PRICE ONE SHILLING NET c,- PEOPLE'S CO-OPERATIVE BANKS For Workers in Towns, and Small Holders, Allotment Cultivators, and others in Country Districts I BY HENRY C. DEVINE A POPULAR EXPOSITION of the Co operative Banks Movement CASSELL & COMPANY, LIMITED London, Paris, New York, Toronto & Melbourne 1908 THE CO-OPERATIVE BANKS MOVEMENT. The Urban Co-operative Banks Association, 39, VICTORIA STREET, WESTMINSTER, LONDON, S.W. President. Mr. ROBERT A. YERBURGH. Committee. Mr. ROBERT A. YERBURGH. I Mr. VINCENT R. HOARE. SIR HENRY ROBSON. Mr. V. A. MALCOLMSON. Mr. JOHN ROSS. Mr. T. M. KIRKWOOD. Mr. V. V. BRANFORD. Mr. W. J. BRAITHWAITE. Hon. Treasurer.-SIR HENRY ROBSON. Secretary. Mr. HENRY C. DEV1NE. It is felt that the time has arrived when a strenuous effort should be made to systematically organise the Movement on a national scale. To enable the Association to utilise the greater opportunities that present themselves for the development of its propagandist work, and to secure the regular and expert supervision of the affiliated banks, which is most essential, an annual income of 1,000 is required. Dr. J. B. PAWN, of Nottingham, writes:-" It is because the Urban Co-operative Banks Association is a non-profit making body of disinterested persons, atif du Credit populaire " at Marseilles, 273 (19 in towns) independent Credit Societies, and the balance Regional Banks (Caisses re*gionales de Credit), established for the purpose of distributing and super- vising the State loans described in my chapter on State Aid. These Regional Banks are self-governing bodies, formed by private individuals, and supervised by the State. Mention should also be made of the Co-operative Productive Bank of Paris (Banque Co-op6rative des SPKEAD OF CO-OPERATIVE CREDIT 41 Associations Ouvrieres), founded some twelve years since by gifts of one person, amounting to .20,000. Its principal business consists in the discounting of bills of French Co-operative Productive Societies to the extent of over ; 1,000,000 per annum. In Austria, at the beginning of 1904, there were, besides a number of Schulze-Delitzsch Banks, 3,908 Raiffeisen Credit Societies, and in Hungary nearly 2,000 Credit Societies (agricultural and industrial), having a yearly turnover of about .3,000,000, affiliated to the Hungarian Central Credit Association, one of the objects of which has been described as " to re-animate small industries which had almost disappeared under the stress of competition with large factories and with Lan- cashire mills." I must refer those desirous of further studying the ramifications of the Co-operative Banks Movement on the Continent and the details of their operations to the bibliographic note at the end of this book. The minor differences in the constitution and regula- tions of the various societies and unions remind me more of the distinctions round which raged the inter- minable controversies of ancient ecclesiastical history than anything else I can think of. An account of the progress of the movement in the British Isles is reserved for a separate chapter. Rates of Interest on Loans. I will conclude this chapter with a few remarks on the important question of the rates of interest at which (with the assistance of their Central Banks and the various forms of State- aid explained in the next two chapters) local banks are able to lend to their individual members. In the first place I must confess that my information on this point is not as explicit as I should like. It is self-evident that Raiffeisen Societies, on account of their small size, absence of share capital, and non- payment of Directors, can disburse credit cheaper than banks organised on other lines. We are told in general terms that the interest charged to their members is " about 5 per cent." According to my information, the Raiffeisen Central Bank charges societies at least 4 per cent, and a small 42 CO-OPERATIVE BANKS commission, and under these circumstances it is diffi- cult to see how they can meet even their small expenses of administration, provide for the occasional bad debts which must occur, and create reserve funds unless they charge their members in normal times at least 6 per cent.* Schulze-Delitzsch Banks charged for loans in their early days as much as 14 or 15 per cent., but this was reduced a few years ago to 8 per cent., and afterwards, according to a leading authority, to from 5 to 5j^ per cent. After making full allowance for their larger and quicker turnover, the growth of their reserves, the limitation of members' credit to a small percentage of the amount of their property (gleaned from Govern- ment Returns), it seems as if this must have been an unintentional understatement. When it is remem- bered that their officers are paid both salary and com- mission, that something, at all events, must be allowed for bad debts, however carefully they are conducted, and that a dividend of at least 5 per cent, (oftentimes more) is paid upon their share capital, I am inclined to feel certain that, whatever may be the case with the money they lend on mortgage, considerably more than 5^ per cent, must of necessity be charged, even in normal times, for loans on personal security (bills and promissory notes) only. The same applies to the societies in the Haas Union, whose Central Banks are financed through the Prussian Central State Bank. In 1904 the latter's rate for deposits ruled generally between 3 and 4 per cent., and for loans from 4 to 5 per cent., with a small commission added. It is obvious that, after adding the administrative expenses of District Central Banks and local Co- operative Credit Associations, much more than 5 per cent, would have to be paid by borrowers. * Mr. H. de F. Montgomery, writing in 1903. when the Neuwied Central Bank charged 4 per cent, and a commission of Vio percent, to Raiffeisen Societies for advances, stated specifically that the commonest rate which they on their part charged to their members was 4$ per cent, and a small commission, though 5 per cent, was not unusual. SPREAD OF CO-OPERATIVE CREDIT 43 In Austria and Hungary local Credit societies apparently have to pay from 3^ to 4 per cent., or even more, for advances from their State-supported Central Banks, and I have heard of them charging from 7 to 8 per cent, for loans to their members, which is not at all excessive for small advances on personal security, involving considerable administrative expenses of in- quiry and supervision. Even in France, where money is lent under the auspices of the State to Regional Banks free of interest, the rate which they charge to local banks is 3 per cent. If they were to lend money for less, members of Credit societies would doubtless obtain advances from them and deposit the money at a profit in the Savings Banks. The general conclusions which I have arrived at on the circumstantial evidence set forth is that when the State advances money free of interest to Central Banks, they can lend to local Credit societies at 3 per cent., and the latter can make loans to their members at 5 per cent. ; but when local societies have to pay 4 per cent, for their money, they must charge more than 5 per cent, to their members, unless their expenses are practi- cally nil ; and in the case of Town Banks, with their greater expenses and more difficult inquiries as to the status of borrowers and sureties, 7 or 8 per cent. It should be borne in mind that Central Credit Banks receiving Government assistance not only dis- count the bills and promissory notes of local Co- operative Banks, but also act at considerable expense as organisers, instructors, advisers, and supervisors of the c e local Credit societies. SUPPLEMENTARY NOTE Colonial and Egyptian Agricultural Credit, and American Co-operative Loan Associations. I add this note principally for the information of those wishing to be informed of the progress, if any, of Personal Co- operative Credit in the British Colonies. A law was passed in 1898 for the establishment of Agricultural Credit Associations in British Columbia, 44 CO-OPERATIVE BANKS based partly on Raiffeisen and partly on Schulze- Delitzsch pinciples, for making loans to their members "for draining, clearing, or cultivating their lands; for fencing or buildings, or for the purchase of live stock, implements, and other farming effects, and to assist in co-operative dairying and farming." No dividends were to be paid on their shares, and they were authorised to raise money by loans or deben- tures, bearing not more than 6 per cent, interest, to an amount not exceeding two-thirds of their share capital, and to receive money on deposit from their members. Power was also given for the Government to guar- antee the payment of the debentures of such Associa- tions, or to advance money to them. Apart from this, I only know of two or three societies founded in the Dominion of Canada through the efforts of a French-Canadian M.P. Efforts have been made to promote them for peasant proprietors in the West Indies, and the Imperial De- partment of Agriculture there issued a small pamphlet on the subject in 1905, entitled " Information in regard to Agricultural Banks," which included a paper on " Rural Agricultural Banks for British Guiana." The Agricultural Banks of Queensland, Western Australia, and South Australia are Government institu- tions practically official Land Mortgage Banks for making loans to settlers on the security of their pro- prietary holdings, like the Government Board of New South Wales, the New Zealand Advances to Settlers Office, and the Savings Banks Commissioners of Vic- toria, who have powers to invest their surplus funds in this way. The interest charged varies from 4 per cent, to 5 per cent., the security is absolute, and many millions of pounds have been lent on terms of repayment ranging from ten to twenty years or more. An Act has recently been passed by the Cape of Good Hope Parliament for establishing a Government Agricultural Credit Bank to which .1,000,000 may be advanced from the funds of the Post Office Savings Bank at not more than 4 per cent, interest. The Natal and the Transvaal Governments have also recently SPREAD OF CO-OPERATIVE CREDIT 45 passed Acts enabling them to make loans to agricul- turists. Another institution which is sometimes mistaken for a Co-operative Bank is the Agricultural Bank of Egypt. It would be interesting, did space permit, to give an account of the great and beneficent work which it has accomplished in granting credit to tens of thousands of small farmers in that land of usury. But, so far from being a Co-operative concern, it is a Joint Stock Company with a capital of ^2,500,000, a dividend of 3 per cent, upon which is guaranteed by the Egyptian Government. I have not heard of the existence of any Co-operative People's Banks in the United States. There are in that country several thousands of societies known as " Co-operative Savings and Loan Associations " or " Mutual Savings and Loan Asso- ciations," which have many points in common with the Co-operative Banks movement, but they are practi- cally Co-operative Building Societies. CHAPTER VII CONTINENTAL METHODS OF CENTRAL BANKING A VOLUME could well be devoted to the descrip- tion and consideration of Continental methods of Central Banking, of which I can only give a resume in this chapter. The need for Central Banks. The growth of the Co-operative Banks movement demonstrated the neces- sity for Central Banks to deal with the surplus funds of local societies and supplement their working capital with advances from time to time. One of the first questions of those invited to form small Co-operative Banks in this country is, generally, " What shall we do with deposits if they are more than the amount required for advances?" or, "How shall we repay deposits if they are asked for before we receive the return of our advances?" Sometimes there is a surplus of money in certain districts and a scarcity in others; in some seasons of the year money is specially needed for investment in agricultural and other directions ; at others, such as after the harvest, it returns into the hands of producers. The object of Central Banks is to satisfactorily adjust these conditions. Central Bank of Co-operative Agricultural Banks of Germany. The Report of the proceedings of the Sixth International Co-operative Congress, held at Budapest in 1894, contains an excellent account of the history, organisation, and methods of this Central Bank of the Raiffeisen Union in Germany, and forms the basis of my summary. After earlier efforts in this direction it was estab- lished at Neuwied in 1876. Constitution. Though purely co-operative in char- acter confining its shareholding membership to Co- 4 6 METHODS OF CENTRAL BANKING 47 operative Societies belonging to the General Union of Rural Co-operative Societies in Germany (submitting their affairs to the Bank's inspection) and to another class of Co-operative Agricultural Association it was, for reasons of convenience, registered as a Joint Stock Company. Its original Share Capital was ,12,500 but this has since been raised to ,500,000 divided into shares of ,50 each, which may not be dealt with in the open market, and can only be transferred with the consent of the Board of Directors. Its management is in the hands of (a) The General Meeting, which elects the Directors (each to hold office for five years) from candidates nominated by the several District Unions, and also decides upon the employment of surplus funds, the exact rate of dividend, and any alterations of the Rules. (b) The Board of Directors. Every district in which there is a branch bank has two or more representatives on the Board of the Neuwied Central Bank, who are elected by the General Meeting from twice the number of nominated candidates as there are vacancies. The Board elects its own Chairman and first and second Deputy-Chairman. Every district has also its own Advisory Board, com- posed of all members proposed for election on the Board of Directors, some honorary representatives, the Chair- man of the district, who presides, and his fellow mem- bers on the local Committee of Management. In addition to this Advisory Board every district has its Sectional Committee, composed of the managing directors of the Sub-sections, or where there are none, of the representatives of societies, of the Advisory Board, and of the Director of the local Committee of Manage- ment, who acts as Chairman. (c) The Committee of Management of the Bank, which conducts its business, subject to the General Meeting, is composed of the Director-General and the Managing Directors of the branch banks. The former is nominated by the Board of Directors, who also elect the branch Directors after hearing the 48 CO-OPERATIVE BANKS opinion of the Committee of Management and Advisory Board of Directors of each district concerned. So much for the scientific construction of the edifice. Methods of Business. The funds required are pro- vided by Share Capital, Deposits and Loans, Com- mission and Interest, proceeds of the Sale of Goods (the Bank has a Trading Department), Bonds and Deben- tures. They are employed in advances to societies, to branch banks for the same purpose, in the Trading Department, for discounting bills (in accordance with the principles laid down by the Prussian Central State Bank and the Imperial Bank), for the purchase or repay- ment of mortgages, for the acquisition of land and buildings for the use of the Central Bank, for the pur- chase of bonds, etc., for management expenses and dividend. Profits. Twenty per cent, of net profits and any balance remaining after payment of dividend are carried to the Reserve Fund. A dividend of not more than 4 per cent, on money actually paid up is allowed to shareholders, and an extra dividend may be declared by the Committee of the District out of profits made therein. Regulation of Personal Credit. The business between the Bank and its shareholding societies is conducted exclusively by the branch banks in their districts, on the basis of a return made by every society showing the collective property of its members. In countries in which a supplementary income tax is levied, the names of members of societies paying it are required. In other countries the names of members, together with a valuation of their properties made by the Manag- ing Com'mittees of Societies, is accepted. On the basis of these valuations, Managing Directors of the branch banks are empowered to credit local societies up to ia per cent, of the property of their members declared in the Income Tax assessment, and 5 per cent, in the other case. Decisions as to further credit rest with the Central Board of Directors. METHODS OF CENTRAL BANKING 40 Credit valuations have to be renewed every year, and for every ^250 of credit claimed societies are re- quired to take up one share in the Central Bank. Important German Safeguards. The facility of as- certaining the " property " of members of German Co- operative Banks is often overlooked or ignored by students of Co-operative Credit. Whatever opinion we may have about it, it undoubt- edly is an exceptionally strong safeguard against losses. Under English law, as is well known, individuals are not required to inform the State of the amount of their property, and incomes of less than 160 are un- taxed. In Germany all classes have to declare their property and all incomes are taxed, and the official returns can in Prussia, at all events be consulted by Central Banks under a special order of the Minister of Finance. In the extremely improbable event of our law being conformed to that of Germany, the inspection of the returns by the conductors of Co-operative Banks or any other private individuals would not be likely to be tolerated. Another safeguard which does not prevail in Great Britain and Ireland is that under German law every change in the composition of Committees of Societies has to be communicated to a law court, and is adver- tised in the official Gazette. Then limited liability with us means liability limited to the exact amount of the shares subscribed for, whereas in Germany shares in Co-operative Societies involve an additional liability in the event of liquidation. Other precautions of safety are set forth in the section of the next chapter dealing with Methods of Super- vision. It is obvious that it is necessary, somehow or other, to ascertain the extent to which societies may be safely entrusted by Central Banks if they are to utilise their funds wisely. Relationship to Prussian State Bank. When a branch bank of the Raiffeisen Union requires funds, it telegraphs to the Central Bank at Neuwied, which assigns it the amount, at its banking account with the 50 CO-OPERATIVE BANKS Prussian Central State Bank, which is described in the next chapter. Surplus cash held by the branches is also paid into the Central State Bank to the credit of the Central Bank. The branch banks make a daily report to the Cen- tral Bank on the state of their accounts, besides ren- dering a monthly report, which includes a record of all changes which may have taken place in the credit valuations of societies. Neuwied Statistics. The statistics of the Neuwied Central Bank for the year 1903 speak for themselves. Number of Number of Shares Money paid up on same Local Banks. taken up. in Marks. 3,675. 8,200. 8,175,000. Share Interest on Interest on Commission Dividend. Deposits. Advances. Charged. 3 per cent. 3^ per cent. 4 per cent. -^ per cent. The following figures refer to Marks, the equivalent of which in pounds sterling can be ascertained by dividing them by twenty. Turnover, M. 307,000,000 ; Profits, M. 240,748 ; Assets at end of year, M. 64,812,057; Reserve Capital, M. 480,970; Liabilities, M. 64,571,309. The German Co-operative Societies' Bank and the Dresdner Bank. Schulze-Delitzsch Societies endeav- oured at first to balance their financial necessities by the agency of a Central Committee. Their founder was opposed to the idea of a Central Bank similar to the one which has just been described. As has been previously stated, he was more of a Co-operative business man than an idealist, which accounts for the otherwise extraordinary fact that he was a consistent opponent (some say persecutor) of Raiffeisen all his life. He therefore made many efforts to induce ordinary banking institutions to trade with Co-operative Banks, and ultimately, in 1864, concluded an arrangement with a private firm of bankers to conduct the German Co- operative Societies' Bank, to receive deposits from METHODS OF CENTRAL BANKING 51 Co-operative Banks on business terms, and open credits with them on the Scotch " cash credit " system, that is, subject to adequate guarantees being received. Private shareholders as well as Co-operative Societies held shares, and business was done with individuals besides associations. In 1871 a branch bank, with a Board of Directors of its own and separate Reserve Fund, was opened at Frankfort. Berlin and Frankfort Statistics. The following statistics for the year 1903 show the great value which it proved to Co-operative banking : The first lines of figures, which are in Marks, refer to the head office at Berlin, and the second to the branch at Frankfort. Share Total Business with Co-operative Capital. Credit Societies. M. 20,000,000. M. 339,331,000. M. 10,000,000. M. 209,955,413. Balances at Close of Year. Credit of Credit Societies. Debit of Credit Societies. M. 7,344,614. M. 6,214,446. M. 1,635,620. M. 4,426,984. Bills of Exchange held for Co- Debit of Co-operative Credit Societies operative^Credit Societies, in\Current Account and in Discounts. M. 6,109,304. M. 12,323,750. M. 1,423,903. M. 5,850,887. For reasons too lengthy and complex for summary explanation, it was decided to accept an opportunity of amalgamating on satisfactory terms with the success- ful and financially strong Dresdner Bank, which had a reputation of forty years for studying the interests of its clients rather than for seeking to pay high dividends, and which arranged to transact the business of Schulze- Delitzsch Co-operative Credit Societies cheaply and efficiently. The Central Bank of the Darmstadt Union. A Central Bank for the Haas Societies was established at Darmstadt in 1883, which, like the Neuwied Central Bank, is a Joint Stock Company. 