People's co-operative banks for workers in towns, and small holders, allotment cultivators, and others in country districts

Front matter

PRICE ONE SHILLING NET

PEOPLE'S

CO-OPERATIVE

Preface

THIS little book has been written in the midst of many pressing engagements in order to make the Co-operative Banks Movement better known, and in the hope of securing increased practical support for it.

The State recognition accorded to Co-operative Credit by the provisions of the Small Holdings and Allotments Act, 1907, relating thereto, will, I trust, make its publication specially opportune.

My experience as Secretary of the Co-operative Banks Association, the Co-operative Credit Department of the Agricultural Organisation Society, and the Urban Co-opierative Banks Association, will at all events be a guarantee to my readers that the facts set forth have been gathered at first hand, and that the conclusions arrived at are not merely theoretical.

HENRY C. DEVINE.

39, VICTORIA STREET,

WESTMINSTER, S.W.

NOTE. — The terms " Urban " and " Town " Co-operative Banks or Societies as used throughout this book are interchangeable. The same remark applies to the terms " Rural" " Country " Banks and " Village " Credit Societies.

Whilst the author welcomes suggestions and criticisms of the Co-operative Banks Movement, he trusts that, in view of the heaviness of his correspondence, any letters requiring acknowledgment or reply will be accompanied with the necessary postage.

Contents

PAGE

PREFACE vii

CHAPTER I. WHAT is A CO-OPERATIVE BANK ? . . i One Definition — Another Definition — Larger Types — Objects of Banking — Difference between Ordinary and Co-operative Banks — Safety of Co-operative Banking — Principles of Co-operative Banking— Limited and Unlimited Liability Banks.

Chapter II. Urban Co-operative Banks : Constitution And Methods ...... 5

Entrance Fees — Shares — Size of Districts — Members' Powers and Responsibility — Committees of Management and Treasurers — Committee's Powers and Duties — Councils of Supervision — Profits and Dividends — Management Expenses — Loans and Rates of Interest — Depositors.

CHAPTER III. RURAL CO-OPERATIVE BANKS : CONSTITU- TION AND METHODS . . . . .10 Entrance Fees — No Shares nor Dividends — Profits — Reserve Funds — Management Expenses — Size of Districts— Members' Powers and Responsibility — Committees of Management — Trustees, Treasurers and Secretaries — Committee's Duties — Council of Control — Loans and Borrowers — Sureties — Security Forms — Depositors — Initial Capital — Unlimited Liability Safeguards.

Chapter IV. Benefits Of Urban And Rural Co- Operative Banks . . . . . .15

Amelioration of Poverty — Twofold Character of Benefits — ECONOMIC BENEFITS — Should Poor People Borrow ? — Reply to Objections — Productive Credit — Town Loan Purposes and Examples — Country Loan Purposes and Examples — Social Credit — Improvident Credit.

x CONTENTS

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CHAPTER V. BENEFITS OF URBAN AND RURAL CO-OPERA- TIVE BANKS (continued) ..... 26 Objections to Saving — Answers to Objectors who Consider it Impracticable — Examples — Answers to Objectors who Consider it Inadvisable — Improvident Saving — Advantages of Saving — EDUCATIVE BENE- FITS.

CHAPTER VI. RISE AND SPREAD OF CO-OPERATIVE CREDIT 34 Origin and Progress — Early Pioneers — Raiffeisen Banks— Schulze-Delitzsch Banks— Haas Banks- Other Varieties of Banks — Some Statistics — Italian, French, Austro-Hungarian and Other Banks — Rates of Interest on Loans — Supplementary Note on Colonial and Egyptian Agricultural Credit and American Co-operative Saving and Loan Associations.

CHAPTER VII. CONTINENTAL METHODS OF CENTRAL BANK- ING 46

The Need for Central Banks— Central Bank of Co-operative Agricultural Banks of Germany — Constitution— General Meeting — Board of Directors — Committees of Management — Methods of Business — Profits — Regulation of Personal Credit — Important German Safeguards — Relation to Prussian State Bank — Neuwied Statistics — German Co-operative Societies' Bank and the Dresdner Bank — Berlin and Frankfort Statistics— Central Bank of the Darmstadt Union — Other Continental Central Banks.

CHAPTER VIII. STATE AID AND SUPERVISION . -53 Two Schools of Thought— English State Aid- Arguments Against State Aid — Arguments for State Aid — Continental State Aid — German and Other Methods of Supervision.

