The Colorado statesman., 1912-11-23
MAKE CHEAP LOANS
German Cooperative Credit Sys-
tenn for Workers and
Farmers.
United States Ambassador Reports on
System of Banks Which Serves
the Artisan. the Workman,
and the Small Busl-
ness Man.

WaSnlnRtOn-Ine German artisan,
as well as the German farmer has pro-
vided himself with financial machin-
cry to assist him in the conduct OF
his business. AS with the farmer CO.
operation is the basis of his banking
scheme-cheap credit and quick credit
is obtained for him by offering a col
lective guaranty. What he could not
secure alone he finds readily obtain
able when he combines his limited re-
sources with those OF his fellow
workmen.
The system OF banks which serves
the artisan. the workman, and the
small business man OF the towns of
Germany is known as the Schulze-
Delitzsch system. AS the membership
of these banks includes a high per
centage Of agriculturists and their op-
erations have an important bearing
upon the question of financing the
farmers, Ambassador Leishman has
included this system in the investiga-
tion which he is making in connection
with President Taft's effort to estab-
lish cooperative credit In this country
for the benefit of the American far
mer.
AS the social structure of the town
is more complex than that of the farm
ing community, SO the structure of the
Schulze-Delitzsch or urban co-opera-
tive banks is more complex than that
of the rural banks of the Raiffeisen
type. Their membership includes men
from many walks of life and of vary
tt1er -
has been found necessary, therefore,
to supply these banks with larger
foundation capital than is the case
with the farmers banks of the Raiffei-
sen type.
The collective guaranty offered by
the farmers is, indirectly. land guar
anty. The guaranty of town residents
is not so well defined. Therefore, the
members of the urban banks are re-
quired to subscribe a comparatively
large amount for capital stock. and
the banks operate upon this cash ba-
sis more in the manner of other banks
than is the case with the Raiffeisen
banks. which operate almost entirely
upon the guarantees given by the
members and with only a practically
nominal capital
Also the urban banks do more of a
| general banking business. Their larg
! er cash capital makes this possible
| for them. They do not depend for
their funds upon central cooperative
banks, but receive loans from outside
banks. They maintain and seek to
pay dividends upon their capital stock
This dividend runs generally from 8
to I per cent, but few of the
| Schulze-Delitzsch banks of Germany
pay as high as 10 per cent. and a
dividend of 25 per cent. is not un.
known.
The primary object OF the urban
banks is to furnish their members
with cheap, quick money. They lend
in two forms-loans on current ac-
count and loans for fixed periods
something over 40 per cent OF the
banks business. Loans for fixed pc
RODS are made on pledge or by dis
| counting bills of exchange. Also loans
! on mortgage form about 10 per cent.
of their total loans. A small number
of loans are granted without guaranty
| of any sort.
Capital shares in the Schuitze-
Dclitzsch banks average little over
| $50 The liability of shareholder is
| generally limited. The rate of inter
est paid for their money by these
banks averages about 3A per cent OF
the tota! working capital while the
gross profits average about 5A per
cent. OF the working capital. Deduct
ing from this margin the cost OF op-
Grating the banks and other expenses
there is still left net profit for dis
tribution averaging about S1a per
| cent. of the share capital. A portion
| of this net profit is carried over as
| reserve and the remainder distributed
as dividends.
Surplus funds not needed by tie
banks in making loans to members
are deposited with outside banks or
are invested in first-class securities.
The urban banks in three provinces
in Germany have organized central
banks. but for the most part the
banks are able to obtain money sat
isfactorily from outside banks. and
the three provincial central banks
are not of much Importance. The
urban banks do, however, maintain
current accounts with the Dresden
Bank. a private bank. in order to ia
cilitate the movement of their funds
and to equalize their debts and cred
its.