52 CO-OPERATIVE BANKS It serves 21 Provincial Central Banks, having an aggregate membership of over 5,000 Co-operative Societies, and is backed up by the Prussian Central State Bank. Other Continental Central Banks. Amongst other German Central Banks I might mention those at Mun- ster, Cologne, Stuttgart, Trier, Berlin, Wachenheim, which have a membership of over 2,000 smaller Credit Banks. Lack of space forbids more than a reference to other Central Co-operative* Banks in various Continental countries, including the Central Co-operative Bank of Upper Austria, the Central Co-operative Bank of Lower Austria (which has a membership of over 500 Credit Societies), the Hungarian National Central Credit Bank, established in 1898 (which had in 1903 a membership of 1,653 Co-operative Societies, nearly all Credit Banks), the Central Credit Society of the Belgian " Boeren- bond," and other Central Banks in that country; the Roumanian Central Co-operative Bank, which is a Government institution ; and the Central Bank of Agri- cultural Credit Societies in Finland. There are no Central Co-operative Banks in France on the German model, but there are about fifty Regional Banks, which make advances and discount the bills of local agricultural Credit Societies, generally at 3 per cent, per annum, out of the large sums placed at their disposal for this purpose, free of interest, by the Bank of France. I am also unaware of any in Italy, but in that country People's Town Banks finance Village Credit Societies, and Co-operative Banks are assisted with advances at a low rate of interest from the Savings Banks. Italian Savings Banks, unlike ours, circulate a large proportion of their funds in the districts from which they are collected, by means of loans to individuals and Co-operative Credit Societies. The social student will find a good deal of useful information about them in Mr. Bolton King's book, mentioned in my Bibliographic Note. CHAPTER VIII STATE-AID AND SUPERVISION THE original idea of the early leaders of Co-opera- tive Banking was independent self-help. All that they desired from the State was " a fair field and no favour." They objected, and rightly so, to legal hindrances to associated effort, and sought from time to time that their exertions for the welfare of the community should be recognised in the framing of the laws but that was all. Two Schools of Thought. Since the great success of German Co-operative Credit, however, there have been two schools of thought in the movement, one for and the other against State-aid. The pros and cons of the question have been so ably dealt with elsewhere, especially at the Sixth Inter- national Co-operative Congress, held at Budapest in 1904 (the report of which is referred to in the previous chapter and in my Bibliographic Note), that it is not necessary to fully traverse them in a popular exposition of this kind, dealing mainly with the movement in the United Kingdom and Ireland. English State Aid. The provisions of the recently passed Small Holdings and Allotments Act (summarised in Chapter IX.), however, bring them within the range of our practical politics. It is also not generally know r n that for some years past Irish Agricultural Banks have been financed to a certain extent by the Irish Department of Agriculture and the Congested Districts Board. The former body has allocated ; 10,000 for lending to approved Agricultural Banks in sums of from 25 to ;ioo, at 3 per cent, interest, and also contributes 53 64 CO-OPERATIVE BANKS towards the expenses of the Credit Bank organisers employed by the Irish Agricultural Organisation Society. The latter has lent several thousand pounds to Agri- cultural Banks in the Congested Districts Board at 2 l / 2 and 3 per cent, interest. The Indian Government also advances small sums on well-defined lines to Credit Societies in the De- pendency. Arguments against State Aid. Apart from object- ing to State-help (as distinguished from recognition and educative support) on principle, as tending to the weak- ening rather than the strengthening of character and the putting of burdens on neighbours (some of whom can ill afford it) for the personal benefit of others who might be competing with them, and making a political question of economic problems, its opponents have ad- vanced several objections against it. They assert that it is generally abused that credit so easily obtained is too readily granted, with the con- sequence that it induces unnecessary borrowing, that it is often frittered away rather than husbanded, and there- fore results in losses to individuals and societies which would not otherwise have been incurred. Arguments for State Aid. On the other hand, its supporters claim that the diffusion of cheap credit in both town and country districts is of such immense social utility in counteracting usury, encouraging in- dustry, and in increasing production, and so beyond the power of private capitalists, that, in the interests of the whole community the State should support it, even if occasional losses result. The moderate believers in State-aid agree that it should not be given to the injury of any other interests entitled to consideration, that it should not degenerate into permanent assistance, nor subordinate its form to political considerations. My personal views are indicated in my reference to the Small Holdings and Allotments Act. Like most Englishmen, I have a strong predilection for self-help, but I also think that those endowed with greater means and leisure should interest themselves in promoting it, STATE-AID AND SUPERVISION 55 and that if they neglect to do so that some form of State-aid is inevitable. Continental State Aid. Without attempting to dog- matise on these points, however, I will simply state a few of the multitudinous facts regarding the growth of various forms of State-help. Continental countries aid Co-operative Banks and other agricultural and industrial organisations in several ways, such as exempting them from stamp duties and taxes on deposits, paying the expenses of organisation and, in some cases, management, making advances to them, generally through their Central Banks, at 4, 3, and 2^ per cent, interest, and sometimes without charg- ing any interest whatever. The repayment of these loans is spread over a con- siderable time five, ten, and twenty years. In Germany the Imperial Bank (the counterpart of our Bank of England) has assisted them, and the Cen= tral State Bank of Prussia was established at Berlin in 1895 as a central institution for credit banking operations in the interests of Co-operative Societies in Prussia. The State placed ^250,000 at its disposal for work- ing capital, which was increased to ;i, 000,000 in 1896 and to ,2,500,000 in 1898. The President of this Bank has stated its objects so clearly that I cannot do better than quote his own words, which are as follows : " Its object is of a social economic character, namely, to promote and strengthen personal credit for the benefit of the humbler and middle classes, who, being themselves only sparingly endowed with capital, contribute to the production of wealth in the main by their own personal labour. Up to the time of the creation of the Prussian Central State Bank those classes, no matter whether industrial or agricultural in their occupation, had no organised personal credit to fall back upon at a moderate rate of interest and adapted to their particular circumstances, or else a credit only within very narrow limits." " Only by means of co-operation can the capacity for credit and the deservingness of credit of the individual be measured and converted, on a sufficiently large scale, into an economic value capable of being pledged." " The Prussian Central State Bank was formed to bridge over the existing chasm and bring demand and supply together by 56 CO-OPERATIVE BANKS interposing between them a powerful institution which, having no selfish interest of gain or profit to study, might be employed to satisfy the needs of personal credit on reasonable conditions in the case of the lower and middle classes, united for productive purposes in Co-operative Societies, and at the same time to serve as a convenient Central Money Office, in which demand for and supply of funds might be brought into direct contact and made to balance one another by taking from the one and filling into the other, while, in the last place, opening a channel with the great outside working market." In 1894 this Government institution was in business relationship with 52 District Unions and Central Banks of Co-operative Societies, representing collectively 5,438 individual societies and 528,148 individual members. Of the 52 Central Banks 19 were mainly " urban " or " industrial " (Artisans' Societies, etc.) and 33 mainly rural and agricultural. In 1903 the money paid out to Central Banks on current account amounted, on an average, to ,47,550 per working day and the money coming in from them to ^47>35o. The interest charged to them has averaged 2?/ per cent, on overdrafts and 3j^ per cent, on debit balances. Austria- Hungary, mainly by the agency of local Governments, has probably done more to foster Co- operative Banking for both town and country purposes than any other State, and people of all classes now join in helping the movement forward. It has defrayed the expenses of forming and subsidising Credit Banks, granted loans free of interest in some cases and at 3 and 3^ P er cent, in others, also exemp- tions and reductions in respect of certain taxes and fees, besides establishing travelling studentships and paying the expenses of itinerant teachers and organisers amongst the various races and nationalities of the Empire. The Central Bank of Upper Austria has received an annual subsidy from the Diet, and that of Lower Austria has had Government grants, while both have been assisted with Government loans. The Hungarian National Credit Association is strongly supported by the State, which contributed 1,000,000 crowns (about .40,000) to its foundation STATE-AID AND SUPERVISION 57 capital and guarantees any deficit occurring by the income not meeting the expenditure out of the interest accruing on the bonds held by the State, and if this is insufficient making up the difference to the extent of 100,000 crowns in one year. The Central Credit Association and its affiliated societies are exempted from fees and taxes. The claims of the latter against their members also rank in priority of other claims, just as the Central Association's claims rank against them. In France the State affords very substantial assist- ance to Co-operative credit through the Regional Banks previously referred to. In 1899 the Bank of France was required, as a con- dition of the renewal of its charter, to lend 40,000,000 francs, free of interest, for the benefit of agricultural Co-operative credit and to contribute a proportion of its annual profits for the same purpose. A special committee connected with the Ministry of Agriculture controls this department of State-aid. The French Government also makes loans, free of charge, to the Co-operative Bank of Productive Work- ing-men Societies, conditionally upon its lending them out to Co-operative Productive Societies at not more than 2 per cent, per annum and for not more than five years. German and Other Methods of Supervision. The necessity for the adequate supervision of the network of Co-operative credit originated by private effort and since largely aided by Imperial Governments and Local Diets soon became apparent. To start financial Co-operative Societies all over the place and then leave them to shift for themselves is a sure road to disaster and discredit. Foreign Governments have instituted various methods of supervision. In Germany, for instance, the law relating to Co- operation provides for every society submitting at least once every tw r o years to a complete inspection not only of its accounts, but also its methods of doing busi- ness, by a person unconnected with it. It is worthy of note that this compulsory regular 58 CO-OPERATIVE BANKS inspection is equivalent to the inspection of the affairs of an English registered society by the Chief Registrar upon the application of one-tenth of its members, pro- vided for by Section 50 of the Industrial and Provident Societies Act, which can only be put into operation in cases of complaint and dissatisfaction. This inspection and audit is delegated to the Unions to which most of the societies belong, and in the case of unconnected societies devolves upon a person ap- proved by the chief legal tribunal of the district, who carries it out at a nominal charge. As a matter of fact, the aim of all the Unions is to provide a revision of their affiliated societies every year. In contrast to the work of English and Irish Central Associations (which is the organisation of new banks), this is now the principal work of the German Central Associations, which are supported by annual fees from local societies and grants from Central Banks. Our German friends systematise their audit inspec- tion as follows : 1. The Councils of Control of Local Societies super- vise the operations of their Executive Committees and the audits of their officers* accounts. 2. The Central Unions, by means of Audit In- spectors, examine the books and check their supervision. 3. The General Unions revise the accounts and con- duct of the Central Unions. In Austria there is a similar law concerning com- pulsory supervision, much of which is undertaken by the large Unions, whose management expenses are defrayed partly by State grants and partly by contribu- tions from local societies. In Hungary, under the law of 1898, Co-operative Societies may only be formed subject to the approval of the authorities or some recognised institution or society, or with the co-operation of the National Cen- tral Credit Association. They are also restricted to well-defined areas, interest on capital is limited to 5 per rent., and members' liability is extended to five or ten times the value of their shareholding. The Central Credit Association, which is also the Central Bank, is entitled to appoint one member of the STATE-AID AND SUPERVISION 59 Council of Control and one on the Executive Committee of each society affiliated to it, and to supervise and direct its business. The Central Association is supervised and controlled by the Government, which nominates two members of its Executive Committee, while the King, on the recom- mendation of the Minister of Finance, appoints its President, and its two Vice-Presidents are appointed by the Minister of Commerce and the Minister of Agricul- ture. CHAPTER IX PROGRESS OF THE MOVEMENT IN THE BRITISH ISLES A SHORT account of the progress of the Co-opera- tive Banks movement in this country may not be out of place. Early Difficulties. We are, as a nation, notoriously slow in adopting new ideas. The British working-man, no less than the British manufacturer and farmer, loves the old ways. When new methods are commended to him to meet the necessities of new times, the former is apt to say, " Yes ! it sounds very well on paper, but how would it work in practice?" This makes the work of the promoters of new ideas, however sound, particularly difficult, because until some- one adopts them it is obviously impossible to quote concrete examples of their working. Fortunately, as a compensation for this innate con- servatism of mind (which is a feature of all classes) when fresh ideas are adopted, as great tenacity of purpose is exhibited in working them as was previously expended in resisting their introduction. The home of Co-operative credit and the scene of its greatest triumphs being Germany, was quite sufficient to lead many British workers to say or think, " It may be all right for them furriners, but it 'ud never work in this 'ere country." Much headway has been made since those days, but rapid progress is not anticipated until there are practical examples of People's Co-operative Banks in every county throughout the land. The Agricultural Banks Association. The first association in England for promoting Co-operative 60 PROGRESS OF THE MOVEMENT 61 Banks was the Agricultural Banks Association, founded in 1893, which in the course of its short existence formed Agricultural Credit Societies in several counties. tThe Toynbee Town Banks Committee. In 1898 a Conference was held at Toynbee Hall, Whitechapel, which resulted in the formation of the Toynbee Town Banks Committee, with the object of establishing Co- operative Banks in pur Town Districts. The Co-operative Banks Association. At a Confer- ence in the Westminster Palace Hotel in 1899, attended by representatives of both these bodies, it was decided to amalgamate them under the title of the Co-operative Banks Association. This association was instrumental in forming a num- ber of additional Village Credit Societies and several Town Co-operative Banks in the Metropolis and the Provinces. It could have produced ten times better results if the financial support accorded to it had been more adequate. The banks themselves, after establishment, are en- tirely self-supporting, but their organisation involves expenses of one sort and another, in addition to a cer- tain amount of supervision by the Central Association. The principal work of the Co-operative Banks Asso- ciation, however, was to create public interest in the movement, and this it succeeded in doing to a con- siderable extent. The Agricultural Organisation Society's Co-operative Credit Department. Ultimately it was decided in 1904 to amalgamate with the Agricultural Organisation Society, which established a Co-operative Credit De- partment, to which the affiliated Village Credit Societies were transferred. The Urban Co-operative Banks Association. For the purpose of assisting the existing Town Co-operative Banks with expert advice and guidance and extending this important side of the movement, the Town Co- operative Banks Committee, which existed during 1904, was formed, in 1905, into a new society entitled the Urban Co-operative Banks Association. Summary of Progress in England Both the Urban Co-operative Banks Association and the Agricultural 62 CO-OPERATIVE BANKS Organisation Society have promoted the establishment of additional banks, and there are now societies affiliated to the former in Stepney, St. Pancras, Limehouse, Ratcliff, South Bermondsey, North Lambeth, two in Birmingham (Yardley and Saltley), and one at Black- burn, Hull, Chester, Hitchin, and Newport (Mon.), and to the latter at Scawby, Spalding, and Friskney (Lines.), Wiggenhall and Whissonsett (Norfolk), Hedge End (Hants.), Castlemorton and Far Forest (Worcester- shire), Freeby and Brookvale (Leicestershire), Clophill (Beds.), Barley (Herts.), and Mayland (Essex). These twenty-six Urban and Rural Co-operative Banks, constituted on the lines described in this book, turn over several thousand pounds per annum. Several other societies have been established, which in the interests of their members and the movement generally I regret to say are not affiliated to any Central Association. Though the progress has been admittedly slow, it has been steady and persistent. The ignorance surrounding the subject has been dis- pelled by the delivery of public addresses, the writing of articles for and letters to the Press, and the circula- tion of an immense number of explanatory pamphlets and leaflets. People have now a good general idea of what Co-operative Banks are. Their aims and objects are theoretically approved by a large section of the public, the Press, and eminent publicists acquainted with social problems. Now that there are this number of concrete examples of their adaptability to British conditions, there is every probability that they will multiply at a much greater rate, until the whole country is covered with a network of them, united by affiliation for general benefit, with district councils meeting annually in convenient centres, attended by delegates from the various local banks, for comparing notes on 'matters of general policy and de- tailed management. Should this be so, our experience will be similar to that of Germany, where many years elapsed between the formation of the first and the second society, and PROGRESS OF THE MOVEMENT 63 many more before the number of Co-operative Banks assumed large proportions. Those of us who have been promoting Co-operative Credit have had to console ourselves for small initial results by this hope, and sustain our courage by realis- ing that it is necessarily a slow process to educate men and women in any but the most elementary forms of mutual self-help. The Small Holdings and Allotments Act, 1907. There is one success, however, which we have achieved, and that is to impress the Government of the country with the importance and utility of Co-operative Credit. Successive Presidents of the Board of Agriculture under both Conservative and Liberal Administrations have acknowledged the truth of our contentions, and this has culminated in the insertion of provisions in the Small Holdings and Allotments Act, 1907, whereby, amongst other things, County Councils may promote the extension of, and assist societies on a co-operative basis for, credit banking. They may with the consent of, and subject to regu- lations made by, the Local Government Board make grants or advances to Co-operative Credit Societies, or guarantee advances made to them upon such terms and conditions as to rates of interest and repayment or otherwise, as they think fit. Where the Board of Agriculture themselves provide Small Holdings under the provisions of the Act they may exercise similar powers. Now whilst all of us appreciate the patriotic motives which animated the insertion of these clauses, many are inclined to be chary in availing themselves of their assistance for fear of their operating against the spirit of independent mutual self-help and prudent manage- ment, which is the dual basis of successful co-operative effort. Economic Co-operation needs money, but that is not