CO-OPERATIVE BANKING. The idea of co-operative banking was conceived by Her man Schulze-Delitzsch and was first put into practice in 1849 at Eilenburg, Prussia. It grew out of his effort to rescue a number of car penters and shoemakers from usury and to obtain money for them at fair terms upon their joint and several liability for buying the raw, materials needed in their trades. The success of this venture led to various plans for people's banks and credit societies, based on co-opera tion for encouraging thrift in their neighbor hoods and for extending financial assistance to their members for productive or provident purposes. • What Banking Co-operation is the voluntary union of persons for utilizing their faculties or resources, or a part of them, under their own management in some economic enterprise carried on upon their common account with a view to their through their mutual benefit. A bank to, be co-operative must be composed of bers having this same aim and be so organized that they shall control its management, partici, pate in its profits and losses and have the exclusive use of its credit facilities. The bank may borrow and even receive deposits from out siders, since these are ways of utilizing tive credit for the members' benefit. But it not lend to outsiders, because if it should allow them to use its funds or resources it would extending benefit to persons who had no voice. in the management nor responsibility for the losses. This would impair its co-operative char acter and make its members simply a group of capitalists seeking profit for themselves without regard to the best interests of others. The bank, however, may invest in market securities. to prevent its funds from lying idle.
The banks are formed either as joint-stock companies, or associations issuing shares,, or as associations not issuing shares. The joint-stock company has the objection that its capita/ stock is a specified and fixed amount and that.share investments therein cannot as a matter Of law Lei withdrawn at a member's will nor ordinarily be canceled and returned by the bank upon his expulsion or retirement. This violates one of
the essentials of co-operation, which requires the relation between the parties to be volun tary and dissolvable by either of them. More cnrer, it is prejudicial to members that desire to keep their money within reach in case of need, while it deters persons from joining who might wish to resort to the bank only for occasional or temporary purposes. These statutory objec tions may, of course, be removed by contract. But the arrangement is not entirely satisfactory, and no co-operative bank has ever been formed as a joint-stock company except where the laws on associations were lacking or defective.
The associational co-operative banks are bodies incorporated under general laws which authorize licenses or charters to be granted upon filing articles of agreement and voluntary disso lutions to be effected upon complying with a few cheap and simple formalities. The first law was that enacted by Prussia in 1867. From this law and many others enacted in Europe, it may be gathered that an association must have no limit for the number of members, except that it shall not be less than the minimum for incor porators; and, if the association issues shares, no limit must be set for the number of these beyond the amount that may be held by one member. The shares may be paid at once or by periodic instalments and must be subject to withdrawal. So the fund thus obtained increases or decreases according to payments or withdrawals made on shares and to any change in the number of members or of outstanding shares. Hence it is variable; and since it be longs, not to the association itself, but to the contributing members and must be returned to them upon retirement or expulsion, it is alto gether different from a fixed capital stodc and is called gshare capital?) These are the points which distinguish an association from a joint stock company.