The daily banner. (Cambridge, Md.) 1897-2008, 1916-01-13
SHORT TERM LOANS
FOR THE FARMER
Rural Credit Associations Provide
Working Capital For German Farm
ers At Low Rates Of Interest.
F. B. BOMBERGER,
Maryland Agricultural College.

Maryland Agricultural College,
Just as the Landschaften or Land
Mortgage Associations are designed to
provide for the German land owners
longtime loans of capital upon the Sc
curity of their land, so the Raiffeisen
or Rural Credit Associations or Banks
are designed to provide short term
loans Of working capital to enable the
German farmers to plant, cultivate.
harvest and market their crops. These
institutions derive their name from
William Raiffeisen who established in
1852 at Anhausen cooperative union
or association of farmers for the pur-
pose of commanding credit for the in
dividual members upon their combined
credit. IN 1890 the number Of Rural
Banks in Germany was 1923, in 1900,
they had increased to 9,793; while in
1910 they numbered 1857. Moreover,
they have spread over the whole Con-
tinental Europe and are in operation
in Asia, Australia, South America and
even in Canada.
Is - Nelohborhood BANK.
The Raiffeisen type of Rural Credit
Bank is very unimposing affair. Its
operations are confined to q very linz
tied area usually district in which
the members are personally known to
the others, the average membership in
the province Of Saxony being ninety
two per bank. Usually the only paid
officer is a treasurer, while the Office
may be centrally located farmhouse,
a postoffice, a store or often the resi-
dence of the parish priest The aver
age cost of management is only one
fifth of one per cent.
The management of the bank is in
the hands Of committee of five, with
another committee of five to audit the
accounts, both committees being elect
ed by the members of the association
at its annual meeting in which every
member has vote. Loans which are
made only to members are usually
small, averaging about $500 and are
ductive purpose, specified in the ap-
plication. To secure a loan the Dor
rover must give his note to the asso-
citation, endorsed by fellow member
or supported by collateral of APPROX
ed type. The advisability of making
the loan in each case is passed upon
by the managing committee, and the
use to which the proceeds Of the loan
are put is under the scrutiny of the
members Of the association who are
the neighbors Of the borrower.
Low Interest Rates.
The terms for which loans are made
range from six months to three years,
the average being about one year. In
case Of failure Of crop, in bad sea-
sons, the loans are extended for addi-
tional periods. A very common form
of loan is that made on current &C.
count. In this case the loan Is ap-
proved up to a certain amount, but
the money is drawn out only as need
ed, interest being charged only on tho
amount used. II the money is misused
the loan can be called at any time.
Funds for the use of members are
derived from the sale of capital stock,
one-half per cent; from reserve funds
accumulated from previous years, 2.6
per cent; from savings deposits and
current accounts, IS per cent; from
central associations, referred to later,
liz per cent. Deposits are accepted
from anyone, but only members are
allowed to keep current accounts.
The rates at which loans are made
to members are very low, averaging
from IL to IL per cent. This con-
dition Is made possible from tho fact
that these banks are cooperative in
fact as well as in name. Usually no
dividends are paid on capital stock,
all earnings being carried to the re-
serve funds. The more successful the
bank the lower are tho rates of inter
est charged to members. The profit
sharing-policy, together with tho ex-
ceedingly low cost of administration,
gives to the farmer exactly what he
needs, abundant working capital, at a
very low rate of interest for periods
of time that will enable him to plant
a crop and await its maturity before
being called upon to repay the loan.
A National System.
Each Of these local Rural Banks is
combined into provincial union, at
the head Of which is the provincial
bank which serves as clearing house
for the local banks. These provincial
banks tend to eQualize the surplus
funds of the several banks and furnish
capital to the local banks for loans
to their members at 4 cost of about
one-half per cent more than Is paid on
deposits. The provincial banks are in
turn united with the National FEEDER
alton of Darmstadt which is an asso-
citation of practically all Of the agri-
cultural cooperative societies OF Ger
many.
The Rural Banks of each province
are united to form q Central Cooper
alive Association for the purchase and
sale for members Of agricultural prod
ucts on a wholesale basis or for carry
ing on cooperative enterprises of any
kind.
Thus the .RaifTeisen Rural Credit
Banks provide their members with
abundant capital at low rates of inter
est for periods suited to their needs
and enable them to cooperate on a
scale scarcely dreamed Of in America.
They enable the German farmers to
cultivate better, fertilize better, take
better care of their land and harvest
and n, q RI. ct. tn cir crnns t. EHttR.. az