its greatest necessity. The object of Co-operation is to help people to help themselves, not to carry them on its back, or advance money without any security. Its primal requisite is men and women willing to unite for mutual aid, and to voluntarily accept con- 64 CO-OPERATIVE BANKS ditions (including the provision of security and the acceptance of inspection and supervision) which will help them to earn an honest livelihood whilst precluding them from exploiting one another. It is useless to impose Credit Societies upon any district where people of this type cannot be gathered together, and therefore those County Councils which decide to put these permissive powers into force will require to be very careful in responding to applications for their assistance in this direction. Another clause of the Act, Section 39 (4), is quite free from these objections, and likely to be of the greatest assistance to the Co-operative Banks move- ment. As it is a very short one I will quote it in full : " The Board (of Agriculture) with the consent of the Treasury may out of the Small Holdings Account make grants, upon such terms as the Board may determine, to any society having as its object or one of its objects the promotion of Co-operation in connection with the cultivation of small holdings or allotments." The strongest co-operative opponent of State-help, in the ordinary acceptance of the term, can have no objection to properly constituted propaganda societies receiving Government support for educating people in improved economic methods w r hich will add to the moral and material wealth of the nation. Hitherto the preaching of co-operative credit, and the organisation and supervision of banks in English urban and rural areas, has been carried on in a spas- modic and unsystematic, and therefore comparatively ineffective, manner, mainly because it has depended entirely upon voluntary subscriptions, which have never been sufficient and a large amount of the energy of experts, which could have been much better utilised in promoting this form of self-help, has been occupied in trying to raise the funds from private sources. In future at ail events so far as rural and urban areas containing allotments and small holdings are concerned it will be different, as under the clause in question a proportion of the cost of education and supervision will be borne by the State in the shape of PROGRESS OF THE MOVEMENT 65 subventions to such Central Societies as prove their claim to it. The co-operative banks organised under their super- vision will doubtless retain that self-supporting status necessary to bring home their responsibilities to their members, and to evoke that personal energy, enthu- siasm, and careful management so essential for success. Irish Agricultural Banks. Much greater success has attended the efforts of the Irish Agricultural Organisa- tion Society in forming Agricultural Credit Societies in the Sister Isle. The first bank was established at Doneraile in 1895, and at the close of the year 1906 (during which fifteen new Agricultural Credit Societies were organised) there were over 240 in existence. Their total membership was approximately 15,000, and 8,440 loans were granted, totalling over ,50,000. Their capital consisted of local deposits amounting to ,16,708, supplemented by loans from the Department of Agriculture, the Congested Districts Board, Joint Stock Banks, and other sources amounting to ,29,672. Their expenses, apart from interest, only came to the ridiculously small sum of ,275 145. id., and their net profit to 550. The latter sum merely represented the amount put towards their Reserve Funds, as they do not work for profit. Their total reserve at the end of 1906 was ,2,322. The following additional facts regarding them may be of interest : Their membership during 1906 in- creased by about 2,000. Their increase in Loan Capital was ,4,000 and in Deposits 4,000, and the number of their loans 1,000, and the total amount of advances ,6,500. During 1907 the Department of Agriculture made use of the machinery of the Agricultural Banks for helping the members to procure supplies of good new potato seed. The seed was in most cases obtained on behalf of the members by a Sub-committee acting for the purpose, and, wherever necessary, loans to the extent of the seed required were advanced by the Bank to its members in the ordinary way. This points to the probability that Credit Societies 66 CO-OPEEATIVE BANKS in future will come to have additional uses of this character, which many of them possess on the Con- tinent. A Bill was introduced into Parliament last Session giving them trading powers, which has not yet become law. Wales and Scotland. The only Co-operative Bank in the Principality is the small one at Newport, Mon- mouthshire, which has been in existence since 1894, but for lack of local support has not succeeded as it was capable of doing. No Agricultural Credit Societies have as yet been established in Wales, though I am convinced that if they were wisely and energetically organised there, they would multiply as in Ireland and bestow much benefit upon the small farmers and others in the Welsh country districts. The movement has also not been introduced into Scotland, where the proverbial thriftiness of the people should lead it to flourish. There is, however, a very excellent People's Bank at Edinburgh, formed on co-operative lines in 1889 with i shares, payable by instalments of half-a-crown. It has power to lend to its members on personal security, having been originally established, in fact, for this purpose. It has become, however, more of a Savings than a Trading Bank, and confines its advances or " invest- ments " mainly to members to purchase their own dwelling-houses or "flats," which, according to the Scotch custom, may be acquired separately. Over ,30,000 was advanced for this purpose during the first ten years of its existence, and its business since in the same direction has been an increasing one. The Central > Banks Committee. Shortly after the establishment of the Co-operative Banks Association it was found necessary to form some body able and will- ing to receive the surplus funds of affiliated Co-operative Banks on the one hand and pay them interest thereon, and on the other make them advances when they needed them to supplement their own capital. As there was not sufficient business or prospect PROGRESS OF THE MOVEMENT 67 thereof at the time to create a formal society for these objects, a Committee of private persons, called the Central Banks Committee, was constituted and still exists in connection with the Urban Co-operative Banks Association. It has paid 3 per cent, upon deposits subject to a fortnight's notice, and its rates for small loans to societies have varied from 4 to 5 per cent. Its transactions, however, have never exceeded a few hundred pounds a year, and it has only been looked upon as a stopgap until the growth of the movement should warrant its supersession by a formally incorpor- ated Central Co-operative Bank. The Central Co-operative Agricultural Bank, Ltd. A Society under the above title was registered under the Industrial and Provident Societies Act in 1907, for the purpose of financing the Village Co-operative Credit Societies affiliated to the Agricultural Organisation Society. It has a most influential Board of Directors. Its shares are of the nominal value of i each (of which IDS. is payable on application), and the dividend thereon is limited to 5 per cent. Credit Societies wishing to avail themselves of the advantages of this Central Bank must subscribe for five shares, and a regulation has been made whereby at least two of the Directors are elected from a list of candidates nominated by the Credit Societies which become members. Societies desiring advances must also furnish : (1) A complete list of their members, giving the address and occupation of each. (2) A copy of their last Annual Return furnished to the Chief Registrar of Friendly Societies. (3) A statement of the total amount of capital which they wish to obtain from the Central Bank. The Directors then fix the limit of credit which they are prepared to grant them. Societies to whom advances have been made are required : 68 CO-OPERATIVE BANKS (1) To notify the Central Bank of any changes in their membership. (2) To furnish a quarterly financial statement showing their assets and liabilities. (3) To furnish a copy of each Annual Return made to the Registrar. The interest charged by the Central Bank will, as far as possible, be 4 per cent, per annum. Deposits are received by it from Credit Societies in sums of not less than 5 up to 20, withdrawable at call, beyond that amount subject to three weeks' notice, The interest paid by the Central Bank upon deposits is 3 per cent, per annum. As stated by the Directors in their preliminary pro- spectus, the Bank has not been formed in opposition to existing banks, but to supplement their operations by fostering a form of credit, which their constitution and custom prevent them from creating. CHAPTER X HOW TO FORM CO-OPERATIVE BANKS A MOST natural query on the part of those con- vinced of the advantages of Co-operative Banks is, " How are they started? " A few general and a few specific suggestions on this point, based on experience, may be useful. First, it is a good plan to work mainly through existing organisations. These have not only brought men and women to- gether from whom the first members of a bank can be recruited, but also sifted them sufficiently to form a good idea of who is reliable and who is not. Trades Unions. Trades Councils should be ap- proached, and if an invitation can be secured, arrange- ments made for addressing them and circulating special literature on the subject amongst their members. The Blackburn and District People's Bank was established by this means, and there is no reason why many others should not be formed through the same agency. Friendly Societies. These should be worked simi- larly. The recent establishment of the Chester and District People's Co-operative Bank as an outcome of an address to the local meeting of the Hearts of Oak Friendly Society indicates the possibilities in this direction. The 2oth Century Equitable Friendly Society has recently distributed propaganda literature of the Urban Co-operative Banks Association to its 500 lodges, with the idea of forming Co-operative Banks in connection therewith. Social Unions, Guilds of Help, Settlements, P.S.A.'s, etc. Another big field for propaganda work lies amongst these, including the Christian Social Union, the Friends' and the Presbyterian Social Unions, 69 70 CO-OPERATIVE BANKS the Wesleyan Methodist, and Primitive Methodist Unions for Social Service, the various Social Settle- ments in London and the Provinces, the Social Insti- tutes Union and Federation of Working Men's Clubs, the Working Men's Club and Institutes Union, Adult Schools, Ethical Societies, the Charity Organisation Society, and the Guilds of Help which are being formed in various centres. Every Church and Chapel in or near working-class districts has now a Men's Meeting or Conference, and this affords opportunities for the establishment of in- numerable Thrift Agencies of this character. The Stepney Bank was formed in connection with a Working Men's Social Club, as were also the North Lambeth, Limehouse, and Ratcliff Banks. The Yardley Society was formed in connection with a Congregational Church, and the Saltley with a Church of England Mission Room, and there is no reason, except lack of proper organisation, why these examples should not be multiplied by hundreds. Individuals. Apart from these organisations there is an increasing number of individuals connected with workshops, warehouses, and other places where labour is employed, who could be interested in forming Co- operative Banks or inducing men and women to join those established in their districts. The Press. Every fair advantage should be taken of the courtesy of the Press for inserting notices, reports of meetings, and letters. As newspapers depend upon the interest of their readers, coupled with their advertisement revenue, re- ports sent them should be brief, pithy, clear, and in- teresting, and advertisements of public meetings on behalf of the movement should also be sent to them. Many societies have been set on foot as the outcome of Press correspondence. Besides the daily Press there are innumerable local magazines and papers devoted to the social welfare, to which notices and articles could be contributed. Country Propaganda. Some of the above-mentioned methods are only applicable in urban areas, whilst others can be adopted in both town and country. HOW TO FORM CO-OPERATIVE BANKS 71 Independent working-class organisations, for ex- ample, are much more numerous in towns and cities than in sparsely populated rural districts. There are, however, the Parish Council and the village Friendly Societies to appeal to, and the increas- ing number of public-spirited people interested in village halls and institutes. Many country parsons, broadminded enough to care for the economic welfare of their people irrespective of their religious beliefs, will prove helpful in this direction. Several English Village Credit Societies have been started by clergymen, and in Ireland a considerable number by Roman Catholic priests. The first English country Co-operative Bank was organised by the squire of a Lincolnshire village, who is deservedly respected by all sorts and conditions of men in his neighbourhood, and is a believer in mutual self-help rather than patronage. Village doctors, schoolmasters, land agents, and energetic small-holders have also taken a prominent place in initiating these societies. The fullest advantage should also be taken of the provisions of the Small Holdings and Allotments Act, 1907, as explained in the previous chapter, whereby County Councils may now promote the formation or extension of Co-operative Banks. As previously stated, authorities are united in hold- ing that a system of Co-operative Credit is an absolute necessity for the success of the groups of small-holders shortly to be established, and the progress of the country side of the movement is bound to be consider- ably accelerated thereby. So much for general suggestions. Detailed Formation of Town Banks. Detailed methods differ with local circumstances, but the follow- ing instructions will give a good idea as to the best methods of procedure. Anyone desirous of promoting the establishment of a Town Co-operative Bank should, after distributing the descriptive leaflets of the Urban Co-operative Banks Association, convene a Public Meeting or Conference of those likely to be suitable members. 72 CO-OPERATIVE BANKS Sometimes the necessity of calling a special meeting is obviated by the willingness of a Trades Union, Working Men's Club, or other Social Institute or Society to have the subject dealt with at one of their meetings. An expert of the Banks Association should be in- vited to attend to explain their principles, methods, and advantages. If, after discussion, the formation of a Society is approved, a resolution to that effect should be passed, and the names of those willing to join should be recorded. In the event of those present hesitating to approve of the immediate establishment of a Co-operative Bank, the next best thing is for them to appoint a Committee to consider the advisability or otherwise of its establish- ment, as it is much easier to go into details with such a Committee than to convene a second Public Meeting. When a resolution favourable to the starting of a Bank forthwith has been passed, an after-meeting of those who have expressed their willingness to join should be held in order to select seven persons to sign two copies of the approved Rules, together with the Registration Application Form, and also to appoint a Secretary and Treasurer. The seven signing members become the Provisional Committee, and the Secretary (who must also sign the Rules and Application Form) the Provisional Secretary, until the first General Meeting, which appoints the Executive Committee which has power to confirm him in his position or otherwise. It has been found advisable in practice that the Secretary, whether salaried or otherwise, shall attend but not be a member of the Committee. The Treasurer, whose permanent appointment rests with the General Meeting of members, can be a member of the Committee or the Council. The next steps are, to agree upon the Rules, which must be registered under the Industrial and Provident Societies Act, and to become affiliated to the Central Association. Model Rules approved by the Chief Registrar of HOW TO FORM CO-OPERATIVE BANKS 73 Friendly Societies are supplied by the Urban Co-opera- tive Banks Association, which also conducts without charge the necessary procedure for the registration of the Societies. Banks affiliated to this Association can be registered at a reduced fee of i, instead of the ordinary fee of 5. Rules must not be issued with the name and address of the Bank nor business commenced until it is regis- tered. After registration a meeting should be called as soon as possible to make arrangements : (a) To prepare and issue a prospectus of the Bank for distribution in the district, and to consider and to adjudicate upon applications for mem- bership. Model Prospectuses and other requisites are sup- plied by the Central Association. The former should contain, in addition to the address of the Registered Office, the hours fixed for the transaction of the business of the Bank, and for the weekly or fortnightly meetings of the Committee of Management. As a rule, one night a week is sufficient for con- ducting the business of the Bank with its members, and another for Committee meetings. The prospectus should also include the names of the Chairman and Committee, the Treasurer, and the Secretary, and later on those of the Council of Super- vision. The rate of interest paid upon deposits and rate of interest charged upon loans should also be stated therein, together with any special regulations in the shape of bye-laws which are not included in the Model Rules. (b) To obtain the necessary books and to arrange for the printing of rules, membership and loan application forms; share, loan, and de- posit cards, which are dealt with more fully in the next chapter. (c) To make the advantages of the Bank thoroughly well known throughout the dis- trict. 74 CO-OPERATIVE BANKS As soon as possible after registration a General Meeting of the members should be called to receive a report from the Provisional Commitee. At this Meeting the first Executive Committee to carry on the business of the Bank should be elected, and also, if possible, the Council of Supervision. Their duties have been dealt with in Chapter II. The Bank is then fully established. Detailed Formation of Country Banks. The proce- dure for starting Village Credit Societies is somewhat similar. First, the convening of a Meeting of those likely to be suitable members, at which a clear statement of the principles and methods of the movement as they concern rural communities should be made. As country folk are inclined to move at a slower pace than their town brethren, it is often found advisable to elect in the first place a Provisional Committee to consider the special wants of the neighbourhood, and as to whether there is likely to be sufficient support to render it possible to commence work effec- tively. Should this be decided in the affirmative, the recom- mendations of the Committee should be reported to a Public Meeting to be held in the parish. This might be usefully attended by a representative of the Agricultural Organisation Society, to advise on any points, or answer questions as to the working of the system. If, after discussion, the formation of a society is approved, a resolution to that effect should be passed (which should include approval of affiliation to the Central Society), and the names of those willing to join should be recorded. These should then select seven members to sign the Rules, when approved, and the Registration Applica- tion Form, and also appoint a Secretary, Treasurer, and Trustees. The $even persons selected constitute the Executive Provisional Committee. Rules must not be issued with the name and address of the society, nor business commenced until the society is registered. HOW TO FORM CO-OPERATIVE BANKS 75 When this is done, a Meeting of the Executive Pro- visional Committee should be called as soon as possible to make the following arrangements : (a) To admit members. (b) To issue a prospectus of the society for dis- tribution in the district. (c) To obtain the necessary books and business forms. (d) To obtain the necessary capital to admit of loans being made. (e) To fix the rate of interest for borrowers and depositors according to the Rules, and to do all other things necessary for the due conduct of the society until such time as the regular Executive Committee is appointed by the first General Meeting of the members. As soon as possible after registration, for which in the case of Village Credit Societies no charge is m ! ade, a General Meeting should be called to elect the Executive Committee for the year, and, if it is decided to have one, the Council of Control. The Bank is then ready to begin business, includ- ing dealing with the applications of such of its members as are able to make use of productive credit, and the receiving of savings deposits. CHAPTER XI HINTS ON THE MANAGEMENT OF CO-OPERATIVE BANKS IN this short chapter I desire to supplement my previous remarks by a few hints on general and special points in connection with the management of Co-operative Banks, and must trust to the reader's general knowledge and good sense to supply any in- advertent omission on my part. Their Spirit and Principles. It is, of course, most important that the conductors* of these societies should constantly bear in mind the root principles upon which they are founded. That they should remember that it is not so much quantity as quality that should be considered, and that the success of these financial