THE FARMER'S CAPITAL 877 



amount without security. Where farmers are known to be capable of 

 paying their debts, and do so without legal proceedings, credit conditions 

 are good and desirable money lenders are attracted. Honest bankers 

 avoid localities where legal pressure is necessary to collect loans; such men 

 merely want their principal back with the stipulated rate of interest. It 

 is true that the individual farmer can do little to establish the reputation of 

 a neighborhood, but the co-operative effort of many farmers can establish 

 confidence and credit. 



The Raiffeinsen Bank has done much for the farmers of Germany, 

 and under a different name has been equally effective in other European 

 countries. It is a neighborhood bank and is a simple institution. Each 

 member pledges his entire resources for the bank's debts. Each must be a 

 shareholder, the minimum holdings seldom being more than $5 each. As 

 soon as the bank is established, confidence is established and the wealthier 

 members deposit their money to be loaned to their neighbors and draw 

 interest. If this does not provide funds for all the would-be borrowers, 

 more money is easily secured in the open market, generally from the largest 

 bank in the nearest town. The organization is entitled to deal in credit 

 like bankers in cities, with the exception that it may lend only to its own 

 members, and then for productive purposes only, the purpose being stated 

 in the application for the loan. The officers, except the cashier, serve 

 without pay and are elected from the membership. 



Borrowing Money. — The amount of money that one can borrow on a 

 farm depends to a considerable extent on the character of the borrower. 

 In most cases, however, the limit is placed at about one-half the actual 

 value of the farm. Bankers will lend freely to men who are industrious 

 and honest, even though they have very little property. Applications for 

 loans are frequently refused to extensive property holders because of a 

 reputation they may have of not paying their debts unless forced to do so. 



Large insurance companies loan much money at the rate of 5 per cent, 

 but the farmer cannot get it at this rate. He must pay his banker or some 

 agent for securing the loan. The commission may range from .5 to 2 per 

 cent of the loan. There are innumerable other small expenses, such as 

 abstract of title, exchange in remitting, recorder's fee, etc. The tendency 

 is to shorten the time of the loan and increase the frequency of these renewal 

 expenses. This condition is unfair to the farmer and calls for a remedy, 

 legislative or otherwise. 



Farmers' Bulletin No. 593, issued by the United States Department of 

 Agriculture, states five rules that should be observed in borrowing money. 

 These are believed to be applicable under all systems of credit. They are 

 as follows: " (1) Make sure that the purpose for which the borrowed money 

 is to be used will produce a return greater than needed to pay the debt. 

 (2) The contract should provide for the repayment of the principal at the 

 most convenient time; that is, when the farmer is most likely to have the 

 means wherewith to repay it. (3) The length of time the debt is to run 



