Cooperative Thought - Raiffeisen

Raiffeisen’s Model (Rural Cooperatives)

          Fredrick Winslow Raiffeisen (1818-1888) was born in Harm, the place near Sigeskg river in 1818. After his early education at home, he served in military. He had a short military carrier .Due to bad dye sight, he retired from the service. After retirement, he entered in public service. He served as a burgomaster  of Weyerbusch in 1848, Flammersfield in 1848, Heddersdort in 1854.

          He had deep sympathy for poor people. He himself had seen poverty and the misery of the rural poor. Therefore, he wanted to make them happier and more comfortable.  He strongly believed the self help will lift the poor out of poverty.      

          He developed voluntary association of poor people to improve their conditions. He was the opinion that self help and mutual aid to obtain capital easier and cheaper and thereby they can save for themselves.   Raiffeisen recognised that the cooperative way was the only solution to save the poor.

Cooperative Experiment

Raiffeisen started his cooperative experiment at Flammersfield where he established the ‘Flammersfield Poor Peasants Society in December 1849. This society was started with the help of philanthropists.  It supplied cattles at reasonable cost to the farmers for the period of 5 years.  The members repaid the amount with interest in easy instalments. The members were jointly and severally liable for all debts of the society.

Raiffeisen founded the ‘Heddersdort Benevolent Society’  in 1854 with the help of 59 better off people.  It was the multi-purpose society.  He dissolved a charity association in 1864 and founded ‘Heddersdort Association of Loan Bank’s.  This was a concrete step taken by Raiffeisen based on self help through mutual help.

Raiffeisen later established such societies in different places. They were famously known as local credit units or village banks. Their functions include supply of credit and agricultural requirements, collection of deposits, marketing of members’ agricultural produces etc.  Poor people begin to get credit at reasonable rate and payable in easy instalments. 

Features

1.    Rural Cooperatives: Raiffeisen’s credit organisations are organised in the rural areas.  These societies were open not only to farmers but also to aritsans, traders, and others having their daily activities within the limits of the village.

2.    Unlimited liability:  The societies organised by Raiffeisen were practiced unlimited liability system by which members were jointly and severely liable for the debts of the society.

3.    Honesty:  Raiffeisen strongly advocated that the basis of members should be character and not material assets. He gave much importance to individuals as human beings.

4.    One village one cooperative: Raiffeisen wanted to limit the area of operation of the society in one village.  This made possible  all the members to know each other closely, selection of members based on character and constant meeting with them.

5.    Small unit of shares:  Raiffeisen started his cooperatives with small unit of share capital as the members were poor. The initial funds are moblished from philanthropist. He wanted to give to all desirable persons.   Collection of share capital will not be a criterion for joining the society.

6.    Sound Capital:  Raiffeisen wanted to have sound capital for the society.  Since share capital is not mobilised, adequate resources are mobilised from the members and non members through collection of deposits.

7.    Personalisation of credit:  Loans to the members issued for productive purposes only.  He insisted that security of loan should be the personal character of the borrower. Therefore the society maintained the record of honest and character each members of the society.

8.    Allocation of profit to reserves: The profit earned by the society is allocated for creating various reserves for meeting unforced losses and debts.  The profit is not distributed to its members.

9.    Democratic administration:  The management of the society organised by Raiffeisen is democratic.  The democratic structure consists of the general body  and the board of management.