friendly societies is not to be measured primarily by the amount of their profits or dividends, but by the moral and economic benefit which they prove to their mem- bers. A small Co-operative Bank conducted in the right spirit of business brotherhood is worth a great deal more than a huge concern which exercises little or no educational influence. There is, as we all know, a tendency to commence enterprises enthusiastically, with high ideals, and to let these be gradually whittled down, by difficulties or indifference, to meagre performances. It should be the constant aim of local leaders to guard against this, and to maintain performance upon the same level as original profession. To assure them- selves from time to time that, by means of the Bank, wasteful habits are being replaced by wise prudence, that members are being saved from usurers, and are profiting by the loans granted to them; and, above all, that the interest of the people is being preserved in 76 HINTS ON THE MANAGEMENT 77 their society, that their knowledge of business methods is being improved, and their esprit de corps fully main- tained. There are many ways for exercising this influence which will suggest themselves to those interested in the movement. Friendly personal intercourse is perhaps the best, and some banks organise social meetings of their members to remind them of the aims and objects of their association, and lead them to bring in others. Correct Book-keeping-. Whilst it is most important that correct books of account be kept in connection with all working-class organisations, it is particularly so with regard to People's Co-operative Banks. Work- ing people, being mainly engaged in manual occupa- tions, are generally ignorant on clerical matters, and though no complicated system is required for keeping the books of a Co-operative Bank, the first task of a newly-formed Committee of Management should be to secure the necessary clerical assistance for carrying this out properly. It is most necessary that local Secretaries should be businesslike and understand simple book-keeping. Many persons who gain ascendency over their fellows by plausibility and fluency of speech are most deficient in these respects. On one occasion, for instance, the aspirant to the Secretaryship of a Co-operative Bank 'expressed what he believed were his qualifications somewhat as follows : " I'll tek on the Secetyship, guv'nor. I'm not much at riggers an' sich like, but I'm a bleever in bruthrud, w'ich I s'pose is the princpul thing." On turning up the following week, I found him, to use his own words, " a bit mixed in his riggers." His explanation, given with perfect nonchalance, was as follows : " I wuz in a bit of a fog, I can tell yer. It wuz hate an' six (8s. 6d.), but I put down a six insted ov a hate in the shillin' collum, and a nine insted ov a six in the coppers. It wuz a proper maze, an' no mistake, but I got it rite at the finish, arter a hour or two." Then another would-be Secretary had the horrible habit of writing down " dif." whenever he could not 78 CO-OPERATIVE BANKS balance his cash columns. The result was a series of deficiencies in the debit and credit columns of his cash book, all of which were accounted for by a repetition of " difs." Doubtless both these men were well-meaning fellows, though quite unsuited for the Secretaryship of a Co- operative Bank. On the other hand, I have come across scores of clear-headed working men admirably suited for such a position, and their number will, with the spread of education, doubtless increase. Members of Committees should consider it their duty to master the business details, including the method and manner in which the books are kept. They are often remiss (not without excuse) in this respect, although, apart from their duty towards the societies, whose interests they have been elected to safeguard, they would find it greatly to their personal advantage to understand such matters. Co-operation with Secretaries. Undoubtedly one of the primary conditions for the success of a Town or Country Co-operative Bank is the finding of a good Secretary. Sometimes, when found, there is an inclination to leave everything to him ; but, whilst he should be given a free hand in the management of the secretarial busi- ness, he should also receive the active sympathetic interest and support of the members, and especially of those who are elected to official positions. This both encourages him to do his best for the Society and guards against the possibility of his drop- ping into lax ways. Important Points. Expenses should be kept down to the lowest possible point consistent with efficiency. Secrecy must be maintained regarding the trans- actions of members. This is most important. It should also be noted that, whilst the Model Rules provide for all general conditions, these may be supple- mented by bye-laws (printed on the prospectus), stating any additional regulations fixed by local Committees, such as the limit on the amount of individual loans and of the time for their repayment. HINTS ON THE MANAGEMENT 79 It is advisable to fix a low limit for loans until the Bank gets a correct knowledge of the trustworthiness of its members. More time will, of course, be granted to agricultural borrowers than to those in towns. Other points to be settled by the Committee are the rates of interest for depositors and borrowers. Managers of Co-operative Banks should also do everything in their power to improve the financial credit of their institutions. The stronger this is the greater will be the deposits from the district. They should specially seek to increase the Reserve Funds of their Societies. Many Banks adopt the wise custom of establishing a Contingency as well as a General Reserve Fund, so that any losses may be met out of it, without interfering with the dividend or trenching upon the latter. Extreme care should be observed in the granting of loans and keeping borrowers up to the mark in their repayments, and immediate notice should be given to sureties of any default in this respect. It is a good plan for Committees to require Secretaries to lay before them regularly a list of any possible defaulters. Working people are apt to be too easy going in these matters, and to confound orderly business pro- cedure with harshness. They soon, however, appreciate the difference when it is tactfully pointed out to them. A good method of ensuring regular attendance of members of Committees of Town and Country Banks is to keep an attendance book for them to sign, and to supplement this by printing in the Annual Report a statement of the possible number of attendances and of each individual's. Hitherto Committee members and officers of Town and Village Co-operative Credit Societies in this country have, with the exception of the Secretary (and, when the operations are large, the Assistant Secretary), rendered their services without financial fee or reward, and, per- sonally, I should like to see this public-spirited custom continued. In any case they should never exact more 80 CO-OPERATIVE BANKS than a nominal remuneration for serving their fellow- workers in this capacity, and thus demonstrate that they are actuated by higher motives than those described by the expression " a policy of pies and pints." Urban Bank Requisites. A few words regarding the books, forms, and other requisites for Urban and Rural Banks may be helpful. It is necessary to have affixed, on the outside of every office or place in which the business of a Bank is carried on, a sign with the name of the Society. An indiarubber name-stamp or seal, together with a locked cupboard or box with duplicate keys (one for the Secretary and one for the Chairman of Committee), should also be obtained. The forms required are Rules, Prospectuses (includ- ing Membership Application Forms), Loan Application Forms, Promissory Notes, Share, Loan, and Deposit Cards. Specimens of each may be obtained from the Urban Co-operative Banks Association. Each Bank should also have a Manifold Letter Book to preserve copies of its correspondence, and, as its busi- ness increases, forms, such as notices to defaulting borrowers, sureties, etc., can be added. I hope it will not be long before uniform sets of books are provided for Co-operative Banks, which would much facilitate supervision and inspection. At present, in addition to a Minute Book, to con- tain a summarised account of Committee, Council, and General Meetings, which should be fully entered up, Banks have : (a) Cash Book, drawn up on analytical lines, that is, with at least eight Cash columns on each page, the left hand, or Dr., being for money received, and the right hand, or Cr. page, for money paid out. (6) Share Loan and Deposit Registers. These Registers may be contained either in one or three books, according to the size of the Bank and the likely number of its trans- actions. They are entered up weekly from the Cash Book, HINTS ON THE MANAGEMENT 81 with the exception of Loan and Deposit Interest items, which are calculated and added at regular intervals. The personal accounts of each register should, of course, tally and be a check upon the Share, Loan, or Deposit Cards of the Bank, which members hold, and which are entered up when they make or receive pay- ments. (c) General Ledger. This book is also entered up from the weekly totals of the cash book, under the various headings of Shares, Loans, Deposits, Interest, Entrance Fees, Rules, Cards, etc., Fines (if any), Establishment Expenses, and Sundries. Though, to persons entirely unacquainted with book- keeping, these details may appear complicated, they will be found to be extremely simple in practice. The great thing is to enter the Cash Book cor- rectly and as neatly as possible, week by week, without getting into arrear. This will not occupy much time, and the book will then show at a glance how much has been received and paid out under the various head- ings on each business night, with the balance, repre- senting cash in hand. A line should be drawn, and each column added up separately. At the foot of this column the total amount of the transactions, up to the end of the previous week, should be brought forward and added to those of the week. Unless there is an Assistant Secretary, it is a good and safe plan for Committee members to attend in rotation each business night and assist the Secretary in receiving cash and making payments. When two persons sit for the receipt of cash, one can enter the amount and initial it on the member's card, passing this on to his colleague for entry in the Cash Book. The Cash Book total and the cash should then agree, and risks of errors or mismanagement would thus be greatly lessened. (d) Balance Sheets and Audit. If these instruc- tions are carefully followed, it will be possible 82 CO-OPERATIVE BANKS to ascertain the financial position of the Bank at a glance at any time, and to render to the Central Association without difficulty the half-yearly Balance Sheets required by the conditions of affiliation. It will also be easy to fill up the Annual Return Form required from registered Industrial and Provident Societies by the Chief Registrar at the close of each year, and to have the books audited satisfactorily. Town Co-operative Banks should draw up and dis- play in their Registered Offices a Balance Sheet of their transactions at least every three months, so that their members may constantly become acquainted with the progress which they are making, and thus have their interest and confidence increased. Country Bank Requisites. The requisites and con- sequent initial expenses of a Village Credit Society are less than those of a Town Co-operative Bank. It is not absolutely necessary to have more than a few copies of the Rules (which may be obtained cheaply from the Central Society) and a small set of books. At the same time, if it can be afforded, it adds to the importance of the Society in the eyes of the inhabitants, and saves speech and clerical labour, if prospectuses (with Membership Application Forms attached), Loan Application and Agreement Forms, Notices to Bor- rowers, and Loan and Deposit Cards are printed. The books needed are Minute Book, Cash Book, and Ledger. The first should contain a summary of all meetings, the second a clear account of Receipts and Payments, and the third Personal Deposit and Loan Accounts, and others dealing with Expenses, Interest, Entrance Fees and Fines, Totals of Deposits, and of Loans and Repayments, Profit and Loss, and Reserve. As the yearly transactions of an ordinary sized Eng- lish Village Credit Society do not occupy more than two or three pages of its Cash Book, not much book- keeping capacity is required to keep a straight record of them, and to fill in the return required by the Chief Registrar of Friendly Societies at the close of the year ending on December 3ist. HINTS ON THE MANAGEMENT 83 Town and Country Establishment Expenses, The small local formation expenses of Town and Country Co-operative Banks are generally defrayed by themselves, and the charge written off against the first two or three years' profits. There is, however, no objection to these initial ex- penses being defrayed by private individuals or public bodies, but both limited and unlimited liability societies must be entirely self-supporting after establishment. Financial Safeguards. All Secretaries should be re- quired to furnish a Fidelity Bond, varying in value according to the amount likely to pass through their hands. It is most important that all moneys received by the Secretary on a business night should be handed over to the Hon. Treasurer, or banked with the Society's bankers, not later than the next day, with the ex- ception of a small amount approved by a resolution of the Committee. Many mutual societies, which have incurred losses through the defalcations of their Secretaries, would not have done so if they had observed this custom. The Treasurer, on his part, should deposit the funds of the Society in the Post Office Savings Bank, or in some other reputable bank approved by the Committee, from which they cannot be withdrawn except by cheques signed by himself and the Chairman, or acting Chair- man, and countersigned by the Secretary. The receipt of the Treasurer or the Bank pass-book (preferably both) should be laid on the table and in- spected at each Committee Meeting. No system, however beneficial, finds itself free from criticism or from instances of failure, but if the prin- ciples and methods which I have endeavoured to set forth are carried out in an intelligent manner, all criticisms will be satisfactorily answered by the practical demonstration of the utility of Town and' Country Co- operative Credit Societies. CHAPTER XII THE IMPORTANCE OF SUPERVISION ONE of the most important matters in connection with Co-operative Banks, or, for that matter, all popular economic societies, is that of adequate supervision. Its Necessity. Their aims and objects may be ex- cellent, their model rules perfect, and their system of book-keeping most exemplary, but unless these are properly carried out, weakness and failure must result. There are also the very real dangers dealt with in my chapter on Counterfeit Co-operative Banks. Hence the necessity for adequate inspection and supervision. The promoters of the movement in this country, I regret to say, have hitherto only been able to exercise a cursory supervision over the operations of the Banks they have founded. If they are to multiply more rapidly and become a permanent factor in the economic life of the nation, this department must be improved and strengthened. In the first place, it may have to be done by volun- tary effort, though many staunch believers in self-help feel that later on the State may be reasonably called upon for aid in this direction. The ideal plan would be for local Co-operative societies (Credit and otherwise) to voluntarily submit themselves to inspection and contribute sufficient to their Central Associations to defray the necessary expenses. I fear, however, that this " policy of perfection " is not likely to be carried out, partly because of its cost, but mainly because my countrymen hold what I venture to believe exaggerated ideas of independence, which prevent the majority from agreeing to such in- spection, however beneficial. 84 THE IMPORTANCE OF SUPERVISION 85 A Suggestion for the Government. I therefore think that it would be a good thing if a system of com- pulsory inspection for ensuring societies " going straight " could be legally established. It would be a heavy and expensive task for the Government to undertake directly, but if they were to depute the duties to our Central Associations and make grants to them to cover the expenses, they could be discharged satisfactorily, at a much less cost and with greater effectiveness. In view of the social legislation of modern times, I do not think there is anything revolutionary in this proposal for protecting the interests of the poorer classes of the population and inducing them to join in greater numbers various forms of Co-operative Societies for their moral and material welfare. It would, however, involve the question of the legality of unregistered societies, of which there are a tremendous number. Under the present law 7 , " No company, association, or partnership consisting of more than 20 persons can be formed for the purpose of carrying on business that has for its object the acquisition of gain unless it is registered as a company under the Companies Act, or is formed in pursuance of some other Act of Parlia- ment or of letters patent." This does not make unregistered Friendly Societies illegal. I have no desire to see the freedom of the subject interfered with except in the interests of the community, but do not think it would pass the wit of man to draft an acceptable Bill which, on the one hand, would permit of associations with a trivial financial turnover being registered or unregistered, and at the same time compel others, in the interests of their members, to be registered and properly supervised. Affiliation. Affiliation to Central Associations, like the Urban Co-operative Banks Association, the Agri- cultural Organisation Society, and the Irish Agricul- tural Organisation Society, is obviously beneficial to local People's Co-operative Banks and Village Credit Societies. 86 CO-OPERATIVE BANKS It adds importance to their membership to be part of a national organisation, which advertises their work and passes on useful information to them from time to time. Other specific advantages are : (a) Registration under the I. and P. Act at a much lower fee. (b) Expert advice and assistance (including book- keeping instruction), not only in the organi- sation of societies, but also whenever they are in a difficulty on any point. (c) The purchase of model rules and other forms for the conduct of societies at a lower cost than if they had to print them separately. (d) Attendance and voting at the annual meetings of Central Associations. The conditions of affiliation are : (a) Approval by the Association of the title of the society, its first rules, and any subsequent modifications thereof. (b) Copies of balance sheets to be rendered by Town Banks to their Association half-yearly. (c) The right of inspection of the books of local Town Banks at any reasonable time, and the right to send a representative of their Asso- ciation to attend any General Meeting, but without the possession of a vote. (d) The payment of a small affiliation fee. (e) Village Credit Societies are required to sub- scribe for one i share in the A.O.S., which involves the payment of one shilling and a contingent liability of 195., which is never likely to be called up. In Germany, as we have seen, the principal advan- tage of affiliation to Central Unions is a thorougli annual inspection of the affairs and methods of business of local Banks, but lack of means has hitherto prevented our copying this excellent example. Registration. The advantages of registration under the Friendly and Industrial and Provident Societies Act (obligatory upon all affiliated British Town and Country THE IMPORTANCE OF SUPERVISION 87 Banks) are fully set forth in the Guide Book of the Friendly Societies' Registry Office. Registration gives societies a legal status by special remedies on summary conviction against persons who obtain possession of their property by false repre- sentations or withhold or misapply it, and other privi- leges, including, in the case of Friendly Societies, exemptions from certain stamp duties, and to all power to appeal to the Chief Registrar, on the representation of a certain number of their members, if they consider their affairs are being misconducted. The main obligation of Co-operative Banks towards the Registrar is the furnishing of Annual Returns, audited either by one of the Public Auditors or by two or more persons appointed by each Society. Good and Bad Audits. Many of the private audits are thoroughly efficient, but many are the reverse. I remember one occasion upon which a Friendly Society secretary " went wrong " to the tune of ,92. When the attention of one of the auditors was called to his recent certificate, all he replied was, " Well, he (the secretary) told me the books were all right, and so I signed it ! " I also recollect the case of a Money Club, held in connection with a political club in the Midlands, the Secretary of which committed suicide after embezzling ,1,000 belonging to the members. The books had been " audited " annually by two honest but ignorant men, who had merely asked the late Secretary each year where they were to sign their names ! Those behind the scenes could, whilst testifving to the honesty and public spirit of the officers of work- men's societies generally, supplement these examples with scores of others. Some persons would deduce from these experiences that it is altogether unsafe to trust working people with the administration of economic societies involving finan- cial responsibility. It is too late in the day, however, to maintain such an attitude. The working people do not, and need not, ask anybody's permission