Sept. 1895.] AGRieULTUKAL BANKS IN BAVARIA. 



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AGRICULTURAL BANKS IN BAVARIA. 



The first successful attempt to establish an agricultural credit 

 bank on what is known as the Raiffeisen system in Bavaria was 

 made in 1867 with the opening of a bank at Theilheim near 

 Wiirzbure:. The success which attended this venture encouraojed 

 its promoters to carry on a propaganda in favour of the forma- 

 tion of similar institutions in other rural districts, and in the 

 course of the next four years 37 credit associations came into 

 operation in the province of Lower Bavaria, while others were 

 opened in different parts of the kingdom. A report of the 

 German Co-operative Union gives the number of land-banks in 

 Bavaria in 1888 as 274, while according to a statement"^ by 

 Mr. Vansittart, Second Secretary to Her Majesty's Legation at 

 Munich, the number of agricultural credit associations, omitting 

 a few small societies, in Bavaria at the present time is 605. 

 But both these estimates include co-operative credit banks 

 of all kinds. 



The principle upon which the Raiffeisen credit associations 

 are based is that of unlimited liability. Raiffeisen, their founder, 

 had in view the needs of a class essentially lacking in credit, and 

 his system was framed entirely to meet the needy circumstances 

 of the peasant farmer and the village tradesman. As Raiffeisen 

 saw the matter, what was required was an association which 

 should borrow money chiefly from persons outside of its member- 

 ship and lend it to its members at a somewhat advanced rate of 

 interest. Such an institution could obviously only be successful 

 if it were in a position to borrow on more advantageous terms 

 than private individuals, and the principle chiefly relied upon to 

 secure this result is unlimited liability. Mr. Yansittart says, 

 " The strength of the Raiffeisen associations consists in unlimited 

 liability. Their safety is so trusted that bankers have declared 

 themselves ready to grant the associations credit, merely on the 

 ground of their unlimited responsibility, and without asking for 

 any other guarantee." 



With the principle of solidarity or unlimited liability a share 

 capital was not deemed necessary, and, at first, the associations 

 were organised^ without a share capital, all the profits of their 

 business in excess of the working expenses being devoted to 

 the creation of a reserve fund. One of Raiffeisen's objections 

 to a share capital was that, besides repelling those who would 

 feel themselves unable to make monthly payments, it would 

 introduce the practice of declaring dividends and thus foster a 

 spirit of speculation antagonistic to the primary purpose he had 

 in view. The reserve fund was to be the back-bone of the 



* Foreign Office Report, Miscellaneous Series^ No. 365, Price \d. 



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