THE DIFFUSION OF CREDIT 113 



utilize deposits for the purpose of making ad- 

 vances. In either case the Village Banks can 

 draw on the People's Banks or on the Savings 

 Banks for the funds they may require to lend 

 out to their members. The fear that was enter- 

 tained in the establishment of the People's Banks 

 that the principle of unlimited liability of mem- 

 bers would be impracticable in Italy was dis- 

 missed on the formation of the Village Banks, 

 which are mostly based on the Raiffeisen principle, 

 the members of each bank being jointly and 

 severally responsible for any default on the part 

 of a borrower. The effect of this arrangement 

 is that the Savings Bank or the People's Bank 

 which lends money to the Milage Bank has 

 good security, and the members of the Village 

 Bank, aware of the risk they run, are careful 

 to admit as fellow-members, and especially to 

 make advances to, only such individuals as are 

 known to be honest and industrious. A loan 

 would not be made outside a village, where, of 

 course, each resident would be known to his 

 neighbours. In this way it was found possible 

 to grant loans to men who, from the point of 

 view of the ordinary bank, had absolutely no 

 " security " to offer. Moral worth, on which 

 nothing could have been raised at a People's 

 Bank, was quite sufficient at a Village Bank, 



