are
mainly industrial, the average paid-up share-cap
ital is respectively 103 and 86 marks, while, on the
other hand, the average is lowest in other regions,
such as Westphalia and Oldenburg, where it hard
ly reaches 4 or 6 marks,
41 4= 4i
In the societies where the liability is unlimited
a member cannot take more than one shar^; in
societies with limited liability, however, he may
take many. The value of the shares and, in the
latter case, also their number, are fixed by the
rules. The shares are re-payable to the members
upon withdrawal from the society, and interest is
paid upon them at a rate which must not in any
(Continued on page 9.)
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