People’s Banks.

Evening Star, Issue 7355, 29 October 1887, Page 1 (Supplement)

People’s Banks.

The following interesting letter, over the signature of Robert Ewen, appeared in a recent number of a Scotch paper : I have been led to pay particular attention to this subject, from having observed when taking short trips to the Continent and America, between 1870 and 1879, that the peasantry in Europe were comparatively better in circumstances and condition than the crofters, cottagers, or country husbandmen in this country. The small farmers in Canada were also better situated than the same class in Scotland, although in most cases the farmers in Canada, with their 120-acre farms of their own, had only been ploughmen, hinds, or shepherds, ere they emigrated. I inquired into the main causes of the differences in their circumstances, and I found, in the first place, that they had, on the Continent, come into the proprietorship of their little farms by inheritance, their forefathers having bought up the freehold of the same from the large proprietors, through the German land banks —just as working men here buy a dwelling - house through a building society. In Canada the purchase-money of the farm is paid up by yearly instalments on a similar principle. Had the large landlords in this country and in Ireland been foresighted, they should have begun to sell off lots of small farms in the same way to their small tenants long ago; in that way they would have beenbetter situated now, and avoided the present land struggle; the small farmers would have been proprietors. In the second place, the Canadian banking system is better than the Scottish banking system is now; the Canadian banks are free, expansive, and very accommodating. I found also all over the Continent a number of small farmers, and small industries of every kind, and these local banks most readily and on reasonable terms supplied the needful money to stock the farm, buy implements of husbandry I and seeds, and also advance small loans to tradesmen to help them to carry on their small industries. There are now in Germany alone above 2,000 people’s banks supported by a million and a-half of members, mostly working men. They have paid in fifteen millions sterling money in shares and de- ! posits of their own, while after tiieir joint credit alone, mark this ! they have obtained the loan of twenty-five millions more capital 1 from the outside public, and with that forty millions they have turned over in advances, j loans, and discount to themselves the members—one hundred and fifty millions in I the past year. That is how the Germans are thriving; it is by their own thrift and their own splendid system of people’s banks, , which are managed by committees of their i own number, which have not only encouraged , their industries, but yielded a profit over and above, as shareholders of their banks. . There they are getting the benefit of their banks both by borrowing and lending, as tho profits derived by the banks go into their own pockets. This is the most perfect form of co operation of capital and labor. 1 It is so highly thought of that people’s banks have spread to every country in Europe. For further information I may refer to “ Report on the system and working of Co-operation People’s Banks in Italy,” and “Report on National and People’s Banks in the United States of America,” which are published by the Government. I have been advocating the introduction of this popular system of banking. It would be very beneficial to all. j People’s banks can easily be established j in any town, provided a respectable party of ( not fewer than seven individuals agree to form a company for this purpose, according 1 to the Limited Liabilities Acts. In the first j place, a provisional committee requires to be j formed to start the concern, and to obtain . as many shareholders as possible. The | capital may be made to suit the size of the j town, but it can be increased as the | banking business increases. The shares | should be L 5 each, but only LI should ; be called up by instalments. The other ! L 4 per share should stand as reserve liability to guarantee the stability of 1 the bank. After a sufficient amount of j share capital is taken up, the provisional I committee should form the banking company in the usual way, and get it registered. A trustee bank could be changed into a jointstock bank with great advantage to all parties. Then there should be seven or more directors appointed to superintend and direct the business. They would be the real managers of the bank, but they would appoint an actuary to act under them. The bank could then be opened for business. The expenses should be moderate and in proportion to the business dine. This bank would be both a savings bank and a loan bank. Depositors would get, say, per cent, for their money on current accounts, but 3 per cent, for deposits at three months’ or six months’ notice. Loans would be given on approved securities, and cash credits and trade bills discounted, as other banks do, at 5 per cent, and upwards, according to circumstances, for the encouragement and assistance of honest, industrious people, even though they be in small trades. It is for them and the smaller class of customers chiefly that these banks are intended—namely, for customers whose wants may not exceed L2OO or so, and to all such who can satisfy the directors that they are good for the money, and can give sufficient security. Such banks would be a great boon, and they would do much to encourage trade and industry. See what a great deal of good would be done to Rothesay if the L 40.000 in the Savings Bank were lent out to encourage small industries in the island of Bute. These local banks have been very beneficial and very successful in other countries. There are very slight losses, because the customers are generally thrifty and industrious, and well known to the directors and shareholders, who are generally of the same class of people. All trades and industries are encouraged. In countries where small farmers are numerous the banks have been great helps to that class. Therefore, these banks would be most serviceable to Ireland and to Scotland, especially to the crofters and fishermen. But in order to be successful, respectable people must come forward and give a helping hand in the management. The banks can be made to pay well—7| to 10 per cent, dividend — as I know from my experience of one in which I was an originator.