[Extracts from Sir F. A. Nicholson's Report on Agricultural 

 Banks, pp. 2-7, 10-12 23-25. ~] 



METHODS AND PRINCIPLES OP ORGANISED CREDIT IN EUROPE. 



It is obvious that as all capital is derived from savings, and as all 

 credit should be based on thrift and prudence, the stimulation of thrift 

 and prudence is a necessary antecedent to the grant of credit. It is 

 emphatically not the mere outpouring of cheap capital that is required, 

 not the mere grant of cheap and facile credit to classes unprepared for 

 the boon : what is wanted is the promotion of facilities for saving, 

 the encouragement of banking deposits, the inculcation of the true 

 objects, uses, and limits of credit ; in other words, the development 

 of the essential national virtues of thrift, foresight, and self-help, 

 through institutions organized for those ends. Hence the object of 

 this study is, necessarily, not mere rural credit-banking, but the 

 promotion and development of all institutions which, while furthering 

 useful credit, base that credit largely, perhaps chiefly, on previous 

 thrift, and are thus able to exercise over their members a beneficent 

 influence in the direction of self-help ; still more specially those which, 

 being based on the principles of co-operation, bring the isolated units 

 of society into association, and, by association, teach the benefit and 

 virtue of mutual assistance in thrift and in credit, in combating 

 improvidence within, and usury without, in developing industry and 

 in assuring to men the full results of their industry, in stimulating 

 men to new ideas of life whether economic, social or moral. 



Credit Universal necessity for Rural credit. The history of rural 

 economy, alike in Europe, America and India, has no lesson more 

 distinct than this, that agriculturists must and will borrow. This 

 necessity iq due to the fact that an agriculturist's capital is locked up 

 in his land and stock, and must be temporarily mobilized ; hence, 

 credit is not necessarily objectionable, nor is borrowing necessarily a 

 sign of weakness. But such borrowing may be abused, and indebted- 

 ness may be a symptom and a cause of danger, if the conditions of 

 credit are unsound or defective, if borrowing is not a mere temporary, 

 'productive mobilization of capital, but the result of ignorance, 

 improvidence, recklessness, misgovern men t, social defects, or even 

 social arrangements such as the laws and customs of inheritance. 