CHAPTER IX. PROGRESS OF THE MOVEMENT IN THE BRITISH

ISLES Co

Early Difficulties — Agricultural Banks Association — Toynbee Town Banks Committee — Co-operative Banks Association — Agricultural Organisation Society's Co-operative Credit Department — The Urban Co-operative Banks Association — Summary of Progress in England — Small Holdings and Allotment Acts, 1907 — Irish Agricultural Banks — Wales and Scotland — Central Banks Committee — Central Co-operative Agricultural Bank, Ltd.

CONTENTS xi

PAGE

CHAPTER X. How TO FORM CO-OPERATIVE BANKS. . 69 Through Trades Unions — Friendly Societies — Social Unions— Guilds of Help— Settlements, P.S.A.'s, etc. — Individuals — The Press — Country Propaganda — Detailed Formation of Town Banks — Ditto Country Banks.

CHAPTER XI. HINTS ON THE MANAGEMENT OF CO-OPERA- TIVE BANKS ....... 76

Their Spirit and Principles — Correct Book-keeping — Important points — URBAN BANK REQUISITES — • Forms, etc. — Cash Book — Share, Loan, and Deposit Registers — General Ledger — Balance Sheets and Audit — COUNTRY BANK REQUISITES — Town and Country Establishment Expenses — Financial Safeguards.

CHAPTER XII. THE IMPORTANCE OF SUPERVISION . . 84 Its Necessity — A Suggestion for the Government — Affiliation — Registration — Good and Bad Audits — Councils of Supervision and Local Auditors — Inspection by Post — Travelling Inspector — District Controllers.

CHAPTER XIII. SOME PERSONAL REMINISCENCES . . 90 The British Working Man— A " Poser "— " Vested Interests " — " A Model Money Club " — Halls and Audiences — Country Wit and Humour — " A Cautious Countryman " — A " Productive Purpose " — " The Conservative Lion and the Socialist Lamb " — Personal Acknowledgments.

CHAPTER XIV. MONEY-LENDING AMONGST THE POOR . 98 Failure of the Money-Lenders Act — Money-Lenders and their Clients — CASES OF VICTIMS — " A Young Mother" — "Another Poor Woman" — "A Printers' ' Chapel ' " — " Ruined Clerks " — Other instances — Village Victims — Other Dodges — Extent of the Money-Lending Evil — Methods of Counteraction — Parliamentary Committee's Commendation of Co-operative Banks.

CHAPTER XV. OTHER LOAN AGENCIES . . . .107 Pawnbrokers — Slate Loan Clubs — ADVANTAGES OF CO-OPERATIVE BANKS OVER SLATE LOAN CLUBS — Greater Permanence and Stability — Greater Command of Capital — Better Facilities for Saving — Less xii CONTENTS

PAGE

Limitation of Loans and No Compulsory Borrowing — Less Fines — Self-Government versus Paternalism — Charges and Dividends — Slate Club Scandals.

CHAPTER XVI. OTHER LOAN AGENCIES (continued} . 117 " FRIENDS OF LABOUR " Loan Societies — Management — Shareholding and Borrowing — Charges — Withdrawals— CONTRAST WITH CO-OPERATIVE BANKS — ' ' SELF-HELP " Societies— Officers— Shares— Loans — Management Fund — Dividend Fund — MONEY SOCIETIES — Investing Members — Borrowing Members — Payment of Officers — Working Expenses — Bad Features of the Money Bond System — Loan Premiums and Candle Clubs — How Bondholders and Borrowers are Penalised.

CHAPTER XVII. COUNTERFEIT CO-OPERATIVE BANKS . 127 Characteristics of these Promotions — Abuse of the Term " Co-operative " — Exploitation of Mutual Aid Propaganda — Deceptive Interest on Loans — Serious Risk of Losses.

TOWN DISTRICTS — Savings — Lending — Ruskin Banks — THE PRINCIPAL NECESSITY OF THE MOVEMENT — National Conference of Co-operative Bank Workers — Centralisation Proposals — A Large London Co-operative Bank — Opinions of the " Statist " and the Chief Registrar of Friendly Societies — COUNTRY DISTRICTS — Early Village Loan Funds — Village Credit Societies an Improvement Thereon — Opinions of the Rt. Hon. R. W. Hanbury, M.P., and Mr. H. Rider Haggard — Larger Schemes of Co-operative Agricultural Credit — RELATIONSHIP TO THE GENERAL CO-OPERATIVE MOVEMENT — The Co-operative Wholesale Societies' Bank — The Co-operative Productive Federation's Loan Fund — RELATIONSHIP TO THE SAVINGS BANK MOVEMENT — A NATIONAL MONEY-LENDING INSTI- TUTION— PROPAGANDA ASSOCIATIONS.

