1908.] Agricultural Credit Societies. 



409 



kind are unlikely to be able to raise enough money among 

 themselves to provide a sufficient capital to enable an institu- 

 tion of this sort to be founded on an independent footing. It 

 has therefore been found necessary to work on the lines of 

 the Raiffeisen banks, but in order that these societies may be 

 maintained on a sound financial footing it is in the highest 

 degree essential that the importance of the two main principles 

 of the Raiffeisen banks should be fully recognised. 



Loans Granted for Reproductive Purposes 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 buildings, glasshouses, &c. It must be remem- 

 bered that borrowed money can only be utilized 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 

 probability 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 ad- 

 vantage to the poor farmer to obtain a loan on easy terms if the 

 money is properly applied to a reproductive 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 promissory 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 

 payment 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 possibility of unfavourable 

 seasons, unproductive 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 unlimited 

 liability societies is that of confining their operations to a 



