280 PRINCIPLES OF RURAL ECONOMICS 



purpose must meet with the approval of the representatives of 

 the bank. They will not lend to any one until they know what 

 he wants to do with the money and are satisfied that it will pay 

 him to borrow ; that is, they will decide whether or not the pur- 

 pose for which he wants the money is likely to prove profitable 

 and enable him to pay back the sum borrowed and leave a sur- 

 plus besides. Under these conditions a sense of solidarity and 

 mutual responsibility is developed among all the members, and 

 practically nothing has ever been lost through loans of this kind. 

 A third feature of the organization is that, after the first organi- 

 zation, new members are elected by a vote of those who are 

 already members. A fourth feature is that these organizations are 

 small and are restricted to narrow areas, in order that only near 

 neighbors shall be in the same organization. This is made neces- 

 sary by the fact that every member is responsible for loans made 

 to other members. In the fifth place, the bank's management is 

 absolutely democratic, the final authority on all local questions 

 being the general meeting in which every member has one vote. 

 The books of the bank are open to all members for inspection. 

 The Schulze-Delitzsch system. The Schulze-Delitzsch banks 

 originated at about the same time as the Raiffeisen banks, but 

 differ from them mainly in that they deal with a somewhat 

 wealthier class of people, a large part of their loans being for 

 commercial and industrial purposes. They do not always insist 

 upon unlimited liability. They raise their funds sometimes by 

 the issue of shares. They pay salaries to their officers and 

 sometimes make use of collateral security. 1 



A system of cooperative credit resembling the Raiffeisen 

 system, in some particulars, has had a remarkable development 

 in recent years in Denmark and Ireland, where it has been an 



1 An excellent account of both these systems of credit may be found in an 

 article by Professor E. W. Kemmerer, in Bailey's Cyclopedia of American 

 Agriculture, Vol. IV, pp. 269-276. See also Henry W. Wolff, People's Banks. 



