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AGRICULTURAL CREDIT BANKS. By R. A. YERBURGH, M.P.

[Read before the Royal Statistical Society, 19th May, 1896. CHARLES BOOTH, Esq., Honorary Vice-President, in the Chair.]

I REGRET that owing to the shortness of the time at my disposal in which to prepare this paper, I have been unable to procure statistics from our representatives abroad and from the authorities connected with the co-operative credit movement in the different countries where it flourishes, which would furnish any information other than that which has already been placed before the public in the reports supplied to the Labour Commission and by Her Majesty's representatives in Austria, Germany, and Italy. I have, however, had the good fortune to be put in possession of the admirable volumeupon co-operative credit which has been prepared by Mr. F. A.. Nicholson for the Madras Government. This work is of a most exhaustive character, and to any persons interested in co-operative credit affords an admirable opportunity of making a thorough acquaintance with every variety of its application as at present in existence. Another disadvantage under which I labour is to be found in the fact that the Statistical Society have already published in their Journal some of the figures supplied by the Foreign Office Reports on the Raiffeisen Credit System. Approaching then this subject under these unfavourable circumstances, I trust that the many shortcomings, which I feel will place this paper below the high level maintained by the papers which your Society is accustomed to consider, may be regarded with some degree of leniency.

As the subject is so vast, and could not possibly be treated in all its extent in such a paper as this, I propose to devote myself principally to that side of it which is represented by what is known, from the name of its founder, as the Raiffeisen System, and I am confirmed in my intention by the fact that it is this system which the Agricultural Banks Association and the Irish Agricultural Organisation Society have adopted with some considerable degree of success.

Herr Raiffeisen, commonly known, in recognition of his great services to the poorer agricultural classes, by the name of Father Raiffeisen, was a native of Germany, and for some time Mayor of Flanmersfeld. Finding that the small peasant holders in his district were to a very large extent in the hands of the Jews, he decided to form an association on co-operative lines which would 2 H

VOL. LIX. PART III.

supply its members with cheap money, and so free them from usury. This he did in 1864. There were already in existence in Germany banks of a co-operative character founded by Herr Schulze-Delitzsch, some particulars of which are given in the accompanying table (A), but the provisions of these were not thought by Herr Raiffeisen to be applicable to the circumstances of people engaged in agriculture.

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518,003 117,080

3,643 137,997 622,855
8,428 330,165 1,495,648

16,398 364,450 1,447,526 39,881
21,582 401,801 1,533,841 34,674
28,475 453,826 1,641,574 40,588
1,561,610

'91-92 1,076 '92-93 1,075 512,509 116,304 31,121 434,248 1,539,034 47,660

Loans made under this system were for short periods, while members were shareholders, and high dividends were paid upon shares, with the consequence that the charges upon the loans made were also high, varying from 8 to 12 per cent. The Directors, too, were paid for their services, and thus the expenses were of necessity heavy. Herr Raiffeisen had to consider how he could provide the money for long terms at the lowest possible rate of interest and at the least possible cost in the way of management. He solved the problem by forming an association for the purpose, not of paying a dividend to its members, but of furnishing them with cheap money. Dividends therefore were forbidden, and to avoid the temptation of breaking up the society and sharing any profits that might have accrued, he made it one of the principles of the association that all moneys remaining over after expenses had been paid should be carried to a reserve fund which was never to be divided, but used either for meeting losses, for loans to members, or applied to some object of public advantage to the whole of the community. In order to secure the active interest of all members and the success of the association, he laid it down that the liability of every member for the obligations of the society was to be unlimited, his view being that each member of the association would, to secure himself, watch with the greatest care the applica

tion of loans, and bring to the notice of the committee of management any proceedings on the part of borrowers which might appear likely to prejudice the association. In order to make further use of the safeguard of the individual interest of members in the transactions of the association, he further laid it down that every loan must be made for a specific productive purpose, and that it must be the duty of the committee to see that loans were applied to the purpose for which they had been granted. Again, in order to keep the expenses as low as possible, and thus to enable loans to be made at very low rates of interest, he stipulated that the management should be defrayed by voluntary effort, and that no salary should be paid except to the secretary, who might receive a small remuneration. As it is essential that an agricultural borrower, in order to obtain the full benefit of his loan, should be enabled to have the use of it for a long period, arrangements were made to meet this requirement. Again, as an additional security against any possible loss to the association, its operations were restricted to a definite area, in order that its members might be as far as possible people living under the same conditions, animated by a common spirit, and capable of a fellow feeling for each others' necessities. In this way the further object was attained of having the character of every candidate for membership known to its members, in order that the association might be secured from the risk, which would otherwise have arisen, of admitting persons who might, from their character and habits, be likely to involve it in monetary loss.

