98 AGRICULTURAL CREDIT BANKS 



European countries. In connection with the problem of 

 indebtedness in India and tropical countries the case of 

 Servia is, however, specially interesting. In that land 

 of small peasant farmers usury was rampant, and its 

 exactions so monstrous that the extreme step was taken 

 of forbidding sales and mortgages without the consent of 

 the authorities. At the close of 1908 Servia had over 

 800 village banks of the pure Raiffeisen type, liability 

 being unlimited, and all profits being carried to the 

 reserve fund. I shall have a word to say before I close 

 of the uplifting effect of these village banks on the 

 Servian peasantry. 



The lessons to be learned from European experience 

 are that, where we are dealing with small peasant 

 farmers the Raiffeisen type is the best. The absolutely 

 essential points are limitation of area, the rigorous ex- 

 clusion of unworthy members, the grant of loans only 

 for productive or economical purposes and on the pro- 

 duction of proper security, the enforcement of punctuality 

 in repayment, and a thoroughly democratic organization. 

 The question of shares or no shares, of limited or un- 

 limited liability, of dividends or no dividends, are matters 

 to be decided according to local circumstances. If there 

 are dividends the maximum rate payable should be fixed, 

 the figure should be moderate, and it should be a sine 

 qua non that a considerable part of the annual profits 

 should be carried to reserve. Where loans have to be 

 taken by the bank it should establish a pretty wide margin 

 between the rate it charges to members and the rate it 

 pays. P-ersonal security is best. Securities consisting of 

 mortgages are dangerous because realization may be 

 difficult and the turnover tends to become too slow. Elee- 

 mosynary loans of State money should be ruled out. 

 Governments easily succumb to the temptation to bribe 

 one class at the expense of another, and, whatever the 

 result to the giver, the taker is not blessed. State loans, 

 if given at all, should bear a rate of interest which pro- 

 tects the general taxpayer from loss. Even so they are 

 only justifiable as a temporary expedient. Their ten- 

 dency is to make banks careless and to turn them aside 

 from their real object of creating credit out of thrift. 



