RURAL CREDIT, various systems of extending loans to farmers for the pur pose of financing the growing and mar keting of their crops. Rural credit may be divided into two chief forms: co-opera tive and state aid. The former is by far the most extensively practiced. The co-operative method had its origin in Ger many, where it was first established by Raiffeisen, from whom it has taken its name as the Raiffeisen system. A num ber of farmers in a community join to gether and form a co-operative bank in which the members are jointly liable for the debts of the association. Each mem ber owns a limited number of shares, usually only one. Each member has only one vote in determining the policies of the association. In Germany, before the World War, the share capital of the banks formed only three and eight-tenths per cent. of the total capital available for loans, eighty-five per cent, of the capital being supplied by the savings accounts of the farmer-members. This system has spread all over agricultural Europe, but has made little or no headway in this country. In the United States the farm
er usually obtains his credit through the regular commercial banks, through credit at the general store, or by means of crop liens, all of which have been ex tremely unsatisfactory. Within recent years credit unions have been established, especially in Massachusetts, where they have been encouraged by special legisla tion. The progress of co-operative credit unions has been so slow in this country, however, that the need of some system of state aid has long been felt, and finally took concrete shape in the Federal Farm Loan Act, passed in July, 1916, with the specific purpose of aiding the farmers to produce for the war needs of the nation during a critical period. See "Co-opera tion in Agriculture," by G. Harold Powell, and "Co-operation Among Farmers," by John Lee Coulter.