Evening star. [volume] (Washington, D.C.) 1854-1972, 1913-11-03

RURAL CREDITS.
1.-The French System.
By Frederic j. Haskin.

| The French system Of cooperative
| rural credits is younger than those of
Germany and Italy, having been In
augurated by the enactment Of the
French professional syndicate law of
1884. But it was not until ten years
later that the movement came into
its own and began to develop rapidly.
In 1894 law was enacted creating
local mutual agricultural credit banks.
and this brought about the conditions
necessary for the spread of co-opera-
tive credit throughout the republic.
In another five years so many local
banks had been organized that It was
found necessary to create sort of
clearing house for them. The result
was the regional banks act. giving
state aid to the movement, and link
ing all the banks together into one
great organization.
In creating the regional banks the
French government placed at their dis
posal the income derived from the con-
In consideration OF the rights which
that institution enjoys. it must adj
vance to the state, without interest, a
loan of $S,000000. and must make an
annual payment upon the basis of the
amount of business done. This pay
ment varies from year to year. some
times going as high as 100000 and
sometimes as low 100000.
The local banks Of the French sys-
tenn are associations made up of the
members of agricultural syndicates or
buying and selling societies. They
must do purely a local business. their
share capital being made up of small
shares ranging between 81 and IS each.
The shareholders have no right to any
dividend. but are allowed per cent in
terest upon their Investments. Each
bank may determine for itself whether
1t Will pay interest on its deposits, and
each Is allowed much latitude in de-
termin1ng the extent of the liability of
its shareholders. Some fix the liability
up to the amount of the stock, others
doubling it, and still others making
IT unlimited so far the management
Is concerned, or even extending this
unlimited liability to all the members
The present tendency lis toward the un-
limited liability idea. making every
of it's debts
The local French rural bank is gen
orally managed by a small council of
members. When
Must Buy Stock it is organized
in Regional Bank. 1 y must .a SUD SUD-
tain number of shares Of the regional
bank of the province or department 1t
can then take advantage of the regional
banks credit facilities. the regional bank
discounting it's loans and making adj
vances for working capital
When a member Of a local bank wishes
to borrow money he goes to the bank
and signs bill. If this passes muster
the local bank indorses it and transmits
it to the regional bank. This bank in
turn discounts the bill and Immediately
forwards the cash less the discount. In
recent year the regional banks dis
counted $16OO0,OO0 in bills in this way
The regional bank charges per cent
interest on such discounted bills and the
local bank charges per cent. The mar
gin suffices to meet the expenses and to
create a reserve fund for the local bank.
The size of the loans made to members
varies but limit is nearly always fixed
which is far on the safe side OF the
danger line.
The security which the bank requires
for a loan varies with the circumstances
and with the policy of the bank itself.
Sometimes one security is accepted and
sometimes two are required. The man
who cannot or prefers not to get an in
dorser. may deposit collateral in lieu
thereof The period of the loan VARIES
according to the nature of the under
taking. from three months to a year.
MANY DdHhS require rene" dis every liiiiClS
days, and some Of them demand smAl
installment on the principal with each
renewal. At least three-fourths of the
profits Of each bank must go to the re-
serve fund until that amounts to half
the paid-up share capital. The balance
may be divided among the members in
proportion to the amount Of interest
paid on loans.
The regional banks receive. through the
government. from the Bank Of France,
loans without interest. four times their
paid-up capital, for period of Ave years,
subject to renewal. For example, a re-
gional bank is made up of ten local banks.
each of which .subscribes 5000 to its
share capital, SO that the stock of the
regional bank amounts to $40. 600. This
gives it the right to a misunderstanding
loan of $4,000 from the Bank of France,
under the concession terms OF that in
stitution.