CHAPTER XIX. GENERAL CONSIDERATIONS . . .142 For Social Workers — For Working People — For the Financial Supporters of Social Reform.

BIBLIOGRAPHIC NOTE . .146

Chapter I What Is A Co-operative Bank?

BEFORE dealing with the constitution, methods, and detailed advantages of People's Co-operative Banks, their use and progress, the circumstances under which they have been introduced into this country, and with what is required to make the movement the great and useful national success which I am convinced it could become, it behoves me to answer the elementary question, " What is a Co-operative Bank? "

One Definition. — The obvious technical reply that it is a bank conducted on co-operative principles, would not be particularly illuminative to the general reader, and so I will elaborate it by saying that Co-operative Banks in the United Kingdom are societies composed of small tradesmen, clerks, artisans, and working-people generally, with the addition of such members of other sections of Society as they invite or approve, formed in town and country districts, and conducted on co-operative principles, for the purpose of collecting and safeguarding the people's monetary savings on the one hand, and on the other constituting funds out of which such of their members as wish to obtain loans may do so upon satisfying their Committees of Management of the utility of the purposes for which advances are required, and of their personal honesty and ability to duly repay them.

Another Definition. — To many working-men this definition might appear to be what they would call a " reg'lar rigmarole," so for the benefit of such I will say that a Co-operative Bank is a mutual society, formed, comppsed, and governed by working-people themselves, ' f-o-r -encouraging regular saving and granting small loans on easy terms of interest and repayment.

Larger Types.— I am quite aware, of course, of the wider scope of Co-operative Banks on the Continent, especially in Germany, where their enormous turnover (dealt with in a later chapter) indicates that they are utilised not only by poor people, but also by those whose transactions are on a much larger scale.

But though in Great Britain and Ireland there is clearly scope for two classes of Co-operative Credit Societies — the first comparatively small ones for working-people, and the second larger ones for the benefit of members of other classes needing to borrow money for various reasons, but who at present must either go without the necessary accommodation, find themselves under the disagreeable necessity of borrowing from friends, or resort to money-lenders — it is work ing-class rather than middle-class Co-operative Banks which have so far been established here, and with which, therefore, this book is primarily concerned.

Objects of Banking. — The popular idea of a "Bank " is " a place where you put in money," although it would be no less accurate to define it as " a place from whence you take out money."

Savings Banks, Penny Banks, and such-like only perform half the functions of banking towards their members, as Loan Societies only perform the other half.

As a matter of fact, a bank is an establishment which deals in credit, attracting by the security which it offers a certain amount of money, retaining a fraction of this to meet possible demands, and using the balance in various forms of loans whereby it makes its profit.

Difference between Ordinary and Co-operative Banks. -This object People's Co-operative Banks set themselves to perform on behalf of the humbler classes of the community.

They are not competitors of the established private and joint stock banks of the country, but rather supplementary institutions — " rivulets of the river of

WHAT IS A CO-OPERATIVE BANK? 3

banking," as the Managing Director of one of the large London banking institutions happily described them to the writer recently.

They are rivulets and not rivals because they assist many to rise to the status of ordinary bank customers, and deal with a class of business which is neither cared for nor catered for by bankers generally, on account of its smallness and lack of commercial profit; and also because they abstain from departments of banking which require expensive expert management.

It would not pay an ordinary bank to deal in the tiny deposits and small loans which compose most of the business of a Co-operative Bank.

Even as it is, bankers feel compelled to charge many of their smaller customers so much a year for permitting them to bank with them.

Then, again, the members of Co-operative Banks who need financial accommodation do not possess the tangible security which bankers very naturally require.

The principal security of a Co-operative Bank borrower is his character, and this is rarely supplemented by anything stronger than one or two personal sureties of men of his own economic status.

This mutual trust is found by Co-operative Banks safe in practice, but if it were exercised by commercial concerns it would be otherwise.

Safety of Co-operative Banking1. — The man who would not trouble to repay a loan obtained from the wearer of a frock coat and silk hat, on the ground that " JE can afford to do without the money better than I can," would strain his utmost to discharge a similar obligation towards a society of his own class.

Not to do so would be considered as " robbing his pals," and would lead to his being cold-shouldered (or worse) by his fellow workmates.

