Finance in Developing Economies

Abstract

C ooperatives are part of my family history. This is perhaps the main reason why I am so happy to write a foreword to this book published in 2012, the International Year of Cooperatives as declared by the United Nations General Assembly. This history started in January 1889 in Urmitz, my home village in Germany, when 15 people founded a cooperative savings and credit association, among them six farmers and six small entrepreneurs. Each member bought a share of 1 Mark (approximately one day’s wage at the time) and contributed 2 Mark of savings. Annual interest rates were set at 3.5% on deposits and 5.5% on credit balances. At minimal costs and no loan losses, the association turned a profit from the first year onwards. Several factors contributed to its growth: forty years of prior history of a self-help movement, the existence of a federation from which the association borrowed 15,000 Mark, and the passing of a revised cooperative law in May 1889 which did away with greatly disliked joint liability. In 1934 credit cooperatives came under the banking law. Ever since, Urmitz had its own Raiffeisen Bank, where my family held its accounts. Today the village has its own industrial zone, with financial services provided by the Raiffeisen Bank, now a branch of a larger, impressive cooperative banking entity covering several neighboring villages. The