for the formation of the 88 CO-OPERATIVE BANKS various forms of Mutual Aid Associations, and the total amount accumulated in Provident Societies with which the Registrar of Friendly Societies has to do, amounts to ^178,807,443, in addition to a very large amount in the hands of unregistered societies. There is room, however, for improvement in the supervision of all Co-operative Societies. Councils of Supervision and Local Auditors. I have already referred to the composition and objects of Councils of Supervision. The advantages of these bodies depend upon whether they regard their duties seriously or indifferently. If they adopt the first-mentioned attitude, they can be of reat service in keeping Committees of Management and ecretaries up to the mark in carrying out the principles of the movement in a safe and businesslike manner. Before considering the question of the additional safeguards in the direction of inspection and super- vision which should be instituted in this country, in order to maintain the true spirit of Co-operative Bank- ing on the one hand and on the other reduce to a minimum the risk of losses, I would like to point out that there are some things such as the detailed audit of the transactions of societies which it seems to me will always be able to be attended to more efficiently, in the case of independent banks, by local persons than by any Inspectors from a distance. Therefore it is difficult to devise any centralised system of supervision likely to be able to dispense with local auditors. Inspection by Post. In the absence of an efficient local audit, one system would be for each Bank to make weekly or monthly returns by post of all their trans- actions, and to send their books and vouchers at the end of each year to be audited by the same body. The disadvantages of this are that the Central Organisation would not be able to check the Share Loan and Deposit Cards, and, when the movement grew, would have, at the commencement of each year, to employ a large body of temporary accountancy clerks for a few weeks, beyond which it would not be con- venient for them to retain the books of their affiliated societies. THE IMPORTANCE OF SUPERVISION 89 They would also have no means of judging of the value of the promissory notes or of the spirit in which the Bank was being conducted. They would therefore require some local body, such as the Council of Supervision, to undertake the duty of examining and reporting upon these matters. Travelling Inspector. Another plan suggested is for the Central Organisation to employ a Travelling Inspector, to pay at least one visit to each Bank per annum, and examine and report upon the state of its accounts and its methods of work. District Controllers. The ideal plan would seem to be to institute a system of District Controllers men of practical business knowledge, including banking whose duty it would be to annually inspect and report upon the conditions and methods (including the local audit) of the Banks in their area, and in addition pay one or two surprise or " pop " visits to each Bank in the course of the year for purposes of supervision. They would have to carry out their duties in a tact- ful manner, so as not to ruffle the susceptibilities of those responsible for the conduct of the Banks. The auditors would report direct to the members, and the District Controllers to the Central Association. Under any system it would be necessary for each Bank, in the interests of its members, to subscribe so much per head for inspection purposes, and for some time, at all events, this amount would have to be supple- mented by a grant from the Central Organisation. As a business man, I feel very strongly on this subject of inspection and supervision, which would un- doubtedly : 1. Encourage local people to form Co-operative Banks at a much greater rate by the assur- ance that the societies, when established, would have a careful eye kept upon them. 2. Conduce to good management. Everyone, more or less, needs the stimulus of supervision. 3. Give much greater confidence to members to deposit their savings in their coffers. 4. Preserve their co-operative character. CHAPTER XIII 3OME PERSONAL REMINISCENCES THE work of organising a movement of the nature of Co-operative Credit, though often hard and discouraging, has many compensations whereby the pioneer is benefited, as much as those for whose welfare he is labouring. He has to meet with and, if possible, convert into friends and supporters all sorts and conditions of men, from peers to peasants, and if he be a student of human nature (without which it is impossible to succeed as the secretary of a popular movement) he learns many interesting things from this intercourse, of inestimable value in life. A philosopher friend of mine used to declare that he declined to write for the public Press because a journalist had to look at things out of other people's eyes, and he preferred to confine himself to his own. Personally, whilst I think his sublime egotism would have made his writings vastly interesting and amusing to the readers of newspapers, I am quite certain that it unfitted him for popular propaganda work, in which, without resigning one's personality, one has to be, in many ways, "all things to all men." The secrets of success, of course, apart from having a good cause, are sincerity, sympathy, and enthusiasm, coupled with good-tempered treatment of critics and the capacity of not being too much elated by success nor unduly discouraged by set-backs. The British Working Man. My duties have brought me much into contact 'with working men, and I have consequently been in a position to estimate pretty accurately their qualities and dispositions. They are often intensely suspicious in the first place, 90 SOME PEKSONAL REMINISCENCES 91 but once get established in their confidence (which can never be done if there is anything patronising in your attitude), and they prove themselves, on the whole, downright good fellows. I have seen excellent speeches coldly received by them, and poor speeches, with the touch of humanism, rapturously applauded. A Poser. The similarity of questions asked at the close of addresses in different places is astonishing. The most regular put, as a rule, in a censorious tone is, " I would like to ask the speaker how much his Association is to receive if a Bank is formed, and how much of the profits they will expect from it every year ? " When I have replied, " A big ought " or " Nothing," the heckler has often joined in the loud laughter accom- panying his discomfiture. "Vested Interests." On one occasion, after ad- dressing a meeting of working people and urging them to establish a Town Co-operative Bank, a man, whom I had been previously told would probably make one of the best supporters of the movement, rose and said he did not agree with my remarks at all, and that, for himself, he would have nothing whatever to do with it. I replied that I always welcomed criticism, but would like him to state his objections specifically, so that I could reply to them, and that in any case I hoped he would join the proposed Provisional Committee for ascertaining whether a Bank would be useful to the neighbourhood or not. But he was obdurate, and refused to say anything further or join the Committee. Now comes the sequel. Another working man, at the close of the meeting, informed me that my critic had been a labourer, and had started selling various articles to his neighbours, until at last he had made a consider- able sum of money. Nearly everyone in the neighbourhood was indebted to him for goods purchased on the " tally " or hire-pur- chase system, and possibly for small loans. He evidently feared, and rightly so, that if the people founded their own Co-operative Bank they would be able to emancipate themselves thereby from his toils, 92 CO-OPERATIVE BANKS and buy for cash at a much lower price the articles he was foisting upon them. This explained everything. He represented the " vested interests " of the Tally system ! "A Model Money Club." Another incident that sticks in my memory is the speech of a critic who stated that, however useful Co-operative Banks might be elsewhere, there was no necessity for one in the neighbourhood I was visiting, as they already had a model money club which possessed all the qualifications and conveniences I had been advocating. I found out afterw r ards that this democratically- governed society, "open to all," was connected with a public-house in the vicinity. When I remarked upon the disadvantage of people having to visit a public-house regularly, to make their payments and attend meetings, he replied, " But two- thirds of them never come near the place." I also discovered, by a little tactful cross-examina- tion, that the treasurer was the publican, that no general meetings of the society ever took place, and that the committee consisted of three persons, self-elected on the establishment of the society several years previously. So much for the democratically-governed model money club, which was described as equal in every respect to a properly constituted People's Co-operative Bank. Halls and Audiences. I had an experience during the first year of my Co-operative Banks work which might have damped my ardour if I had not been, to use the expression of a friend, such " an abominable optimist." Arrangements had been made, through a local gen- tleman, for me to address a meeting for the formation of a Bank in a densely-populated industrial district, and large numbers of leaflets announcing the fact dis- tributed broadcast. I went down, accompanied by the friend who had had sole charge of the arrangements, turning over in my mind what I should say and how I would say it, and wondering what sort of an audience I would have SOME PERSONAL REMINISCENCES 93 to address; but, to my discomfiture, on entering the large, well-lighted hall precisely at the hour when the meeting was to have commenced, I saw an empty plat- form, and also that the audience consisted of two poor old women with shawls over their heads, a girl, and an anaemic youth of about seventeen years of age. It was a regular fiasco. Even the chairman had not put in an appearance, and, when I met him later, the only comfort I received was, " There is no good in coming down here. No public interest is taken in anything. The only way to get people to attend a meeting is to provide them with a free tea and comic songs." I consoled myself with remembering the experience of a far more influential organiser than myself, who had often to visit villages four or five times before being able to secure an attendance, and who on one occasion, after tramping through wind and rain along rutty roads to a village school, found not a soul in the place except the caretaker, whose principal anxiety was as to w r ho was to pay for the oil used for the lamp lighting. I have addressed many crowded audiences since, but cannot entirely get rid of the horror of finding a hall without an audience. Country Wit and Humour. Townsmen are apt to think they possess a monopoly of the sense of wit and humour, but those, like myself, who have addressed audiences in country villages, oftentimes miles from any railway station, have been made aware of the fact that not only does the stolid exterior of the agricultural labourer hide much sound common sense, but that if he can be got to talk he will drawl out many caustic com- ments of a most humorous character. One example of this occurred in the Institute of a village on the borders of Nottinghamshire, after I had delivered an address on the advantages of forming a Credit Society for the district. The dead silence of a few minutes which followed my remarks was broken by a typical villager, and I only regret that I cannot repeat what he said in his own dialect, but the purport of it was as follows : " You've heard what the gentleman says, and you 94 CO-OPERATIVE BANKS know it's true, but you sit and look at one another like a lot of mummies and don't move an inch. You remind me of the tramp who was found lying down by the roadside. When he was asked where he was going, he said, * I don't know. I always goes where the wind blows, and take care to have it at my back, and now it's gone down I don't know what to do ! ' " Stand up like men, face the wind, strike out a path for yourselves, and don't need so much shoving ! " A Cautious Countryman. I have generally found it more difficult to ascertain whether I was impressing my audiences favourably or not in the country than in the towns. At the close of another speech on behalf of Village Co-operative Credit, a rural inhabitant ex- pressed the extent to which I had succeeded in the following words : " You must pardon me, master, but wen oi were a lad we used to bathe in a pond. It were a muddy 'un, and as non on us wanted to get drownded, we used to test it wi' a long stick. Now, you must excuse me, master, but it's the same wi' this 'ere scheme o' yourn. We wants to know w'ere we is, and to tek care as we don't get drownded in it." From the nodding of heads and various marks of assent with which this oration was greeted, I felt that it admirably reflected the general opinion of the meeting. A Productive Purpose. I cannot resist jotting down one more country story, the recounting of which at pro- paganda meetings invariably causes much merriment. In the Irish Co-operative Banks the regulation as to only lending money for productive purposes is rigidly adhered to. When a young Irishman was asked what he wanted a loan for, he replied " for a new suit of clothes." On this being objected to on the ground that it was not a productive purpose, the son of Erin retorted : " Well, you see, it's this way, gentlemen I want the suit for courting a colleen whom I hope to marry, and surely your honours will admit that that is a productive pur- pose." The Conservative Lion and the Socialist Lamb. The unifying influence of the Co-operative Banks move- ment was strongly illustrated at a recent meeting on SOME PERSONAL REMINISCENCES 95 its behalf held in the town hall of a large Lancashire manufacturing centre, under the presidency of the Mayor, who was supported on the platform by the local leaders of the Conservatives, Liberals, Radicals, Socialists, Labourists, Churchmen, Roman Catholics, and Nonconformists. One speaker humorously remarked that he was glad to see the Tory lion lying down with the Socialist lamb, with a few little Liberals trying to lead them. To which, amidst laughter, the Conservative leader responded that " it was a great relief to be out of the dusty arena of political and religious strife, if only for a short time, on an occasion such as that." The scene inspired the editor of the principal local paper, who was also present, to publish in his journal a comical cartoon, under the above title, exhibiting a lion and a lamb being led towards a grassy slope, upon which the words " Co-operative Bank " were inscribed. Personal Acknowledgments. In concluding this brief record of a few of my experiences whilst engaged in Co-operative Bank propaganda (to which I regret it has only been possible to devote a portion of my time), I would like to acknowledge the friendship extended to me by many men and women of all positions, parties, and creeds. I value intensely the trust and confidence of large numbers of manual workers in London and the Pro- vinces, and the goodwill of many Labour leaders, in- cluding Mr. W. C. Steadman, M.P., Secretary of the Trades Union Congress. I should have to make a long list if I attempted to enumerate the secretaries of societies, heads of settle- ments and institutes, and other social workers who have helped me, and I also owe much gratitude to the con- ductors of the Press in the Metropolis and elsewhere. Especially do I desire to put on record my indebted- ness to Mr. Robert A. Yerburgh, D.L., J.P. (the head of the movement in this country), who represented Chester in Parliament for so many years, and has kindly accepted the dedication of this little book. Also to Sir Henry Robson, J.P., the Mayor of Ken- sington, who has supported the work with exceptional 96 CO-OPERATIVE BANKS generosity; Dr. J. B. Paton, of Nottingham (with whom I have had the privilege of being acquainted since boyhood), at whose instigation I entered upon it by becoming Secretary of the Co-operative Banks Associa- tion ; Mr. V. A. Malcolmson, whose business experience and advice have been invaluable; and Mr. Victor V. Branford, M.A., Founder and Hon. Secretary of the Sociological Society. In addition to these, I must mention the public support and valued personal friendship of Lord Stam- ford, the Rt. Hon. Sir Horace Plunkett, Mr. R. N. Sutton-Nelthorpe, Founder of the first English Credit Society; Mrs. J. C. Carver and Mrs. Mills-Carver, co- Founders of the first English Town Co-operative Bank ; Mr. John Ross, C.A., Hon. Auditor to the movement since its commencement; and Mr. W. Harvey, of Black- burn, whose extensive experience of industrial banking and supervision has been freely placed at my disposal. This list would be very incomplete if it omitted acknowledgments to Mr. J. C. Gray, the able and genial Secretary of the Co-operative Union; Mr. R. Halstead, Secretary of the Co-operative Productive Federation; Dr. G. W. Kitchin, Dean of Durham; and Mr. E. O. Greening (both contemporaries of the Chris- tian Socialists of the 'forties) ; the Bishop of London, the Bishop of Islington, the Archdeacon of London, Mr. H. Rider Haggard, Mr. Douglas Eyre, Vice-Head of Oxford House; Mr. T. M. Kirkwood, Mr. A. H. H. Matthews, Secretary of the Central Chamber of Agricul- ture; Mr. J. J. Stark, Mr. Francis E. Douglas, Mr. W. J. Braithwaite, Mr. J. G. Cloete, Mr. S. T. Weston, Mr. B. W. Howe, Mr. Arthur Bowman, Mr. J. K. Montgomery, Mr. R. G. Pearse, Mr. J. H. Diggle, Mr. . J. G. Lee, Mr. J. L. Hargreaves, Mr. Councillor James Johnson, J.P^, W. Creed, Mr. S. Gainsley, Mr. J. G. Lee, Mr, Mr. William Easter, Mr. Edward Spencer, Mr. C. Buckeridge, Mr. George Matheson, Mr. F. C. Mills, the Hon. and Rev. J. G. Adderley, Rev. Edgar Todd, Rev. R. L. Payne, ' Rev. Rollo Meyer, Rev. L. Ehrmann, Mr. R. H. Cazalet, Mr. C. E. Moore, Sir K. W. Brabrook, C.B., Mr. J. D. Stuart Sim, Chief Registrar of Friendly Societies; Mr. Hall Hall and Mr. SOME PERSONAL REMINISCENCES 97 W. H. Tozer, of the Friendly Societies Registry Office; the Secretaries of the Irish and English Agricultural Organisation Societies, Mr. W. H. Wolff and other writers mentioned in my Bibliographic Note; also the members of the various Committees in connection with the movement whom I have served under, and the Officers and Committees of the Co-operative Banks formed as the outcome of our propaganda. Complete lists of those who have given financial support to Co-operative Credit propaganda in the United Kingdom and Ireland are contained in the Annual Reports of the Urban Co-operative Banks Association and the English and Irish Agricultural Organisation Societies. These include, besides most of those whose names have been given, the Hon. W. F. D. Smith, M.P., the Hon. T. A. Brassey, Sir Edgar Speyer, Mr. Frank A. Bevan, Mr. R. L. Barclay, Mr. R. C. Gosling, Mr. L. D. Gosling, Mr. Francis W. Buxton, Mr. D. C. Stiebel, Sir Raymond West, Mrs. D'Arcy Hutton, Mrs. F. Cecilia Tubbs, Mrs. P. H. Bagenal, Mr. Vincent R. Hoare, Mr. Geoffrey Drage, Sir Ralph Neville, Mr. Charles Robertson, Mr. Alexander Thomson, Mr. Alex. Devine, Mr. J. M. Ludlow, C.B., Mr. C. J. Whitting- ton, Mr. Sam. Bostock, Mr. George Devine, Rev. Minos Devine, Mr. Frank H. Hope, and Mr. A. Camp- bell Miles. CHAPTER XIV MONEY-LENDING AMONGST THE POOR THOSE unacquainted with working-class life would be astonished if they knew how extortionate usury flourishes amongst the poor. Now and again the public is shocked by newspaper reports, under such glaring headlines as " In the Clutches of the Money-lender," " Shylock's Victim," " A Human Vulture," etc., of poor people being harried out of their lives by the exactions of money-lenders; but these are simply instances possessing features which lend themselves to attractive publicity. The great army of victims drag along their weary way in a mist of obscurity, without even the satisfaction of knowing that their miseries are seen or sympathised with. Many of them fall deeper and deeper into the mire of inextinguishable debt, until they are landed in the workhouse, the madhouse, or a premature grave. These facts were proved up to the hilt before the Parliamentary Select Committee, whose report resulted in the Money-lenders Act, 1900. Failure of the Money-lenders Act. I do not think I am exaggerating when I say that no Act has more signally failed to accomplish its object than this one. So far as I am aware, it has done little or nothing to lessen the evils against which it was directed. Professional money-lenders continue to flourish under what have been ironically described as its " pro- tecting w clauses, hardly any prosecutions have been instituted for the offences mentioned therein (for the 98 MONEY-LENDING AMONGST THE POOR 99 simple reason that they may be committed with im- punity and their penalties evaded), their victims rarely get redress from the Courts on account of the ineffective drafting of the Act, and they themselves continue to flood the country with their specious circulars and de- ceptive advertisements, and to wring extortionate inquiry fees, interest, and fines from their victims as heretofore. To the lay mind it would appear comparatively easy for a Court to decide when the interest on a loan was excessive and a transaction harsh and unconscionable, but our judges have generally been unable to define the conduct of money-lenders as such (at all events in a legal sense), unless defendants could demonstrate the possession or anticipation of considerable means, which of course is out of the power of the generality of poor persons who resort to money-lenders. What has been done, however, in occasional in- stances, when unconscionable interest has been charged, has been to make orders for the amounts to be paid by extremely small monthly instalments, but this could have been done under the old law. Money-lenders should be licensed, and the maxi- mum interest and other charges upon their loans should, as with pawnbrokers, be fixed by law, and anything paid above it be recoverable. Money- lenders and Their Clients. I have before me particulars of innumerable piteous cases, both in town and country, of sufferers from usury, and have also come into personal contact with many heartrending instances of persons who have had experience of the " tender mercies " of the money-lender, though for the credit of human nature, I am glad to be able to say that " there are money-lenders and money-lenders." All are not as hard-hearted as the majority. Some conduct their trade in a reputable manner, and are satisfied with large profits fairly stated, instead of practising gross extortion and the cruel deception of borrowers as to the rates they are paying, and the nooses they are fastening round their necks. On the other hand, there are dishonest as well as honest borrowers, the latter of whom have to pay for 100 CO-OPERATIVE BANKS the losses involved by the former; but, even after allow- ing for this, the usual charges of money-lenders are outrageous. Cases of Victims. I have only space to record a few instances exemplifying the usury which prevails in our midst, and these must necessarily be confined to those concerning the poorer class of borrowers. The following "human document," signed "A Young Mother," which appeared in a London evening paper, illustrates so vividly and truly one of the every- day sordid tragedies of our mean streets, that I make no excuse for reproducing it : A Young Mother. " SIR, I have had the misfortune through reverses to fall into the hands of a money-lender. I first began by borrowing a pound at a penny to the shilling ; that would mean is. 8d. per week. " I paid that amount over twelve months, and still owed the pound the same as when I first began. " I paid 4 6s. 8d., and still owe the pound now. Sir, I have a little family of five, and my husband is a labouring man of very modest means, which this money-lender knows, yet week after week they are heartless enough to demand this interest. " Sir, my excuse for writing this is in the hope that some kind heart who has influence may read this, and take some measures to stop these bloodsuckers, as I am only one out of the dozens I know of. The road I am living in holds no less than seven of them, so God help the poor victims who fall in their hands." Another Poor Woman. Another poor woman who saw this letter wrote : " Young Mother's case is by no means rare. I borrowed 405. principally to get my girl some clothes to go to service, and am still paying 35. 