The Delta independent., 1915-08-20
The Reserves of Rural Bank.


AS said in the Field and Farm last
week the rural cooperative bank ex-
acts fair interest for its loans or cred
it; it also exacts adequate prices and
compensation for the supplies it sells
and the services it renders Never
theless, it limits its profit-takings to
its own actual necessities. Its aim
is rather to save the economies and
reduce the expenses of members than
to derive gain from them; and espec-
pure association and distributes no
dividends. Hence, perhaps arises the
belief in its benevolent nature. But
this belief is erroneous. A rural CO.
operative bank has too many needs
for funds to give things away free.
In order to attract deposits or saw
ings it must offer interest at as high
rate as is paid by the ordinary banks
in the neighborhood. 1t must also
pay the market rate for the money it
may borrow. And if it has no share
capital it must accumulate a reserve.
All this-saying nothing of the cost of
business-must come from its dealings
with or for its members. The fact
cannot be too strongly emphasized
that cooperation is not charity. True
the bank eXerts an effect which is
morally as we'll as materially bene
ficial to members, through bringing
them together and organizing their
resources for their common good; but
it can do this only with persons who
are seIf-reliant, capable and honest
and known to be so.
very striking feature in a true
rural cooperative bank is the reserve.
All the net earnings are carried to this
fund. 1t serves. of course, as a capital
stock and every effort is made to
maintain it in volume sufficient for
both working and a guaranty fund.
Its accumulation is the chief reason
that the bank has for trying to make
any profits at all. The larger pro
portion of this fund is made an in
diyisible permanent. local foundation
that cannot be dispensed in any way.
In Germany. upon dissolution of a
bank. the indivisible reserve must be
turned over to the federation to be
held for some new bank: if one is
not formed within thirty years. then
it goes to the state to be donated to
some public. agricultural object in the
neighborhood.
Many of these local foundations are
10000 TO 100000. Distribut-
ed as they are throughout the Empire
they have stabilized the rural popula-
tion. Farmers when once they be-
come members hesitate to forfeit their
rights in the use of this fund by re
tiring from a bank which they and
perhaps their ancestors helped TO
build up. The effect would be the
same in the United States. The ind
visible reserve, however. is not new
idea in this country. 1t is common
among American mutual SAVINGS
banks. The Cleveland Society for
Savings. OF which am president, was
organized in lS49-one year before
the first cooperative bank was formed
in Germany. Its first secretary kept
its securities in tin box. which he
took home with him at night and put
under his bed for safe keeping. The
Society has never distributed share
dividends
Its profits are used for paying IN
terest on deposits and for creating
reserves. One of the latter is obli-
gatory and is called the surplus fund.
1t now amounts to S4,000.O00 and is
yearly increasing from the earnings
of S63, 100000. To whom does this
belong? Certainly not all of our pres
ent depositors because. although they
now number $685.. they have contrib