For the purpose of stimulating the active interest of the members in the association, it was provided that it should be controlled by a committee elected by the members themselves, and that this committee should in turn be supervised by an administrative council, both of these bodies being elected at the annual general meeting, in which was to reside the supreme authority of the association. As a further guarantee of the stability of the association, its books had to be audited at regular intervals.

Such, briefly, are the principles upon which Raiffeisen founded his first bank, with the result that there were in Germany in 1890 about 1,730 of these associations. What their exact number now is I have been unable to ascertain. In the Neuwied circle alone the numbers increased from 245 in 1885 to 408 in 1888, to 684 in 1890, to 830 in 1891, and to 1,000 in 1893. In 1891 735 banks belonging to the Neuwied Association, with 70,000 members, did business to the extent of 30,000,000 marks. Baden banks in 1888 numbered 77, with 9,247 members. In Hesse in 1889 the banks numbered 238, 99 of which belonged to the association for the Duchy; while in Bavaria in 1888 the banks numbered 71, in

June, 1890, they had increased to 105. In 1890 the Würtemberg Association numbered 276 banks, with a membership of 19,000; and that of Westphalia 190 banks, with 20,239 members. As regards the financial position of these banks, it is stated that it is generally sound, and that while no cases of bankruptcy have occurred, instances of liquidation have been rare, and have not resulted in material loss to the members.

In 1877 the Central Agricultural Credit Bank was founded as a joint stock company ("Actiengesellschaft "), for the purpose of granting pecuniary assistance to separate banking associations, and, further, in order to receive deposits from associations having a surplus to dispose of.

The shareholders ("actionnaires ") are limited to the members of the governing bodies of the central bank (i.e., the Council of Directors and Board of Control), and such credit banks as

(a.) Are constituted with the unlimited liability of members according to the provisions of the German law respecting co-operative societies ("Genossenschaften ") of the 4th July, 1868.

(3.) Which endeavour to ameliorate the moral as well as the material condition of their members.

(c.) Which receive, as members, only persons within a specified district: this district to be of the narrowest possible limits compatible with self-maintenance. No person to be a member of more than one association.

(d.) Which, as far as the law permits, issue no members' shares ("Geschafts-Antheile "), but which, if such are issued, allow only one to be allotted to each member.

(e.) Which allow no salaries, but only their bare expenses to the officials, with the sole exception of the accountant.

(f.) Which accumulate the profit obtained for the common

benefit of their members.

Each association takes at least one share (" Actie ") of 1,000 marks (507.), and is liable only for the amount subscribed.

The original capital ("Grund capital ") amounts to 5,000,000 marks (250,000l.), divided into 5,000 shares of 1,000 marks each. Of this amount 2,207,000 marks (110,350l.) were paid up to the 1st April, 1895, and nearly 200,000 marks (10,000l.) stands as reserved capital.

Of the share of 1,000 marks, 25 per cent., or 250 marks, must be paid up at once. Interest is paid upon this amount. Further instalments are made at a maximum of 10 per cent., the amount to be determined by the Council of Directors.

In order to prevent the shares coming into the possession of capitalists, and in order to make it difficult for associations to withdraw from the Central Bank, they may only be transferred

provided the Board of Control consent to the transference of the share to another association.

Complaints have been made as to the difficulty which is sometimes experienced by associations desirous of withdrawing from the Central Bank, but it is explained that this discretion is necessarily vested in the Board of Control, to prevent associations from suddenly retiring without rhyme or reason, and thereby injuring the whole organisation.

During the year 1892, 176 associations were inscribed in the Central Credit Bank, and at the end of that year the total number of members was 886.

This number was distributed amongst the following districts:

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On 1st May, 1895, the number of members had risen to

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