Hence there is a stronger monetary conscientiousness between workman and workman than betwreen workman and parson or other charitable lender, which is one practical reason why patronage should not be intrusive in connection with Co-operative Banks.

In villages the security of personal credit is specially strong, as " everyone knows everyone else and all about

4 CO-OPEKATIVE BANKS

them," and it is therefore comparatively easy to distinguish those who can be trusted from those who cannot.

But even in town centres, especially in the Provinces, men of their own class have a fair knowledge of each other's character and ability and considerable facility in " spotting a wrong 'un."

This is the principal reason why so few losses, and those only of small amounts, retrievable from reserve and contingency funds, are made by People's Co-operative Banks.

Principles of Co-operative Banking.— I have only sketched the skeleton, as it were, of such societies in these brief introductory remarks.

Their vitality is due to their co-operative principles — the brotherhood basis upon which they are formed and worked — and the education in individual and social life which animates them.

They claim the sympathy and support of public-spirited men and women not only because they enable poor people to retain amongst themselves the financial profit of their economic transactions, but also — and mainly — because they train the intelligence and character of their members, educating them in self-control, reasonable prudence, administrative ability, and other qualities tending to the improvement of manhood, the capacity for free citizenship, and considerate human comradeship.

Limited and Unlimited Liability Banks.— There are, roughly speaking, two kinds of these societies, one formed with shares on limited liability principles, the other without shares, with unlimited liability.

In this country these are respectively known as Urban or Town Co-operative Banks, and Village Credit Societies, Country Co-operative Banks or Agricultural Banks.

Abroad it is different, both classes of societies operating in urban and rural districts.

The next two chapters set forth the detailed constitution and methods of these types of Co-operative Banks.

Chapter II Urban Co-operative Banks — Constitution And Methods

URBAN Co-operative Banks are registered under the Industrial and Provident Societies Act, 1893, as amended in 1894 and 1895.

(A) Entrance Fees. — Some of these societies charge an entrance fee of 6d. per member, and others of 6d. per share. In my opinion, it is better to charge 6d. or is. per member, but the decision on this and other minor points rests with their local committees.

(B) Shares. — Each member must subscribe for at least one share, the value of which is generally £i, but may be as low as ios., 5s., or even less. They may be paid up at the rate of 3d. or 6d. per week. The dividend on shares is limited to not more than 5 per cent, per annum.

They are not withdrawable but are transferable, and every facility is afforded for the transfer of shares by those leaving a neighbourhood or whose poverty compels them to realise their investment in the society.

A member's financial liability is limited to the amount of his shareholding.

(c) Size of Districts. — The area of each Society is limited to a small district in order that the character of applicants for advances should be either well known or easily ascertainable.

(D) Members' Powers and Responsibility. — Each member, whatever the amount of his shareholding, has one vote only which he can exercise at Ordinary and Special General Meetings. No voting by proxy is allowed.

(E) Committees of Management and Treasurers. — An Executive Committee (consisting of from five to thirteen members) and a Treasurer are elected at Annual General Meeting, which all members are invited to and entitled to attend.

(F) Committee's Powers and Duties. — These are to appoint a Secretary (who has no vote at Committee Meetings), admit members, grant loans, fix the rates of interest for borrowers and depositors, and generally manage the Society on behalf of the members.

(G) Councils of Supervision. — A Council of Supervision of not less than three nor more than nine members should also be elected every year by the General Meeting from amongst the members of the Society, who are not on the Committee. The duties of this Council are to meet three or four times a year to review the transactions of the Society, to see that its rules are being complied with, and its members' interests duly safeguarded.

So much for the constitution of Town Co-operative Banks.

It will now be opportune to describe their methods of work.

The benefits conferred by them will be dealt with afterwards.

Town Co-operative Banks have two departments, one for receiving deposits from members and non-members upon which interest is paid, the other for making advances to members only upon which interest is charged.

Before dealing with these two departments, which represent one great difference between the operations of Co-operative Banks and those of Savings Banks (Penny and otherwise), Slate Loan Clubs, and Mutual Loan Societies, it may be as well to say a few words regarding the disposal of the profits arising from the business of such a society.

Profits and Dividends. — The general rule is to place one-fifth of the profits of each year to the Reserve Fund.

Out of the balance of profit a dividend not exceed-

URBAN CO-OPERATIVE BANKS 7

5 Per cent, per annum on fully paid up shares may be declared.

Any other profit is free to enable the Society —

(a) To remunerate officials.

(b) To devote to educational or other purposes

at the determination of the General Meeting.

(c) To reduce its charges to borrowing mem-

bers.

