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The foundation of the system is the unlimited'" liability of each 

 and all the members of the bank. 



In the Scotch Credit System, which did such wonders for Scot- 

 land in the early part of last century, there is the principle in 

 germ, but in germ only. The Lords and Commons Committee of 

 1826, in reporting on it says : — 



'Any person who applies to the bank for a cash credit is 

 called upon to produce two or more competent securities, who are 

 jointly bound, and after a full inquiry into the character of the 

 applicant, the nature of his business, and the sufficiency of his 

 securities, he is allowed to open a credit .... This system 

 has a great effect upon the moral habits of the people, because 

 those who are securities feel an interest in watching over their 

 conduct ; and if they find that they are misconducting themselves, 

 they become apprehensive of being brought into risk and loss 

 from having become their securities ; and if they find they are so 

 misconducting themselves, they withdraw their security,' 



Here are the two main pillars of co-operative credit recognised — 

 joint liability and individual checking. The sureties become an 

 intermediate body between capital and want, helping the latter 

 but also effectually safeguarding the former. 



But this is co-operative banking applied to people who possess 

 property and also some commercial education. Raiffeisen's 

 object was to dive deeper and so he proceeded upon broader and 

 more popular lines. He multiplied the sureties, and quickened 

 the vigilance and control by responsibility carried still further. 



The fundamental idea of co-operative credit banking is, that a 

 number of persons, all quite poor, or poor and rich combined, join 

 together to pledge their credit in common, in order thereby to 

 obtain the temporary command of money, which, individually, 

 they cannot secure, with a view to disposing of that money among 

 themselves, for temporary employment and for profitable pur- 

 poses. 



If we can ensure repayment from members and thereby secure — 

 absolutely secure — those who virtually pledged all that they possess 

 we create a good foundation for credit, and make the scheme 

 practicable. This is done by selecting the members, by watching 

 the borrower, by watching the loan and reserving power for 

 calling it in, and by subordinating everything that is done to the 

 one consideration of safety. 



The unlimited liability of all the members of the bank directly 

 serves to supply all this. 



Without unlimited liability, you can never make sure that your 

 bank will be sufficiently careful in the selection of its members. 

 Such selection, limiting the membership to persons absolutely 

 trustworthy, is the first condition of success. With only his 5s. 

 or £1 share at stake, no person would care to say 'No' to the 



