Question: What are "schulze-delitzch banks of co-operation"?
Very different were the people among whom Schulze-Delitzsch established his form of co-operative credit; and very different the organization he adopted and the results which have flowed from it. In 1850 Franz Hermann Schulze was a judge in his native town of Delitzsch, almost at the middle point of the southern edge of Prussia, and established there his first "Vorschussverein," or Advance-Union. He had been in England and knew something of our co-operative movement, but he scarcely seems to have derived any part of his inspiration from it. The people he desired to help were townsmen, especially the small craftsmen working on their own account, the joiners, shoemakers and so forth; and his ideal was to do this merely by stimulating their thrift.
In a Schulze-Delitzsch bank, a number of such men combine together to raise a capital of guarantee: to do this every member takes up one share and one only, which is of large value, say £30 or £50 or even much more, but can be paid up by small instalments. Thus every member is committed to a long course of saving. On the strength of this capital in course of formation, and the unlimited liability of the members, the bank is able to borrow, or to receive as savings and deposits from members and others, a much larger capital. The funds so constituted it lends out at the highest rates it can command, originally 12% or 14%, but now very much less, and varying, of course, with the market. It lends to members only, but to any amount, for any purpose and on any good and sufficient security, whether acceptance, promissory note, overdraft, discount, mortgage, pledge, surety or what not. The loans, however, are always for a short period, usually three months, renewable for another three months, and sometimes further than that. The committee of management are elected by the general meetings; they decide on all loans, and receive a salary, plus a commission on the business done. The council of supervision are also paid, or at least entitled to pay. The great objects which a bank keeps in view are security and a good return on capital. It is not confined to a small area, but works for as large and as varied a constituency as possible. With such a constitution the Schulze-Delitzsch banks grow big and accumulate a large capital of their own. On an average each bank has nearly 600 members and lends about £150,000 per annum, including loans renewed. Losses are sometimes made, but they are not heavy on the whole. All the profits are divided upon capital, or put to reserve, except some, usually small, sums given to charitable or educational purposes. Dividends average about 5%, but have been known to reach and even exceed 30%.
It may therefore justly be said that for co-operative institutions these banks smack too much of joint-stockism: they are in fact co-operative not much more than in the same sense that the Oldham cotton mills, and other "working-class limiteds," have sometimes been loosely called co-operative. They seem constituted to make the lender's interest supreme, but they have, nevertheless, conferred enormous benefits on the handicraftsmen, small traders, small cultivators and others who borrow from them. They have put capital within their reach at reasonable rates.
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