The best method of doing the latter is to declare a dividend to custom in the shape of a bonus upon advances made, thus demonstrating in a practical manner the economic advantage of the union of members.

Management Expenses. — It is most essential that the expenses of conducting these financial friendly societies be small.

The principal items of expenditure are Secretary's Salary or Honorarium, Rent of office, and Printing.

The Secretaries are the only paid members, and the acknowledgment made to them for their services varies, according to the profits of the particular society, from £5 to £20 per annum.

It is often possible to secure the use of a room, one or two nights a week, rent free, on the premises of a School, Institute, Club, or Settlement.

In other cases, from! is. upwards a week would have to be allowed. Printing need only be a small item.

Loans and Rates of Interest. — Loans are granted to members only, and solely for purposes which, in the opinion of the Committee of Management, are wise and remunerative.

The limitation of dividend on shares, referred to previously, removes the temptation which might otherwise arise in some cases to charge extortionately for loans, and so enrich those who did not use the society for borrowing at the expense of members applying for advances.

As Co-operative Banks are established for the mutual benefit of all their members, and not for the purpose of paying large dividends to their shareholders, it is by means of but outside the Bank that profit accrues to those who join them.

No uniform rate for loans has been adopted, but the average charge made by English Town Banks has hitherto been 2d. in the £ per month on the amount outstanding.

The exact amount to be charged by Committees depends upon : —

1. The size of a society.

2. Its annual turnover.

3. Its cost of maintenance.

4. The payment or otherwise of officers.

Extremely low as the above-mentioned rate is compared to the ^d., id., and more per shilling per week charged by working-class money-lenders in warehouses, workshops, and mean streets, which works out at 35. 4d. and 6s. 8d. in the £ and upwards per month, or over 200, 400, and 1,000 percent, per annum, it is sometimes criticised as heavy, and contrasted to its disadvantage with the 5 per cent, charged on overdrafts to their customers by Private and Joint Stock Banks.

A little experience of working-class life and working-class loans would soon show such critics that they were speaking in ignorance.

The man who goes to his Joint Stock Bank for an overdraft of, say, ,£1,000, generally deposits or gives his banker a lien over, undoubted security for it, besides turning over with him in the course of the year business which yields other profits to the bank.

If, at the end of a year or other period agreed upon, the banker wishes to realise his loan, he can call it in, and has made upon it probably at least 3 per cent, or ^30 (the difference between a payment of 2 per cent, paid on deposits and 5 per cent, charged), with little or no risk of loss. This illustration refers to normal times, unlike those of the moment, when the Bank of England rate is so high.

In the case of a People's Co-operative Bank, ^1,000 might represent not merely one but two or three hundred or more separate loan transactions.

Much more searching inquiries have to be made as

URBAN CO-OPERATIVE BANKS 9

to the reliability of these borrowers of sums from £i and upwards, and the security received, apart from the character of the borrower (which is the most important), is simply a promissory note signed by the borrower and backed by one or two sureties.

As the interest includes all expenses of inquiries, innumerable entries in the books, reminders to debtors in arrear, and risk of bad debts, I feel sure that any business man will admit that 2d. in the £ per month is both a cheap and moral charge to make under the circumstances.

Anyhow, working-men fully recognise this, and it may be lowered by the bonus system.

Loans are generally repaid at the rate of 6d. in the £ per week, but interest is only charged on the balance outstanding from month to month.

Fines, as fixed by the Rules, may be charged for amounts in arrear, but in cases where these arrears are shown to Be the result of unforeseen misfortune or poverty they are not required.

With ordinary usurers a debtor's difficulty is his creditor's opportunity to grind more profit out of him, regardless of everything else.

In the case of a Co-operative Bank a defaulting member is treated with brotherly consideration.

Depositors.— The banks also receive deposits, and as a rule pay thereon 3 per cent, interest per annum on complete pounds deposited for complete months.

Their security is the paid and unpaid share capital, combined with regular statements of accounts and yearly audit.

Depositors have, of course, a first claim upon the assets of the societies.

As banks affiliated to the Urban Co-operative Banks Association can always obtain 3 per cent, interest upon their surplus funds from the Central Banks Committee, described in Chapter IX., they can accept deposits' freely from their members.

Chapter III Rural Co-operative Banks — Constitution And Methods

RURAL Co-operative Banks, known generally in this country as Village Credit Societies, are constituted somewhat differently, and are registered as specially authorised societies under the Friendly Societies Act, 1896.

