26o THE POPULAR SCIENCE MONTHLY 



advisability of the proposed expenditure in making the loan, the mem- 

 bers of the bank all knew the plan of the member and were interested 

 in his success, because in case the member failed and was unable to 

 repay his loan to the bank they would all be losers. 



EaifTeissen did another thing that is of utmost importance in rural 

 banking. He adjusted the loans of the bank to meet the needs of agri- 

 culture. The farmer needs a longer time loan than the merchant or 

 manufacturer. City loans for three and four months do not fit the 

 business of farming. With the farmer 6 to 9 months is the shortest 

 time for which he needs a loan. The time from planting a crop till it 

 is harvested and ready to market is at least six months. The city mer- 

 chant will turn over his money four or five times during the year but 

 the farmer only once, so that the rural banks must make the loans for 

 longer periods than is customary in the city. In case of crop failure in 

 bad seasons loans must be allowed for still longer periods and in Eaif- 

 feissen banks these provisions were made. 



From their beginning in the Ehineland the Eaiffeissen banks have 

 spread not only over all rural Germany, but almost all rural Europe. 

 They have been modified to meet local conditions but with it all have 

 kept in view the purpose of serving the needs of the farmer. 



In studying the agricultural banking or credit system of a country 

 the condition of the individual farmer must be taken into consideration. 

 A system applicable to peasant farmers with small holdings, such as 

 are found in many parts of Europe, is not likely to offer much of value 

 for American farmers. But in a section in which the average wealth 

 and stand of the farmers is on the same level as in America, a svstem 

 that is proving successful may afford some good lessons. 



Eukal Banks in the Province of Saxony 



Such a section is to be found in the province of Saxony where the 

 rural banks are splendidly organized and doing a business of $100,- 

 000,000 per year. 



The first striking difference between these rural banks and the orig- 

 inal Eaiffeissen banks is that they are organized on a limited liability 

 basis. The farmers of Saxony for the most part are well to do, but they 

 vary greatly in their financial worth. The man whose property is worth 

 a hundred thousand marks is not willing to become a member of a rural 

 bank or a cooperative association of any kind with members who are 

 worth only five thousand marks and agree to an unlimited liability for 

 its members. Consequently the Saxon banks are organized limiting the 

 liability of the members in proportion to the interest they have in- 

 vested in the bank. The fundamental object of the rural banks is to 

 furnish credit to their members for working capital at the lowest rates 

 of interest possible and not to make a profit on their business. In the 



