course, be described only in broad outline here, is
somewhat startling. They have no subscribed capital, but every member is
liable for the entire debts of the association. Consequently the
association takes good care to admit men of approved character and
capacity only. It starts by borrowing a sum of money on the joint and
several security of its members. A member wishing to borrow from the
association is not required to give tangible security, but must bring
two sureties. He fills up an application form which states, among other
things, what he wants the money for. The rules provide--and this is the
salient feature of the system--that a loan shall be made for a
productive purpose only, that is, a purpose which, in the judgment of
the other members of the association as represented by a committee
democratically elected from among themselves, will enable the borrower
to repay the loan out of the results of the use made of the money lent.

Raiffeisen held, and our experience in Ireland has fully confirmed his
opinion, that in the poorest communities there is a perfectly safe basis
of security in the honesty and industry of its members. This security is
not valuable to the ordinary commercial lender, such as the local joint
stock bank. Even if such lenders had the intimate knowledge possessed by
the committee of one of these associations as to the character and
capacity of the borrower, they would not be able to satisfy themselves
that the loan was required for a really productive purpose, nor would
they be able to see that it was properly applied to the stipulated
object. One of the rules of the co-operative banks provides for the
expulsion of a member who does not apply the money to the agreed
productive purpose. But although these "Banks" are almost invariably
situated in very poor districts, there has been no necessity to put this
rule in force in a single instance. Social influences seem to be quite
sufficient to secure obedience to the association's laws.

Another advantage conferred by the association is that the term for
which money is advanced is a matter of agreement between the borrower
and the bank. The hard and fast term of three months which prevails in
Ireland for small loans is unsuited to the requirements of the
agricultural industry--as for instance, when a man borrows money to sow
a crop, and has to repay it before harvest. The society borrows at four
or five per cent, and lends at five or six per cen