4d. every week for interest, for I cannot get out of it anyhow and dare not tell my husband, who is a poor man." A Printer's " Chapel." On one occasion I was invited to meet fifty or sixty compositors employed by one of the largest firms in London, nearly every one of whom had borrowed from a certain money-lender, and, after re- paying much more than the original amounts borrowed, found themselves owing more, the explanation being that without in- vestigating the matter they had agreed to pay interest at some hundreds per cent, per annum, and also be mulcted in fines when- ever any of their payments were in arrear. At the cost of a small MONEY-LENDING AMONGST THE POOR 101 initial outlay, therefore, and by the piling up of interest and fines, coupled with a ready acquiescence in renewing balances with added interest, the money-lender was drawing a very fair liveli- hood at the expense of their ignorance and folly. All I could do was to advise the men to allow him to take his threatened proceedings against them, and then to lay their united cases before the County Court Judge, in the hope that in view of the unconscionable interest charged, he would make such small orders for payment that the money-lender would come to terms with them. As explained above, it was quite hopeless to expect him to declare in their favour, whatever in- terest they had paid or received claims for. Ruined Clerks. Hundreds of clerks are ruined yearly through getting into the hands of money- lenders. Amongst other cases of this kind which I have had to deal with, I have reason to remember one in which a Cabinet Minister in the late Government asked my assistance : The clerk in question was the son of a man who had been employed professionally by his family, and had come down in the world. This man had borrowed 10, repaid ^15, and, failing to keep up the perpetual instalments through some home trouble, had received many rude threats. After investigating the case, and satisfying my- self of the truth of his statements, I was empowered to call upon the money-lender to settle the case for as little as possible, and, while sitting in his outer office, was astonished to see the number of respectably-dressed clerks calling to pay instalments upon their loans. The man of money, evidently taking me for another " pigeon," came forward smilingly, but when he heard my errand his face changed, and in an extremely off-hand manner he absolutely refused to take a penny less than the amount of his full claim, although I explained (without mentioning the name) that I called on behalf of his debtor's would-be benefactor. 102 CO-OPERATIVE BANKS On remarking that, under the circumstances, I would leave him to take legal action, he replied, very cheekily, that he was not such a fool as to take his debtor into Court, as he could ruin him more readily by presenting to his employers (a big in- surance company in Lombard Street), if he were not paid forthwith, an order upon his salary, which he had compelled the borrower to sign in addition to a default bill. One of the conditions of employment in many bank- ing and insurance companies being that employees shall not involve themselves in debt, the exaction and use of such a document practically amounts to black- mail. It happened, in the case in question, that the noble lord who was interesting himself in the matter was himself a large policy-holder in the insurance company. He very kindly, therefore, made a special request to them that no penalty should be enforced against the money-lender's victim if the former should carry out his threat. But the difficulties of dealing with such unscrupu- lous creatures may be gauged from the fact that the company, whilst agreeing not to penalise their clerk, said they would prefer to pay the amount rather than have such persons as the money-lender in question (who has since been described in Truth as an unmitigated scoundrel) upon their premises. The result was that he got his money and unconscionable interest. This case illustrates the fact that, in addition to retaining the power of charging extortionate interest, money-lenders can also fasten themselves round the necks of their clients (a) By default bills, which enable them to sign judgment for the full amount of debt and interest if one instalment is in arrear. (b) By getting them to sign garnishee orders, giving them a claim against their salaries. In my opinion, both these rights have been so grossly abused that they should be abolished. MONEY-LENDING AMONGST THE POOR 103 Other Instances. The following are three other typical cases illustrating the manner in which Civil Service, insurance, and bank clerks are treated : 1. Loan of 31 Interest i a month until the sum could be paid in full, and not by instal- ments; this lasted seven months; rate of interest 400 per cent. 2. Loan of 20: Interest $ a month; details of arrangement same as last case ; this ran on for twelve months, and, for all I know, may still be running. Rate of interest 300 per cent. 3. Loan of 10: Interest 2 IDS. a month; same as above; lasted six months. Rate of in- terest 300 per cent. Village Victims. Village tradesmen, farmers, dairymen, gardeners, and labourers form a large pro- portion of those drawn into the usurer's net. The smaller men are induced to give " hiring agree- ments " over their furniture, and the others bills of sale. In the event of failure to meet one instalment, the whole debt and interest becomes due, and they are pounced upon and required to either renew their loans at a more exorbitant interest, or have their homes sold up and they themselves disgraced or ruined. Other Dodges. One dodge, especially of those who offer to lend "on note of hand only, no bondsmen," is to charge an inquiry fee of 5s. or more, and then write stating that they cannot entertain the proposal. Another is to profess to lend ^30, so as to bring the transaction up to the amount required to execute a Bill of Sale, and then to take back 10, or more, at once. As an instance of deception exercised re interest, I will conclude these proofs bv an account of a case which I heard only the other day from the lips of a small tradesman : Needing 20 rather badly, he was induced to write to one of the authors of the temptingly com- posed advertisements offering to lend " from ,5 104 CO-OPERATIVE BANKS and upwards " to respectable people, " on note of hand only, at 5 per cent." After hearing his story, the representative put down 20 on the counter, remarking, " Here you are; sign this paper here," pointing to a space at the foot, " and you shall have it at once." Being somewhat on his guard, the man pulled the paper from him, and found it to be a promise to repay no less than ^35, i.e. the 20 and 15 interest. On indignantly denouncing the deception, the money-lender offered to accept 5 interest instead f 1 5> i*e* at the rate of 100 per cent, per annum; but I am glad to say he was ordered off the premises. The man was not so cornered as to be compelled to agree to this extortionate interest. Extent of the Money-lending Evil. The extent to which this trade " in human blood and tears " is con- ducted may be measured by my readers when I inform them that the touting usurers' circulars, which they doubtless receive in common with all of us, are not only addressed to mansions and suburban villas, but also to householders in every tiny out-of-the-w r ay village, in- cluding the homes of fishermen and farm labourers. Judgment summonses are being issued in batches, and defaulters hauled before the Courts in shoals, their homes broken up, and in many cases the bodies of bread-winners committed to prison for non-payment of the harsh and unconscionable compulsory contracts one cannot call them free-will bargains made with money-lenders. Apart from professional usurers, there is a class of male and female lenders (small shopkeepers, etc.) who infest working-class districts, and charge from id. to 3d. in the is. per week (i.e. 433 to 1,300 per cent, per annum) to their clients. Workers in mills, engineering shops, railway yards, etc., could testify to the wholesale existence of such sordid creatures, who wring from their dupes enormous regular returns for a small initial outlay. I knew of a man of this sort, who became a labourer MONEY-LENDING AMONGST THE POOR 105 in Sheerness Dockyard at i a week, in order that he might make at least 2 a week or more by " obliging his mates," and of another (a coal-heaver), who died worth ,700 obtained in the same manner. When persons of this type attain to positions of trust, by becoming foremen and such-like, they can and do exercise much tyranny, and those employed under them are practically compelled to borrow " to keep in " with them. Many of their borrowers, it is true, are improvident persons who need little encouragement to entangle themselves in their meshes, and who, whatever their earnings, always need more, and have got into the bad habit of borrowing in the course of the week, and paying " through the nose " for it on wage day. The cure for this is improved education all round. As I have explained under the heading of " Improvi- dent Credit " in Chapter IV., the Co-operative Banks movement is no scheme for facilitating such lack of self-control. All it seeks to do is to make it possible for every self-respecting man or woman to be free from the neces- sity of raising money from extortionate usurers of any class. Methods of Counteraction. If a tithe of those who are shocked at the recurring revelations of working-class money-lending would band themselves together to apply a remedy, the money-lending snake would be scotched. Last year a Money-lenders' Victims Defence Asso- ciation was formed by a clergyman in the South of London for the purpose of defending persons in poor circumstances from the avaricious extortion of usurers, and to press for the passing of further legislation for the protection of such persons. Whilst wishing every success to its noble mission, I must also emphasise that a more difficult and more necessary task is to counteract usury by the formation of institutions which will render them unnecessary; and therefore I appeal to all who not only condemn money- lending " sharks " with their lips, but are also willing to help their poorer neighbours to escape from their clutches, to help in promoting the Co-operative Banks 106 CO-OPERATIVE BANKS movement. The remedy lies in the education, organisa- tion, and supervision of people in associating together to help themselves. Parliamentary Committee's Commendation of Co- operative Banks. I feel that I cannot conclude these remarks on " Money-lending Amongst the Poor " more appropriately than by quoting the following extract from the Report of the Parliamentary Select Committee on "Money-lending," which speaks for itself: " Your Committee has received important evidence as to the operations of the Co-operative Banks on the Continent and in some parts of the United Kingdom. It appears that the establishment of such banks has been of great use in abolishing, or largely dimin- ishing, the trade of lending money at extortionate rates ot interest to the poorer classes. Your Committee are impressed with the extreme usefulness of these institutions, and they are of opinion that they meet a real want." CHAPTER XV OTHER LOAN AGENCIES IT will doubtless be interesting to the social student to consider what other sources of financial accommoda- tion are available to working people, so as to be able to contrast them with the advantages which a national system of People's Co-operative Banks would confer. Pawnbrokers. First and foremost is the familiar pawn-shop, commonly described as " the poor man's bank." Though there is plenty of room for reform in con- nection with the pawnbroking business, on the principle that " a friend in need is a friend indeed " it has un- doubtedly been very helpful to the poor. Under the Act which regulates their calling, pawn- brokers are permitted to charge j^d. for a ticket describing the pledge left in their custody, and ^d. interest per month on every 2s. or part of 2s. advanced to their customers i.e. at the rate of 25 per cent, per annum. As, if they understand their business, they have absolute security for all money lent, this is a pretty stiff price, but even it does not fully represent their gross profits, which are swelled by various devices, one being a custom of advancing odd shillings, for which ^d. per month is charged (which obviously doubles the profits on the amounts represented), and another charg- ing for special shelf or cupboard room. But the principal increase is due to the fact that the majority of their regular customers take their pledges out every Saturday and re-pledge them on Monday morning, and as every time they have to pay one month's interest, this brings the rate of interest to 100 per cent. ! Verily there is room in London and other large 107 108 CO-OPERATIVE BANKS cities for the establishment of Monts de Pie"te", such as those of France (under the management of the State), Italy, Germany, Denmark, Belgium, Austria, Russia, Spain, and one or two in the United States, which are popular pawnbroking establishments run in the interests of borrowers rather than lenders. Slate Loan Clubs. There are an enormous number of societies of this description, which are sometimes described as Sharing-out Clubs. Slate Clubs, as their name indicates, are temporary, or rather annually, terminating societies, to which men and women make weekly contributions in the case of a Slate Loan Club for loans, and in other instances for sick benefit, life insurance, and other purposes. These societies are supposed to have originated in village inns, where it w 7 as the custom of their habitues to contribute to a box any small sums they could spare towards the sick and funeral expenses of themselves and friends. After a while subscriptions of a similar amount from each person were arranged, and friendly societies formed which shared out at the end of the year any balances in hand. Nearly every public-house, most large workshops, many social clubs, and a large number of churches and chapels run Slate Clubs. They are so simple to form, and so easy to conduct, that they are very popular with working people and those connected with them. Whether this is a sufficient justification for pre- ferring them to other forms of co-operative credit association is another matter. It would be out of place to comment here upon the strong and bitter controversy between the champions of Slate, Sick, and Benefit Clubs, and the permanent Friendly Societies, as to the respective merits and de- merits of each. I must confine myself to a summary of the con- stitution and methods of Slate Loan Clubs, and a com- parison of these with those of Co-operative Banks. Slate Loan Clubs are formed with shares which are usually of the value of 2OS. or 255., paid up at 6d. per week. OTHER LOAN AGENCIES 109 Some clubs limit the number of shares to be held by any one individual. Members neglecting to pay their weekly contribu- tions regularly are fined ^d. or id. per week per share, and if not " clear of the books " on quarterly nights a further fine per share is imposed. In addition to 3d. or 6d. for Membership Card and Rules, a charge of 3d. or more per share is made for " quarterage." Out of the funds collected by means of share subscriptions members are entitled to obtain advances. Sometimes, though not invariably, these loans (which are usually granted at the discretion of the Secretary) are limited to the amount of their share- holding. Members requiring loans above the amount of their contributions up to date must provide one or two other members as sureties, such persons to have enough in the club to cover their guarantees. One shilling in the pound for twenty weeks is charged in advance as interest. Borrowers in arrear with their repayments are fined id. in the per week, and those six weeks in arrear receive a notice, for which 2d. and upwards is charged. Finally, the members of those clubs who do not take out loans in the course of the year are fined is. Some Slate Clubs charge more than the foregoing, but my illustration is drawn from the rules of well- conducted clubs of this description. About a fortnight before the end of the year comes the great share out, when each member receives back the amount he has paid on his share or shares, to- gether w r ith his dividend, which, in the case of a club such as I have been dealing with, would amount to 2S. and upwards. Members in arrear with their instalments and fines receive no dividend, but simply the return of the moneys they have paid in, less their proportion of working expenses and their overdue fines. The " Slate " is wiped clean, and nothing further is written upon it until the first week in January, when operations are recommenced. 110 CO-OPERATIVE BANKS This is the general rule, though in some cases it is customary for members to leave a small sum on the books to recommence the New Year with. I have set forth the constitution of Slate Clubs at some length, as they are so often thought to be satis- factory substitutes for Co-operative Banks, although, as a matter of fact, the utmost that can, in my opinion, be rightfully claimed for them is that they are ele- mentary institutions for compelling their members to lay by something for Christmas, and borrow their own money at interest. I am hoping that in the near future many of their conductors and members will see the advantage of con- verting them into Co-operative Banks, still, of course, under their own management. Towards this end I will jot down two or three Advantages of Co-operative Banks over Slate Loan Clubs. i . Greater Permanence and Stability. A friend of mine, interested in Thrift movements, remarked the other day that a Slate Club was like a squirrel in a cage always working but never getting any forwarder. The supersession of Slate Loan Clubs by Co- operative Banks would place the financial interests of the people upon a more permanent basis. It stands to reason that no sound system of popular credit can be reared upon the basis of an annual break- ing-up custom. How could the ordinary commerce and banking of this or any other country be conducted if firms had to be liquidated annually, and the capital returned to partners and shareholders ? 2. Greater Command of Capital. No external credit can be obtained by societies wound up automatically every year. Well managed Co-operative Banks, on the other hand, can secure advances from bankers and others, in the case of Share Banks on the security of their capital, and in the case of those without shares on the collec- tive securitv of their members. They are, therefore, an improvement upon the old system, for enabling working people to increase their command and control of monetary credit. OTHER LOAN AGENCIES 111 3. Better Facilities for Saving. Slate Clubs, be- sides possessing no permanent capital as a basis of credit, have no Deposit Departments in the ordinary acceptance of the term. In one sense the temporary share subscriptions constitute compulsory deposits, but these are limited to a small amount, no one being permitted to pay in, in the course of the year, more than his nominal share- holding. One has only to contrast this with the Savings Departments of Co-operative Banks, in which people are invited to deposit sums of id. and upwards when- ever they are able, receiving interest thereon, instead of having to pay " quarterage " or any other charge, to recognise their superiority in this respect. Other ways in which Slate Loan Clubs operate against saving and tend towards improvidence are: a. By fining those who do not withdraw their savings in the shape of loans. b. By compelling their members to withdraw their shares at Christmas time, when there is every temptation to fritter them away. The fortnight's interval between the winding up of the Old Year's society and the commencement of the New Year one, leads all but the most prudent to get rid of all the cash which they have saved hi the club during the year. As for public-house Slate Clubs, members of Mutual Societies should surely recognise the unwisdom, for the purpose of saving, of resorting to places whose exist- ence depends upon constant expenditure, and where it is not the fault of " mine host " if, when sharing-out day arrives, they do not depart with sundry bottles of gin, whisky, or other liquors, and a packet of cigars, amounting to much of their boasted savings. 