284 Cooperation in Agriculture 



town of a few thousand inhabitants may have several 

 banking institutions that are successfully operated and 

 that furnish credit to the farmers at reasonable rates of 

 interest. Through these local and state banks, a respon- 

 sible farmer who desires credit has little difficulty in se- 

 curing a short-term loan provided he can offer acceptable 

 security, and his land is available for security for long- 

 term loans. The small farmer and especially the tenant 

 farmer whose only security is his crops or cattle or other 

 personal property, the whole amount of which may not be 

 available to hypothecate as security for a short-term loan, 

 may have more difficulty in securing credit from a bank and 

 is forced to depend on the store as his principal source of 

 credit. One of the fundamental difficulties in rural credit 

 is the inelastic nature of the country banking system which 

 restricts the credit that a rural bank can extend, and the 

 further fact that the best security in the world, the land 

 on which he grows his crops, is not liquid as security. 

 The security of the farmer as well as the credit of the bank 

 is therefore restricted. The average farmer is obliged 

 to sell his crops at the prevailing market prices at the 

 harvest time. He cannot hold them for better market 

 conditions, because he has usually secured credit for a 

 short period on the expectation of repaying it when the 

 crop is harvested. 



The agricultural credit needs have been met in foreign 

 countries by the organization of cooperative credit banks 

 or societies on the principle that where a group of persons 

 combine to furnish a collective guarantee, they can utilize 

 the security of that guarantee as a basis for obtaining 

 credit at a low rate of interest. This collective guarantee 



