advisability of the proposed expenditure in making the loan, the members of the bank all knew the plan of the member and were interested in his success, because in case the member failed and was unable to repay his loan to the bank they would all be losers.
Raiffeissen did another thing that is of utmost importance in rural banking. He adjusted the loans of the bank to meet the needs of agriculture. The farmer needs a longer time loan than the merchant or manufacturer. City loans for three and four months do not fit the business of farming. With the farmer 6 to 9 months is the shortest time for which he needs a loan. The time from planting a crop till it is harvested and ready to market is at least six months. The city merchant will turn over his money four or five times during the year but the farmer only once, so that the rural banks must make the loans for longer periods than is customary in the city. In case of crop failure in bad seasons loans must be allowed for still longer periods and in Raiffeissen banks these provisions were made.
From their beginning in the Rhineland the Raiffeissen banks have spread not only over all rural Germany, but almost all rural Europe. They have been modified to meet local conditions but with it all have kept in view the purpose of serving the needs of the farmer.
In studying the agricultural banking or credit system of a country the condition of the individual farmer must be taken into consideration. A system applicable to peasant farmers with small holdings, such as are found in many parts of Europe, is not likely to offer much of value for American farmers. But in a section in which the average wealth and stand of the farmers is on the same level as in America, a system that is proving successful may afford some good lessons.
Rural Banks in the Province of Saxony
Such a section is to be found in the province of Saxony where the rural banks are splendidly organized and doing a business of $100,000,000 per year.
The first striking difference between these rural banks and the original Raiffeissen banks is that they are organized on a limited liability basis. The farmers of Saxony for the most part are well to do, but they vary greatly in their financial worth. The man whose property is worth a hundred thousand marks is not willing to become a member of a rural bank or a cooperative association of any kind with members who are worth only five thousand marks and agree to an unlimited liability for its members. Consequently the Saxon banks are organized limiting the liability of the members in proportion to the interest they have invested in the bank. The fundamental object of the rural banks is to furnish credit to their members for working capital at the lowest rates of interest possible and not to make a profit on their business. In the
