August, 1009.] 



101 



Miscellaneous. 



which the loan is required is one that 

 affords a reasonable security for his 

 being able to repay the loan at the date 

 fixed ; and (4) that the operations of the 

 society are confined to a small area in 

 order that the personal character and 

 needs of applicants for loans may be 

 known to the members and committee. 



The collective liability of the members 

 to the extent of their whole means arose 

 partly from the fact that it was the only 

 system on which such societies without 

 means of their own could raise money 

 to lend to their members, and also that 

 at the time of their foundation it was 

 the only system recognised by the 

 German law. In some parts of Ger- 

 many, however, the principle of un- 

 limited libility has not been received 

 with favour, and the explanation is to 

 be found apparently in the distribution 

 of the agricultural population. In dis- 

 tricts where small peasant proprietors 

 predominate, all of a similar station in 

 life and not varying very greatly in 

 wealth, the Raiffeisen principles have 

 made great headway, but where farms of 

 different sizes occur the various classes 

 are disinclined to share on equal terms 

 the burden of unlimited liability, and 

 some form of limited liability has been 

 preferred. It is possible for this reason 

 that co-operative credit banks based on 

 unlimited liability have up to the present 

 made so little progress in England, while 

 in Ireland, where there is a greater pre- 

 ponderance of holders of the same class, 

 they have increased in numbers with 

 considerable rapidity. It appears, for in- 

 stance, that in 1907 there were only 15 

 agricultural credit societies in England 

 and apparently none in Scotland, where- 

 as there were 246 societies in Ireland, 

 which had loans outstanding in that 

 year to the amount of £50,164, and had a 

 membership of 15,100. With an exten- 

 sion in the numbers of small holdings in 

 this country, the opportunities for the 

 establishment of credit banks are likely 

 to become more numerous. 



The agricultural co-operative credit 

 societies formed up to the present are 

 usually based on the principle of the 

 unlimited liability of the members for 

 the debts of the society, because this 

 joint liability provides a security on 

 which money can be borrowed at normal 

 rates of interest. A community of small 

 cultivators, who may wish to form a 

 society of this kind are unlikely to be 

 able to raise enough money among them- 

 selves to provide a sufficient capital to 

 enable an institution of this sort to be 

 founded on an independent footing. It 

 has therefore been found necessary to 

 work on the lines of the Raiffeisen 

 bauks, but in order that the societies 

 may be maintained on a sound financial 

 21 



footing, it is in the highest degree essen- 

 tial that the importance of the two 

 main principles of the Raiffeisen banks 

 should be fully recognised. 



Loans Granted for Reproductive Par- 

 poses only. — It is necessary in the first 

 place that the societies should lend 

 money for reproductive purposes only ; 

 such as, for example, the purchase of 

 manures, feeding stuffs, cattle, sheep, 

 pigs and poultry, the erection of build- 

 ings, glasshouses, &c. It must be remem- 

 bered that borrowed money can only 

 be utilised with advantage if the margin 

 of profit obtained from its employment 

 is higher than the rate of interest paid 

 for it. The possibility of obtaining 

 money on favourable terms constitutes 

 one of the strongest arguments for co- 

 operative banks, but it is necessary that 

 the probablity of obtaining a higher 

 profit from money thus obtained should 

 be clearly shown. In this connection it 

 may be noted that the Department of 

 Agriculture for Ireland in its Annual 

 Report for 1906-7 observes, "It is of the 

 greatest advantage to the poor farmer 

 to obtain a loan on easy terms if the 

 money is properly applied to a repro- 

 ductive purpose, but if the loan merely 

 tempts him to increase his liabilities, 

 without any ultimate prospect of finding 

 himself in an improved position, it can 

 but injure him." 



Moreover, it is essential that the pro- 

 missory note signed by the borrower 

 should depend for its value not merely 

 on the signature of the borrower and 

 his sureties, but that it should have 

 behind it, as it were, goods actually 

 purchased with the money. Loans 

 should never be granted for the pay- 

 ment of debts, nor is it desirable that 

 loans should be renewed, or new loans 

 granted, in the place of old ones which 

 have not been discharged. The possi- 

 bility of unfavourable seasons, unpro- 

 ductive crops and unsatisfactory prices 

 should always be borne in mind. 



Need for Limiting the Operations of 

 each Society to a Small Area. — The 

 second principle of importance in un- 

 limited liability societies is that of con- 

 fining their operations to a small area. 

 It is obvious that where loans are 

 granted on personal security an inti- 

 mate acquaintance with the circum- 

 stances of each of the members and parti- 

 cularly of their character, for sobriety, 

 honesty and integrity is absolutely 

 necessary. This can hardly be the case 

 if a society extends beyond the limits of, 

 at the most, two or three parishes, but the 

 need for limiting the area necessarily 

 results in each individual society possess- 

 ing but small powers of raising money. 



Advantages of a Central Bank,— The 

 drawbacks connected with this restric- 



