364 PROVISION Ol' BORROWING FACILITIES. 



the disorganization of loan operations when deposits are withdrawn, 

 are among the weak points t of these societies. 



Reserve. This is generally provided for in the rules by an allotment 

 of from one thirty-second of the net profits after deducting all dues to 

 subscribers for repayment of principal and for guaranteed profits; such 

 allotment is usually trifling. It is also to provide by rule that this 

 reserve shall be broken up and divided in whole or in part every three 

 or four years ; on examining a large number of balance sheets, it is only 

 occasionally that a reserve is ever mentioned, and, where found, it is 

 usually extremely small. Small as is the reserve at its maximum (usually 

 only 1 or 2 per cent, of the capital), at certain periods it is either nil or 

 infinitesimal. Moreover, the reserve is often laid out in charitable 

 investments, probably for the deity or temple which gives its name to 

 the fund ; that is not a legitimate use for a reserve. 



Prof is. In Mutual Loan societies, such as the Nidhis, profits 

 ought to be entirely subsidiary to the main purpose, viz, the cheapening 

 of credit; profits are indeed a legitimate means of stimulating thrift, 

 but must not become the chief aim of society, especially when all profits 

 are provided solely by the borrowers and when directors and office- 

 bearers, as such, take almost as large a share (usually seven-sixteenths) 

 as the whole mass of subscribers. After providing the fixed profits 

 according to the rules, all other profits should be kept as low as possible, 

 whereas in the report of certain Nidhis. the annual profit is from 10 to 

 14 per cent ; part of this, of course, goes back to the borrowers, but the 

 bulk is absorbed by non-borrowers, directors and office-bearers, and is 

 unduly high. This divergence from the true co-operative idea is the 

 besetting temptation of Co-operative societies all over the world ; 

 in America one borrowing member furnishes the profits for three 

 investing members and for himself; in Madras the tendency is for three 

 borrowing members to furnish relatively small profits for themselves 

 and for one investing member, and relatively large profits for directors. 

 There can be no doubt but that the men who start these Funds are 

 not generally aware of their co-perative origin and development; 

 co-operation in its modern sense is hardly known in this presidency, and 

 the compulsory registration of the Funds under the Joint Stock 

 Companies' Act causes them to be looked upon simply as Joint Stock 

 societies, where profits or investments are a principal object. In all 

 correspondence and in public discussions, these Funds, as well as ' 

 proposed Agricultural banks, are treated as joint-stock companies or 



