6. Payments of not more than 5 per cent interest on shares, the rest of the profits, after deduction for deprecia tion and reserve, to go partly- to an educational fund, partly to charity, and the remainder to be distributed to purchasers, whether members or not, in proportion to their trade at the store.' 12. Example of a credit-union.—As has been stated, credit-unions have been encouraged by law in some of the progressive states, such as New York and _Massachusetts. But for the present purpose, the work of the Jewish Agricultural and Industrial Aid Society may be studied as being concrete and as af fording on account of its age, a basis for appraising the value of the organization and management of a typical credit-union. The society was founded in 1900 as an incident to the administration of the Baron de Hirsch Fund.
The basic activity of that Society consists of the making of loans to Jewish immigrants desiring to become farmers. Loans are, therefore, made either for the purchase of a farm, for its equipment, or both. Loans are likewise made to those already- on the farm, to enable them to make improvements, buy additional equipment, and so on. There is little, if any, difference between the system adopted by the Society for making mortgage loans and those of the various corporate European land banks, especially the Credit Foncier. Ex cept for the way in which the Society raises its funds, its credit system is based upon the cardinal principle, prevailing in continental Europe, which makes the borrower's interest most important. Sound business policy of course must be respected. The differences between the European and American systems are merely in non-essentials.
The rate of interest charged is 4 per cent, which is a frac tion lower than that charged by the majority of European land banks, and less than half that charged the average American farmer. The principal is repayable in easy in stalments extending over periods aggregating an average of ten years. A complicated system of amortization, used by the Credit Foncier, and the indefinite repayment system of the German Landschaft do not find favor and ars not used. The terms of repayment are based largely upon the ability of the farmer and the earning capacity of the farm. The overhead charges and other obligations the farmer must meet each year and the productiveness of his farm are all taken into consideration. If the annual payments the farmer has to make to other creditors are comparatively heavy, the payments to the Society are made correspond ingly smaller, and rice versa. Generally, during the first
two or three years after the loan is made, no pay-ment on the principal is required; then they begin with a nominal payment of, say $25, or $50, which is gradually increased as the farmer becomes better established and his earning power becomes grea The most marked diffTerence between the European and•the American sy-stems, however, lies in the nature of the security which the Society accepts. Its funds being limited, and the demands upon them constantly- increasing, the Society- finds it necessary to exercise discrimination in the making of loans based not so much upon the security offered as upon the needs of the borrower. It does not, therefore, as a general rule, make a loan where the funds are elsewhere obtainable, and rarely makes loans on first mortgage. .Most of its loans are on second mortgage, and not a few on third, supple mented by a chattel mortgage or other collateral. The So ciety loans up to 75. per cent of the value of the farm, al though in special cases it has loaned even beyond the farm value. In the making of loans the Society sees to it that the money is needed for a productive purpose or for some urgent need, such as the repay-ment of a pressing obligation. It also makes sure that the money is properly applied. It assists the would-be farmer not only in the finding and pur chase of his farm but in the purchase of his equipment, thus making certain that the farmer gets value for his money.
During the fourteen years the Society has been in opera tion, it has made 9.,991 mortgage loans aggregating $1,739, 415.76. These were made to 2,600 Jewish farmers occupy ing 2,168 individual farmsteads in 32 states, besides Canada. It 'can, therefore, be seen that the operations of the Jewish Aid Society, altho hampered by limited funds and con fined to a special class cover a much larger area than that of all the European land credit banks taken together. Its outstanding loans, as shown by the report of the Society for 1913, amount to $902,649.18. 'The total repayments on the principal during the fourteen years aggregate $461, U8.77, that is, 30 per cent of the amount loaned, while the Society reports as charged off to profit and loss $41,751.47, or less than 21/, per cent of the amount loaned. Consider ing the substandard nature of the security, this record is most remarkable. The payment to the Society for the fiscal year ended December 31, 1913, amounted to $100,091.94 on the principal and $30,292.18 in interest.