66 HUNGARY - CREDIT 



which it had to work and partly to the formal exactions of the Hungarian 

 Government for the better guarantee of its good working. But after the 

 formation of a working capital of 100,000 florins, of which 30 % is paid up, 

 the land bonds of the institute were admitted on the Pest Exchange (July 

 25th., 1872),, and on that of Vienna (November 24th.) and the rules were ap- 

 proved in their first form by the Agricultural Department (September 6th., 

 1873). The Rules as amended on April i8th., 1876, in consequence of the Com- 

 mercial Code coming into operation, define the co-operative character of 

 this institute and its scope, which is that of facilitating the use of mortgage 

 credit for its members. 



In this institute, as in the two previously dealt with, we find two class- 

 es of members ; the foundation and the ordinary members. The general 

 meeting is attended, in addition to these two classes of persons, also by cred- 

 itors, who are bondholders, and have a right to one vote for ever^^ 10,000 

 fls. worth of bonds issued, while the Saxon Agricultural Association of Erdely 

 has a right to five votes. 



The foundation members, who have subscribed shares to form the 

 working capital, receive not merely the interest on these shares, calculated 

 at 6 %, but also a dividend equal to the tenth part of the net balance for 

 each working year. This dividend was, however, aboHshed in 1883 and 

 the division of the profits was definitely regulated by the Rules of 1903, 

 as follows : 



Ten per cent of the net profits is placed at the disposal of the Erdely 

 Saxon Agricultural Association. Another 10% must be distributed among 

 the members of the board of management and the commissioners of ac- 

 counts in the proportion established at the general meeting. Half the 

 profits must be placed to the reserve fund. The balance, 30 %, may be 

 used for purposes of public utility or to increase the reserve fund. 



We have shown above that the initial capital did not amount to more 

 than 100,000 florins, of which 30 % was paid up. But as the Law XXXVI 

 of 1876 ordered that the issue of land bonds must be guaranteed by the 

 formation of a special fund of 200,000 crs. to cover the obUgations towards 

 bondholders, and the Institute of which we are speaking had not the capital 

 necessary for the purpose, it had to suspend the issue of land bonds for some 

 years and provide for the demand of mortgage loans out of the money de- 

 posited with it by the local population. But in 1879 the guarantee 

 fund required was already formed and then the issue of bonds was resumed. 

 The mortgage loans have always been granted and paid up to the 

 full nominal value of the land bonds without taking into account the cur- 

 rent price on the exchange, except for the deduction of i % for the re- 

 serve fund. 



The period for repayment was at first very short and the conditions 

 of the loans consequently rather burdensome. Thus, the loans granted in 

 1879 could not be for periods longer than 17 years and the annual instal- 

 ments amounted to 9.5 %; in t88o the term for repayment was prolonged 

 to 27 years, and the instalments were 8.2 %. The business, therefore, only 

 made slow progress up to 1885, when loans were made redeemable in 30 