(A) Entrance Fees. — A small entrance fee, the amount of which is fixed by the Committee, is charged on joining. This is often no more than is., and never exceeds 55.

(B) No Shares nor Dividends. — They have no shares, and therefore no dividend to pay thereon.

Profits are made, as in the case of Town Banks, by the difference between the sum paid for the use of money and the charge made for the same.

Reserve Funds. — Any surplus accruing to a society after payment of the cost of administration is carried to a reserve fund. Should any loss be incurred, it may be met out of this fund if voted by the Annual General Meeting.

According to one of their Rules, Reserve Funds are not divisible amongst the members under any circumstances.

If a society is dissolved, it must be devoted to some useful purpose in the district; the object can be determined upon by the meeting at which the dissolution of the society takes place.

Management Expenses.— These are extremely small, the village parson, postmaster, schoolmaster, or some small holder being generally found willing to undertake the duties of the secretaryship, either in a

RURAL CO-OPERATIVE BANKS 11

purely honorary capacity or for an extremely small honorarium.

It is also rarely necessary to pay rent in a village, which means a saving over town conditions, and the printing item, where everybody knows everybody, is naturally an extremely small item.

Another small saving is effected through the exemption from stamp duty on certain legal documents accorded to Friendly Societies which divide no profit, bonus, or dividend amongst their members.

(c) Size of Districts — In order that members shall be fully acquainted with one another, it is well to limit the area of each society to one parish, but if this is too small two or three can be included.

(D) Members' Powers and Responsibility. — Each member has one vote solely, which he can exercise only by personal attendance at Annual General and Special Meetings.

(E) Committees of Management, Trustees, Treasurers, and Secretaries. — The Committee (consisting of at least five persons) has to be elected by the members from amongst themselves at the Annual General Meeting.

The General Meeting also appoints at least three Trustees, in whom the property of the society is vested, and who invest any of its funds (not required for loans or repayment of deposits) under the conditions of the Friendly Societies Act, as sanctioned by the Committee.

The Treasurer, who is appointed by the General Meeting, becomes, by virtue of his office, a member of the Committee, and receives from the Secretary all moneys paid to him on behalf of the society.

The Secretary is appointed by the Committee.

^F) Committee's Duties. — These are to appoint a Secretary (who has no vote at Committee Meetings), to elect a Chairman, who also presides over the General Meetings of the society, to admit members, grant loans, and fix the rates of interest for borrowers and depositors.

(G) Council of Control. — The duties of this body are to meet at least once a quarter to review the work of the Committee and satisfy itself that all the Rules have been kept.

It presents a report to the Annual General Meeting, and at meetings of the Committee to consider conjointly with itself any matters which it deems desirable to be settled thus.

It consists of not more than five members (who must not be members of the Committee), elected annually at the General Meeting.

In consequence of the difficulty found in some districts of constituting a Council of Control, its formation is made permissive in English Rules.

The advantages of such supervision are, however, undoubted, and societies are strongly recommended to establish it.

Loans and Borrowers. — Loans are granted to members only, and solely for productive, business, or economical purposes likely to be beneficial to them.

Ample time is allowed for borrowers to make their profits out of advances before repayment.

In country districts loans are generally repaid in full at the end of a fixed time instead of by weekly or monthly instalments, as in towns, where money is turned over more quickly.

It is also possible to charge less—

(a) Because the management expenses, as ex-

plained in a previous paragraph, are so extremely low.

(b) Because there is no share capital upon

which interest has to be paid.

The charges of village societies in this country have hitherto been 5 and 6 per cent, per annum.

Sureties. — Applicants for loans are required to offer, in addition to their personal security, that of one or two friends who are willing to guarantee to repay them in full to the society should they fail to do so.

The exact number of sureties is determined by the Committee.

Security Forms. — Two kinds of forms are used. The first is an ordinary promissory note; the second an agreement setting forth the purpose for which the loan

RURAL CO-OPERATIVE BANKS 13

is granted and the terms arranged for its repayment, signed by the Borrower and the Surety or Sureties who agree thereon to be responsible for the principal and interest in case of default.

Depositors. — These societies also receive deposits, and pay not more than 4 per cent, interest upon them, The rate has generally been 3 per cent.

Societies may, subject to the provisions of the Societies Borrowing Powers Act, 1898 (relating to nondivision of profits), receive deposits or borrow money at interest from non-members.

As the Central Co-operative Agricultural Bank, Limited, pays 3 per cent, upon any surplus funds placed in its hands, local credit societies who are members thereof can accept all deposits tendered to them.