4. Less Limitation of Loans, and no Compulsory Borrowing. In most, if not all, Slate Loan Clubs the amount that can be borrowed is limited by the members' shareholding. In Co-operative Banks it is simply limited by the value of oersonal security for their due repayment which is provided. This advantage of the Co-operative Banks system is 112 CO-OPERATIVE BANKS due to the reasons explained under the section relating to the greater command of capital which they can obtain from outside sources for the benefit of their members. Many Slate Loan Clubs suffer from a paucity of cash at the beginning of the year, when share sub- scriptions are beginning to be paid in, and an over- plus of cash later on, when all the shares are, or should be, paid up, and most of the loans repaid. Then the compulsory borrowing rule of Slate Clubs or fines in lieu thereof, besides penalising the member who is trying to save money, leads to unnecessary and wasteful borrowing, many members who do not need a loan arguing that, as they have to pay interest in any case, they might as well have the money. 5. Less Fines. The conductors of Slate Clubs are naturally so anxious to declare a good dividend at the end of the year, to satisfy their members and attract a large number the following year, that they generally work the fines system for all that it is worth. It is obvious that their profits, and consequent divi- dends, are largely dependent upon this source, as other- wise they could not exceed the interest paid by their members for loans plus interest received upon surplus funds (which latter would not be more than at the rate of 5 per cent, per annum), presuming, as is generally the case, that their " quarterage " payments were ab- sorbed by working expenses. Co-operative Banks have permissory regulations em- powering their Committees to fine members in arrear, but these are not depended upon as a source of income, and are not put into force if any reasonable excuse is offered. 6. Self-government versus Paternalism. In the por- tion of this book devoted to the benefits of Urban and Rural Co-operative Banks I have dealt at some length on their educative influence. With every desire to be fair to the promoters of the earlier system, I must say that even the best Slate Loan Clubs exhibit what I may describe as more con- cern in providing loans for their members than anxiety to develop their powers of self-government. It is always easier to do something for our poorer OTHER LOAN AGENCIES 113 neighbours than to help them to do something for themselves, but it is not equally beneficial. There are, doubtless, instances where this criticism does not apply, and where there are regular meetings of the members for discussing the affairs of the Slate Loan Club, electing and controlling officers, declaring dividends, etc., but I have mixed pretty freely for many years past in working-class districts, and have generally found these clubs run entirely by one or two men, with no special system of book-keeping, and in hosts of cases a very perfunctory audit. The great majority of them are also unregistered. I have failed to convey one of the most important features of Co-operative Banking if my readers have not been made to realise that it educates its members in economic affairs, and makes a special point of training them in the management of their affairs. 7. Charges and Dividends. There is an impression in some quarters that Slate Clubs make up for any weakness in their constitution by charging their mem- bers less for advances than Co-operative Banks, but this is not so. Their members often think that they are only paying 5 per cent, interest, but they fail to recognise that is. in the , repayable by twenty weekly instalments of is., amounts to 25 per cent, per annum. Town Co-operative Banks, whose rate is 2d. in the per month, only charge interest upon the balances of outstanding loans, which brings the rate, inclusive of all incidental expenses, to a little over 10 per cent., while the Village Credit Societies only charge from 5 to 6 per cent. In the former case the dividend on shares is gener- ally 5 per cent., and the latter have no shares. It is true that Slate Loan Clubs declare a larger dividend than Co-operative Share Banks are permitted by their Rules to do, but all the working capital is provided by their members, free of deposit interest, and if they receive a dividend of 25. 6d. in the , part of it represents the return of the amount they have paid for interest, and part the return of sums deducted for quarterly management expenses and fines. 114 CO-OPERATIVE BANKS What it costs a member of a Slate Club to borrow money depends so much on his circumstances and character, and those of his fellow members, that it is difficult to make an exact comparison. If the latter are poor payers and he is a good one, he will benefit considerably by participating in the fines inflicted upon them; but if, on the other hand, he be a poor payer, he will help to swell the dividends of his more for- tunate brethren. This was tersely expressed by an East End friend of mine, who remarked anent Slate Loan Clubs, " Wot they want iz gud borrerers an* poor payers." It will be obvious that to judge a Slate Loan Club by the amount of dividend which it distributes at the end of the year is deceptive, unless at the same time the amount of fines, etc., imposed is taken into considera- tion. In some public-house clubs, for example, six weeks is the usual length of time allowed a member to be in arrear with his share subscriptions, and if he does not or cannot continue them he loses all that he has paid in, which accounts for the larger divi- dends of these clubs compared with others whose depositors in arrear do not have their subscriptions commandeered. To sum the matter up, therefore, the charges which Co-operative Banks are able to advance money at are less than those of Slate Loan Clubs, on account of their small expenses of administration, their facilities for borrowing at low rates of interest, and because they can utilise a proportion of the deposits of their savings departments. On the other hand, members of Slate Clubs who repay their loans promptly are slightly to the good, financially, through their proportion of the management expenses represented by " quarterage " being paid out of the fines of other members, and something else being received in addition from the same source. In conse- quence of this fine system most of the members pay a great deal more for their financial accommodation than they would have to do if they were members of either Town or Country Co-operative Banks. OTHER LOAN AGENCIES 115 This has been practically demonstrated by the fact that, in one or two London districts where the people will stick to the old system, Slate Loan Clubs are run (rightly or wrongly) as departments of Co-operative Banks, and the balance of profit of these Slate Clubs, after paying a dividend of 2s. 6d. in the to their members, constitutes a substantial contribution to the funds of the Banks. Slate Club Scandals. The following is an extract from a leading article in the London Evening News and Mail which appeared at Christmas time, under the title of " Unthrifty Thrift " : " At this festive season of the year there is at least one class of people among whom a gloomy, not to say despairing, spirit prevails, viz., the depositors in what are known as Slate Clubs. "There are doubtless many of these institutions for the encourage- ment of Thrift which possess perfectly honest treasurers, but at the same time, the number of defaulters is so large as to give the im- pression that the absconding of the responsible official with the whole of the available cash is a necessary and regular part of the proceedings. " Every year without fail we hear of case after case in which unfortunate depositors have lost every farthing, the total in some instances running into hundreds of pounds, and even where the defaulter is caught his victims get but little satisfaction, for the treasurer has more often than not been living on the funds during the whole of the preceding twelve months." I have before me whilst writing a considerable col- lection of newspaper cuttings dealing with Slate Loan Club scandals of the kind referred to. It is most pathetic to read these accounts of poor people being defrauded out of their small savings at a time when they are so much needed. So long, however, as they continue to hand their savings in a haphazard fashion over the bar of any public-house, or into the hands of any glib-tongued and persuasive person who starts a Slate Club, they have mainly themselves to blame. Very many publicans, I need hardly say, are abso- lutely honourable and reliable persons, but one-man Slate Clubs are altogether bad. Doubtless most of the defaulting officials start with fair intentions, but the temptation to temporarily specu- late, or otherwise use the funds in their hands, proves 116 CO-OPERATIVE BANKS too great, and leads to falsification of accounts and em- bezzlement. If working people will persist in belonging to Slate Loan Clubs, they should at all events confine them- selves to those which have precautions against the risk of fraud in the shape of Trustees, Committees, and Auditors, though even then, as I have endeavoured to prove, Co-operative Banks are safer and better. A great many Slate Loan Clubs are registered as specially authorised societies under the Friendly Societies Act, and are carried on under a variety of titles, including " Mutual Loan and Investment," "Mutual Aid," "Mutual Benefit," "Family Invest- ment and Loan," " Thrift and Loan," " Friendly Loan," and " Mutual Help " Societies, and occasionally under more fancy titles, such as " Jolly Fellow " Society and " Tree of Life Investment and Loan " Society. Some of these societies, for creating funds to be lent out to or invested for their members (especially in the Provinces), are well conducted, but, generally speaking, all their management expenses and part of their divi- dends are obtained from fines and cancelments of contributions. CHAPTER XVI OTHER LOAN AGENCIES (continued) THE limits of this work prevent my dealing exhaustively with every form of loan association. I will therefore simply say that, besides loan societies registered under the Friendly Societies Act, there are others registered under the Industrial and Provident Societies and Companies Acts. I must, however, devote some space to two or three more types of loan clubs, including those societies (of which there are a considerable number) which are not registered but certified under the Loan Societies Act of 1840, which has been aptly described by the Chief Registrar as " very imperfect and representing substantially an obsolete type of Friendly Societies Act." Friends of Labour Loan Societies. They are known as " Friends of Labour Loan Societies," this title being generally prefixed by some distinguishing word such as "Surprise," "Perseverance," or "Goodwill." In the early part of last century there were a great many semi-charitable funds for lending small sums of money to " the industrious classes " (as working people were then described) in our towns and villages, and in 1835 an Act was passed to regulate them, which was superseded by the Act of 1840. This Act (which only applies to England, the Channel Islands, and the Isle of Man) has been taken advantage of for the formation of mutual loan associa- tions in place of the original charitable societies it was intended to deal with. It confers several privileges, including exemption from stamp duties and power to bring defaulters before justices. It prohibits fines and balloting for loans, and limits the amount of interest chargeable to borrowers 117 118 CO-OPERATIVE BANKS to 12 per cent, per annum, in addition to a maximum inquiry fee of is. 6d. The rules of these societies need not be printed, and their Treasurers and other persons entrusted with the receipt and custody of cash must provide fidelity bonds. On the other hand, no greater sum than ^15 can be lent by them to any one person at the same time, or until it is repaid, their defaulting members can (as explained before) be hauled before magistrates, and in- dividually members have no statutory rights beyond those of inspecting, and altering and repealing the Rules. They are not entitled to copies of Rules or Balance Sheets,' nor to the inspection of Accounts, and there is no legal provision for the audit of Accounts or settle- ment of disputes. The only necessary officers of this class of loan society are a Trustee or Trustees, a Treasurer, and a Secretary, but many of them voluntarily elect Com- mittees in accordance with more modern ideas. Though their interest on loans is limited by law, it is apparently legal to require contributions towards management expenses from those who are investors only. A brief summary gathered from the Rules of the Society of this kind having the largest turnover will illustrate the constitution and methods of the best class of Friends of Labour Loan Society. This society was founded in 1865, and meets in a public-house which retains the old title of " tavern." Its objects are described as : " To raise a Fund by means of the contributions of members, for the purpose of lending money to members only, in sums of not less than one pound, nor more than fifteen pounds, taking payment by instalments, with interest thereon ; and, after paying working ex- penses and placing at least five per cent, in the reserve fund, dividing the balance of profits in equal proportion amongst those members who shall be entitled to dividends." The amount of profit due is credited to members' stock account each quarter, but any member allowing his promised contributions to remain more than four weeks in arrear during any quarter, or failing to " clear OTHER LOAN AGENCIES 119 his book " on the last pay night of any quarter, forfeits the dividend on all stock paid during that quarter. Thus the legal prohibition against fines is overcome, or rather compensated for, by not crediting defaulting members with the share of profit which would otherwise accrue to them. Management. The management is vested in a Com- mittee of twelve, " elected every quarterly night from amongst members present at the meeting house only " Treasurer, three Trustees, two Auditors, Chief Secre- tary, Cash Secretary, Check Cash Secretary, and In- quiry Officer. These latter officers (with the exception of the Trustees, who hold office during the pleasure of the Society) are elected by the members present at the Annual Meeting. The regulations regarding the duties of the Com- mittee and Officers and their supervision by the Trustees (who are required to attend in rotation once a week for this purpose, and to sign cheques, receipts, and other business documents) are, in the case of this Society, first-class. The Treasurer, who has to provide a security for ;ioo, receives all moneys from the Chief Secretary (who has to furnish a guarantee bond of ,50), and is re- quired to olace them in the Society's bank within forty-eight hours. The following scale of salaries is paid : Committee of Management is. per attendance. Trustees (except at Committee Meetings) 35. per attendance. Auditors IDS. each for each audit. Chief Secretary, 2 los. per 100 members per quarter. Cash Secretary, -s. 6d. per 100 members per quarter. Cash Check Secretary, 55. per 100 members per quarter. Nothing is said in the Rules about the remuneration of the Treasurer. Shareholding and Borrowing. Every member may hold from one to five shares, each share being of the value of 10, payable at the rate of 6d. per share per week. Members who are eligible may borrow up to ^15, upon the security of their investment in the Society, 120 CO-OPERATIVE BANKS to the extent of but not exceeding twice the amount of their stock (upon signing the note in accordance with the Act), after they have belonged to the society for at least three months. Those who have not sufficient stock for the amount of loan required may borrow : From i to 5, on providing one satisfactory security, and From 5 to 10, on providing two sureties who have to be jointly and severally responsible for repayment of principal and interest. Charges. These are is. in the for forty weeks, plus is. 6d. inquiry fee. Women are admitted to the privilege of membership, with the exception that no loans are granted to married women unless their promis- sory notes are endorsed by their husbands. Withdrawals. Members may withdraw a part or the whole of their stock by giving fourteen days' notice in writing, subject to a deduction of 2^ per cent, for working expenses. I have purposely taken for my illustration one of the best societies of this description, and one which I believe has learnt by expensive experience the necessity of strict supervision over its affairs and business-like system in carrying out its objects, but many of the safe- guards it has instituted are not required by the Act under which it is certified, nor have they been set up by similar societies. Before contrasting these societies with Co-operative Banks, I would like to point out that their old-fashioned certification is an improvement upon the non-registration of so many Slate Clubs, as is also the non-fining of borrowers (although this is counteracted by the penalisa- tion of share depositors in arrear) and the non-break- up at Christmas. Their working expenses are likely to be greater. Contrast with Co-operative Banks. i. It is clear that the Friendly or Industrial and Provident Societies Acts (under which Urban and Rural Co-operative Banks are registered) are far better suited for working people than the old-fashioned Labour Loans Act, if only because they require the election of Committees and OTHER LOAN AGENCIES 121 compel annual audits, besides bestowing upon their members many other statutory privileges. 2. The non-withdrawable but transferable shares of Urban Co-operative Banks provide sounder security for outside borrowing. 3. Then, whilst Labour Loan Club advances are limited to ^15, Co-operative Banks are entitled to grant credit to any amount commensurate with the security offered. 4. British Urban Co-operative Banks charge 10 per cent, interest per annum, and Village Credit Societies 5 to 6 per cent, (instead of the Labour Loan 12 per cent.), and these charges include all expenses of inquiry and administration. 5. The deposit departments of Co-operative Banks do not exist with Friends of Labour Loan Societies. 6. Though members of Co-operative Banks may, at the discretion of their Committees, be fined if they are in arrear with their payments, they are not denuded of all participation in profit for this cause, as with Friends of Labour Societies. 7. Finally, Co-operative Banks Committee members and other officers, with the exception of the Secretary (who generally receives a small honorarium), are not paid for their services; consequently it costs less to conduct them. If all officers attended regularly, a Friends of Labour Loan Society, on the lines described, with 200 members, would cost per annum : for Chief Secretary 20, Cash Secretary ^3, Check Secretary 2, Committee of Management about *] 43., and Trustees over 10 i.e. over ,40 per annum. A similar sized Co-operative Bank would not re- quire to pay more than an honorarium of 10 to its Secretary. Self -Help Societies. There are also a number of well-conducted mutual saving and loan associations, carried on in connection with the Church of England, under this title, which are registered as specially authorised Friendly Societies. It will not be necessary for me to devote much space to describing their constitution and methods in detail, as they are on the same lines as those of the 122 CO-OPERATIVE BANKS Friends of Labour Loan Societies, with certain distinct improvements. Their object is to create funds by weekly sub- scriptions to be lent out to or invested for their members, all profits arising therefrom to be divided at the end of each quarter and credited to the members' accounts. Officers. These consist of three Trustees, Trea- surer, Secretary, Cashier, and a Committee of Manage- ment of ten members. Shares. Members are allowed to take from one to six shares, upon which they pay 3d. per week per share. They can withdraw their stock from the Society, less a fair share of the expenses incurred (unless it is mortgaged as security for another member's loan), upon giving seven days' notice. Loans. Members are eligible to borrow not less than los. nor more than the amount fixed in their rules, subject to the approval of the Trustees, after they have been in the Society for three months, on providing satisfactory sureties (who must be members), unless their stock equals the amount of the proposed loan. The interest is at the rate of is. in the for forty weeks, during which the loan must be repaid by weekly instalments of 6d. in the . Management Fund. Members contribute for one or two shares 3d., three or four shares 4d., and five or six shares 5d. per quarter. The officers of the first Society of this character are paid from this fund as follows: Trustees, is. each per attendance (the Trustee acting as Chairman to be paid 2s.) ; Secretary, 3d. per quarter per member for the first 400 members and 2d. per member per quarter above that number; Cashier, i per quarter; Treasurer (who must furnish a bond for ,100 in a Guarantee Society), i per quarter; Auditors, 2s. 6d. each per quarter for the first 400 members and 6d. additional for every additional 100 or fraction of that number; Committee members, attending in rotation once a week to assist the Secretary, receive is. per attendance. I understand that in the societies formed since, all officers, except the Cashiers and Secretaries, render their assistance free. OTHER LOAN AGENCIES 123 Dividend Fund. All interest arising from the grant- ing of loans is paid to this fund, but any member neglecting to pay up all arrears on quarterly night is only entitled to receive dividend upon each complete quarter's money. The dividend generally equals about is. in the per year. Their main idea, unlike that of so many mutual loan societies, is not the lending of money regardless of whether it is required for provident purposes or not, but to encourage thrift by inducing regular weekly savings. All those with which I am acquainted publish very clear and business-like audited statements of accounts, showing the receipts and payments of their different departments, and a list of the amounts (denominated by numbers) standing to their members' credit at the end of the year. Altogether, in my opinion, they represent the best system of saving and loan funds, short of Co-operative Banking, that has been devised. Money Societies. Another form of financial asso- ciation met with throughout the Provinces is that represented by the Money Club. Some of these societies are worked by half a dozen persons, who provide the money for borrowers like a Loan Office, and retain all the interest paid thereon for themselves. A better type, known as Mutual Permanent Money Societies, are Co-operative in character. They are registered as Specially Authorised Societies under the Friendly Societies Act, have a business-like set of rules detailing the method of electing Committees (" one man one vote "), the appointment of officers (including Trustees and Auditors), and other matters of management. Their Secretaries are often local accountants, whose offices are the Registered Offices, thereby enabling busi- ness to be transacted daily. They have two classes of members investing and borrowing. A description of one of the best conducted of these societies will convey a good account of their methods. 124 CO-OPERATIVE BANKS Investing Members. These can take up shares of from $ to ,200 in value, the weekly subscriptions upon which are from 7754 members, and sales amounting to nearly ; 1 00,000,000, not from any lack of appreciation of the magnificent work which it is doing, but because it is altogether separate from the Co-operative Banks move- ment, and whilst in no way hostile does not encourage agencies for the provision of personal co-operative credit. The average member of a co-operative store is a thrifty person, who believes in cash trading, and appar- ently cannot distinguish between getting groceries "on tick " and the productive and social credit dealt with in Chapter IV. He finds the co-operative store an excellent deposit- ory for his savings, and it is difficult for him to realise that there are others who do not go to the store, and will never save unless more aggressive means are adopted for inducing them to do so. So long as he prospers, he does not find any neces- sity to borrow, and when, through losses or other mis- fortune, he needs to borrow, he is at an equal dis- advantage with other poor persons. In the meanwhile, there are hosts of others who are not members of co-operative stores, and who need advances for the various purposes previously described, some resorting to one or other of the various loan agen- cies which I have contrasted with Co-operative Banks, and some to usurers. I venture to suggest that it is the duty of Co-opera- tors to aid the movement for improving this state of affairs. I am thankful to be able to say that several prom- inent Co-operative leaders and many members of stores have recognised this, and acted accordingly, and I hope l hat more will do likewise. Their accession gives stability to societies, and their NOTES AND SUGGESTIONS 139 experience in the details of economic mutuality is in- valuable. I believe that some scheme of Co-operative Banking within the general movement is being recommended. Anything which utilises the workers' capital for the workers' benefit has my hearty sympathy, though so far as I understand the proposals in question do not include the much-needed better provision for personal credit. The Co-operative Wholesale Society's Banking Department. It will be unnecessary for me to deal at any length with the banking transactions (amounting to over ^"100,000,000 per annum) of the Co-operative Wholesale Society, which does not -make loans or receive deposits from individuals, its business being confined to Co-operative Societies, Trade Unions, and other corporate bodies. The Co-operative Productive Federation's Loan Fund. I would like also to mention with appreciation the Co-operative Federation, Ltd., one of whose objects is to secure capital for Co-operative Productive Societies. At the end of 1906 the Federation, which receives loan capital and pays thereon 4 per cent, per annum, had advanced over ,3,000 to societies connected with it. Relationship to the Savings Bank Movement. I am sometimes told by people who have not properly studied the aims and objects of the Co-operative Banks move- ment that there is no need for a Co-operative Credit Society in their district, because it already has an ex- cellent Savings Bank. If this objection were a sound one, it would apply to every parish in the kingdom which has a branch of the Post Office Savings Bank. As a matter of fact, there is plenty of room for Savings Banks and Co-operative Banks to work side by side, and the managing director of the largest insti- tution (apart from the Government Bank) of this kind in the country recently stated to me that he would be very glad to see a Co-operative Bank established in every town where there was a branch of the excellent Savings Bank over which he so ably presides, the reason being that his institution was unable by its constitution 140 CO-OPERATIVE BANKS to advance small sums of money to those who his ex- perience has shown him would largely profit thereby. The history, methods, and progress of the various forms of Savings Banks in this country are most lucidly dealt with by Sir E. W. Brabrook, C.B., F.S.A., in his admirable sixpenny booklet " Institutions for Thrift,'* published by P. S. King and Son. The work they have done in encouraging thrift, and the public-spirited honorary services of their trustees, are beyond praise, but when all this is admitted, the fact remains that the funds which they collect from their depositors are taken away from their districts, and compulsorily invested by the National Debt Commis- sioners, artificially inflating the price of Consols, and costing the country a considerable sum per annum. In the year ending December 3ist, 1905, this amount was ^92,032. The promoters of the Co-operative Banks movement claim that by utilising more local savings for local pur- poses, much national benefit will result, A National Money-lending Institution. In my chap- ter on " Money-lending amongst the Poor," I have endeavoured to draw a true picture of the great evils which result from unrestrained money-lending. A friend to whom I read the chapter objected to one of the paragraphs on the ground that my readers would think I w r as striving after effect. I re-read it, and as, though somewhat lurid, it was literally true, let it stand as written. I plead guilty to striving after effect, but not the effect of attempted fine writing or hysterical trading upon the feelings of sentimental readers. What I aimed at was to bring home the evils which are being perpetrated every day with sufficient force to induce some of my readers to determine to do some- thing definite to sweep the reproach away. The Co-operative Banks movement has extirpated usury in many foreign countries, and there is no reason why, if properly supported, it should not also succeed similarly in our own land. The ignorance of many of our poor people, the wretched wages which they receive, and the abominable NOTES AND SUGGESTIONS 141 conditions under which they live, are the principal diffi- culties in the way. Sometimes, when I have been confronted with par- ticularly sad cases, and felt the burden of educating the workers economically, I have been inclined to feel that there was room for a National Money-lending Associa- tion, with branch honorary committees throughout the country. But I have no faith in entrusting the task to private individuals as such, and an association of the nature which I have in mind would require a Board of men above suspicion in a financial sense, and it would have to be established with a capital of guarantee on a non- profit basis as regards shareholders, like the Yorkshire Penny Bank. Propaganda Associations. I will conclude this olla podrida by begging- those of my readers who might otherwise not do so, to differentiate between Co-operative Credit Propaganda Associations and the Banks which they establish. Personally, I receive scores of communications applying for individual loans from persons who appar- ently consider that the Association with which I am officially connected is "a society for lending any amount of money with little or no inquiry, at a low rate of interest, and with no security." This is not Co-operative Credit. The committee has had to print a special circular letter pointing out that the Association is not a bank for making loans to individuals, but simply a propaganda society for spreading information about Co-operative Credit, and promoting the formation of popular Co- operative Banks, which on their part lend to members only at as low a rate as possible, after ascertaining that there is every reasonable likelihood of these advances being of practical service, and being o\ily repaid. Mutual association, it seems hardly needful to say, is the necessary preliminary to Co-operative Credit. CHAPTER XIX GENERAL CONSIDERATIONS HAVING in preceding chapters described the forma- tion, methods, and benefits of People's Co- operative Banks, I will now conclude with a short statement of what is required to assure their success in this country. This may be summarised under three headings : ist. An increase in the number of students of social conditions, willing to introduce and to lead in the carrying" out of this moral and economic reform. 2nd. An intelligent study of its possibilities of usefulness by working people, followed by definite action on their part. 3rd. More financial support to those engaged in organising the movement by means of pro- paganda literature, lectures, and personal intercourse and supervision. For Social Workers. Whilst I would be the last in the world to criticise in an unfriendly spirit the various Settlements established in London and elsewhere for improving the conditions of the people, I cannot but be struck by the fact that very few of those who work in connection wit/i them have much knowledge of business methods Fortunately, nuch that is required for brightening the lives of people living in sordid districts, and im- proving the conditions by which they are surrounded, can and is being supplied by University men and women. As the Co-operative Banks movement, however, operates in the economic sphere, the more business capacity which its leaders possess the better. 142 GENERAL CONSIDERATIONS 143 Hence it affords special scope, not only for the advocacy of the theoretical economic student, but also for the active leadership of business men and women, able and willing to devote their leisure time to efforts for the moral and material benefit of others. One of the most encouraging signs of the times is the large and increasing number of people willing to bestow time and thought, free of charge, in neighbourly social service. The town worker and the villager need friendly and impartial economic information and leadership badly. The Co-operative Banks movement supplies a sphere in which even those who have no special gifts of learn- ing, oratory, or entertainment can find ample oppor- tunity of real usefulness. I hope, therefore, many more possessors of business capacity and powers of organisation will see their way to enter it. For Working People. Then I would like to make a special appeal to working people to study the move- ment and to put its principles into practice in their respective districts. One thing is very certain, and that is that unless and until they take it up actively themselves, it will never " catch on " as it is capable of doing, and become an active feature in our national life. The material advantages of Co-operative Banks might conceivably be gained through some other form of organisation, but the moral benefits are largely de- pendent upon men and women forming their own societies, and tackling and overcoming all the difficulties incident to doing things for themselves, instead of having them done for them. There is much declamation against the evils of Capitalism which cannot be dealt with in a book like this, which is not written with any political intent, but one thing I would like to impress upon my numer- ous working-class friends, and that is that it is possible for them to obtain a much greater share in the control of capital than they have at present, and to show by example how it may be utilised more humanely. I wish they would rise to the opportunity. 144 CO-OPERATIVE BANKS Certainly, if they are unwilling to assume the respon- sibility of the collection and control of capital, their protests against its misuse will meet with scant attention. In recent years they have awakened to a realisation of their powers of participation in Local and Imperial Government. How long will it be before they have a more adequate idea of their powers of influencing the condition of production and commerce ? The Co-operative Banks movement offers a splendid training-ground in this connection. For the Financial Supporters of Social Reform. Finally, I would like to say a few words to those who possess the means and the will to financially support sound schemes for the welfare of their poorer neigh- bours, of whom there are so many in this country. I have often felt woefully deficient in the capacity to place the strong claims of the Co-operative Banks movement properly before them. I do not believe for a moment that, if they knew them, there would be any difficulty in raising sufficient funds to establish a Co-operative Bank in every indus- trial district and a Village Credit Society in every rural spot where it could be helpful to the community. Surely it is better to assist people to thrive than to pay voluntary or compulsory contributions towards relieving unemployment and distress. While the sources of the poverty which we all de- plore are numerous, one, at all events, is the lack of productive credit for small people which this movement, if adequately supported, would sweep away altogether. Others are habits of wastefulness engendered by the non-popularity of saving for a rainy day, and the lack of responsibility due to exclusion from participation in the control of business enterprises. The movement is capable of doing much in remedy- ing these. It is generally recognised that the most effective way to make a man a good patriot is to allow him to participate in representative government, and to make him a good citizen to give him a vote in municipal affairs. GENERAL CONSIDERATIONS 145 The same principle applies in economic matters. The man who has little or no stake in the economic wealth of a country will naturally become the victim of the first demagogue who comes along. He has nothing to lose and everything to gain by any change, whether accompanied by spoliation or not. But help him to put a few pounds between him- self and the precipice of absolute want, assist him to form with his fellows societies w^hich will provide him with financial accommodation when he can profit by its prudent use, and last (but not least) initiate him into the responsibilities of the government of these friendly financial institutions, and he will become a different person, guided in his political judgment not by the caprice of the moment, but by well-considered reasons of thoughtful equity. BIBLIOGRAPHIC NOTE THE bibliography of Co-operative Credit is most extensive, as can be seen by reference to the excellent " International Co-operative Bibliography," prepared and published by the International Co-operative Alliance (6, Bloomsbury Square, W.C.), in which no less than 30 pages of small type are devoted to enumerating the books and papers written upon this subject in various countries, principally in foreign languages. The most exhaustive work on the subject in the English language is Sir F. A. Nicholson's monumental " Report Regarding the Possibility of Introducing Land and Agricul- tural Banks into the Madras Presidency." When I add that it is contained in two huge closely printed volumes of 408 and 291 pages respectively, some idea may be formed of the tremendous amount of work and thought involved in its compilation. A book more within readable compass is the one by Mr. Henry W. Wolff, the principal English writer on the history of Continental Co-operative Credit, entitled "People's Banks " (P. S. King & Son. IDS. net). The same author, in his " Co-operative Banking " (P. S. King & Son. 75. 6d. net), has dealt very fully with the principles and practice of Co-operative Credit, and he has also published several minor books and manuals and written many articles thereon. One of the most helpful books for the student of the subject is the " Report of the Proceedings of the Sixth International Co-operative Congress at Budapest, 1904," issued by the International Co-operative Alliance, under 146 BIBLIOGRAPHIC NOTE 147 whose auspices it was held. It contains a considerable number of authoritative reports and papers on Co-operative Credit Institutions including Central Banks, and on Co- operation and State-Aid. Amongst smaller compilations may be mentioned "The Best Methods of Organisation for Agricultural Co-operation and Credit," by Dr. Herbert G. Smith, and "Co-operative Agricultural Credit in Germany and Switzerland," and "Agricultural Co-operation in Germany," by Mr. H. de F. Montgomery, which were published by the Department of Agriculture and Technical Instruction for Ireland. Some useful information on the subject is also contained in Mr. Bolton King's " Italy of To-day " (Nisbet. 125. net) and Mr. Edwin A. Pratt 's " Organisation of Agricul- ture " (John Murray, is.). A few British Government Reports have been printed from time to time, notably " Reports from Her Majesty's Representatives Abroad on the Raiffeisen System of Co- operative Agricultural Credit Associations " (Commercial No. 6, 1895), furnished in response to a request of Mr. Yerburgh. Most of them, however, are out of date and out of print. Some useful information is contained in the " Report of the Committee on the Establishment of Co-operative Credit Societies in India, 1903 " (Eyre & Spottiswoode. 5d.), and "Co-operative Credit in the United Provinces," by Mr. J. Hope Simpson, I.C.S., Registrar of Co-operative Credit Societies. "United Provinces," reprinted from the Journal of Agricultural Science, Vol. I., Part 2, April, 1906. PRINTED BY CASSKLL AND COMPANY, LIMITED, LA BELLK SAUVAOU, LONDON, E.G. The Central Co-operative Agricultural Bank, Limited. (Affiliated to the Agricultural Organisation Society.) Capital. The Shares are of the nominal value of One Pound each, of which Ten Shillings per share is payable on application. No limit is fixed to the number of shares which may be allotted. Directors. The EARL OF COVENTRY. HUGH ANDREWS, Esq. The LORD LUCAS. The Rev. T. H. L. JELLICOE. R. N. SUTTON NELTHORPE, Esq. R. A. YERBURGH, Esq. Chairman of the 'Board of Directors. R. A. YERBURGH, Esq. Advisory Council. The MARQUESS OF ZETLAND, K.T. The LORD BARNARD. The EARL OF STAMFORD. The Hon. W. F. D. SMITH, M.P. (The members of the Advisory Council have no financial responsibility, but are shareholders in the Bank and approve of its objects.) 'Bankers. Messrs. HOARE & CO. Secretary and Registered Office. Mr. J. K. MONTGOMERY, Dacre House, Dacre Street, Westminster, London, S.W. THE CENTRAL CO-OPERATIVE AGRICULTURAL BANK has been formed for the purpose of financing the Village Co-operative Credit Societies affiliated to the Agricultural Organisation Society, and thereby aiding, on business lines, in the establishment of a network of such societies for the benefit of small cultivators, agricultural labourers, village tradesmen, and others, to whom the principle of Co-operative Credit can be advantageously extended. Some difficulty having been found by the Credit Societies in this country in obtaining the necessary working capital, the Executive Committee of the Agricultural Organisation Society sanctioned the formation of the Central Co-operative Agricultural Bank with a view to the removal of this difficulty. Another difficulty which it is hoped to remove is that which the Credit Societies (which are banks of deposit as well as loan banks) experience in dealing with the deposits which they receive from their members. Up to the present the societies have often been compelled to refuse deposits because they were unable at the moment to make use of them. It is suggested that all surplus deposits should be handed to the Central Co-operative Agricultural Bank, which would either advance them to societies requiring additional capital or otherwise invest them. As the primary object of the Central Co-operative Agricultural Bank is not the gain of individuals, the dividend payable on shares is specifically limited to 5 per cent, per annum. FED 14 1941 M 10Jun52wV 1952 OF CALIFORNIA LIBRARY