CASSE RURALI. – Credit institutions distinguished by their characteristic features, both in the objectives they pursue and the means they employ, and in the particular legal form they assume.
Their origin is relatively recent, and their spread, after an initial phase of slow development, has been considerable, not only in Italy but especially in Central and Eastern Europe.
I. ORIGIN OF THE RURAL BANKS
The first rural bank was founded in 1848 at Flammersfeld (Germany) by the mayor Federico Guglielmo Raffelsen (1818–88). Impressed by the serious repercussions that the German agricultural crisis of 1846–1847 had on the economic situation of the peasants, he conceived and established this institution, which was intended to meet the credit needs of small owner-cultivators and, at the same time, free them from the burden of usurious interest on loans.Having overcome the obstacles posed by the traditionalist agricultural milieu, the German rural banks, which numbered 265 in 1885 and 1,729 in 1890, had already reached the considerable figure of 9,208 by 1899. At approximately the same time, there were more than 2,000 rural banks in Austria, 712 in Hungary, 271 in Belgium, and 450 in France.
In Italy, the first rural bank was established at Loreggia (Padua) in 1884, on the initiative of Leone Wollemborg. This precedent, however, found few imitators. Subsequently, the savings bank of Parma promoted such institutions, which, according to its program, were to act as intermediary bodies between the savings bank itself and the humbler farmers of the province. But for rural banks to multiply more rapidly, it was necessary to reach 1892, when, following the publication of the encyclical Rerum novarum, the clergy began to take an interest in establishing these societies, with the aim of contributing to the economic and moral advancement of the small artisan and agricultural classes. A meritorious pioneer in this particular form of social action was Msgr. Luigi Cerutti, of the diocese of Venice. He soon had disciples and imitators everywhere, so much so that the Catholic rural banks, which in 1892 numbered only three, rose to 69 in 1894 and to no fewer than 779 in 1897. Between 1900 and 1914, their number rose to approximately 2,000.
II. ETHICAL-RELIGIOUS CHARACTER OF THE RURAL BANKS
According to their historical origin, in Italy the rural banks were divided into lay banks, associated with Wollemborg, and Catholic banks, associated with the Christian-social movement: the former, although grouped in a national federation and coordinated by a central bank, did not achieve widespread success, whereas the latter, as noted, within the brief span of two decades formed a powerful economic movement, organized into diocesan and provincial federations and represented by a central body structured on technical and rational principles and ably directed.The confessional character of the rural banks gave occasion for the following objection to be raised: cooperation is an economic association insofar as it aims to achieve economic purposes and, consequently, the religious element introduced into rural banks deprives them of the essential requirement of being economic and transforms them into instruments serving extra-economic ends; accordingly, the cooperative nature of such bodies may be challenged.
From the formulation of the principle to practical hostility
was not a difficult step. The credit cooperation promoted by Catholics was considered spurious and was not admitted to the state assemblies in which the problems of cooperative societies were debated from a general point of view.
Luigi Luzzatti himself, founder of the popular banks and apostle of cooperation, intervened, asserting that the religious factor was merely a powerful impulse inducing a particular category of persons holding common beliefs to unite in cooperatives, whatever their purpose might be. Consequently, the reality of such an occurrence could not suppress the nature of these cooperatives, provided that the function they performed was genuinely cooperative—that is, directed to the benefit of their members.
But to reinforce Luzzatti’s point of view, it would have been sufficient to emphasize that the ethical-religious inspiration of the rural banks concerns their associative composition, and not the enterprise they manage according to the techniques of credit.
III. ASSOCIATIVE NATURE OF THE C. R. — Every collective private enterprise is an emanation of an association of persons. Nevertheless, there are collective private enterprises based on persons and collective private enterprises based on capital; collective private enterprises that pursue mutual-benefit aims and collective private enterprises that pursue profit-making aims. The former enterprises take the legal form of cooperative societies, and the latter that of companies based on capital. The c. r. belong to the first category of societies. Therefore, in order to identify the elements that distinguish these institutions from ordinary and special credit institutions, as well as from cooperative banks, it is necessary to consider the individuals who, by joining together, proceed to establish the c. r. They share a common professional characteristic: they are small entrepreneurs who, taken individually, could not obtain credit from third parties, both because of the modest guarantees they are able to provide and because of the low liquidity of their investment operations as regards the lenders; or, if they were in a position to be granted credit, they would obtain it only at high interest rates and with maturities unsuited to the cycle of their respective production processes.
The professional qualification of the members of a c. r. is what determines its economic character, since it is through the exercise of a credit enterprise, directly managed, that the said members can obtain on loan the monetary capital they need. Although the c. r. is their immediate emanation, it nevertheless stands between them and the savers as debtor and guarantor; the latter therefore do not find themselves facing isolated applicants for credit, but rather an institution endowed with its own legal personality.
It is nevertheless certain that the c. r. cannot guarantee to third parties the obligations undertaken except within the limits to which the members, in turn, are guarantors vis-à-vis II. The Commercial Code of 1882 laid down no special provisions in this regard for the c. r.; in their capacity as cooperative societies, they could, at their discretion, constitute themselves as general partnerships, limited partnerships, or joint-stock companies. From their very origin, however, the c. r. adopted the form of cooperative general partnerships. Indeed, it may be asserted that the expansion of the c. r. was greatly facilitated by this legal configuration which, by exempting the members from subscribing share capital, committed the entirety of their assets in favor of the creditors. It was therefore rightly observed that the c. r. essentially amount to a means suitable for discounting a collective bill of exchange, or to mutual insurance societies for the benefit of one or more creditors.
Under the Consolidated Act of 28 August 1937, the c. r. may also be constituted as companies with limited liability; in that case, besides being obliged to subscribe one or more shares, the member is liable for payment of the company’s debts up to an amount to be determined in the instrument of incorporation, which in any event may not be less than ten times the nominal value of the shares subscribed. In either case, the company’s debts ultimately come to be apportioned among the members, and if one of them proves insolvent, the unpaid portion of his share is redistributed among the other members. This guarantee by the members in relation to the c. r. is, moreover, subsidiary; that is, it operates after the share capital and the reserve fund have proved insufficient to meet the institution’s liabilities.
The greater guarantee that the c. r. can offer creditors, and the greater security that consequently derives for the members, depend, however, on the moral integrity of the members themselves, both with regard to the proper use of the sums borrowed and to their present and future solvency. This condition of the moral integrity of those joining a c. r. is so predominant that from it, as a fundamental premise, derive the principles that Raffeisen established for the proper functioning of such institutions and that may still be stated as follows: 1) a limited territorial area, to make the mutual acquaintance of the members possible; 2) prior determination of the number and maximum limit of loans for each member; 3) verification of the use made of the sums lent.
It is evident that if the basic principle whose observance ensures the proper conduct of the c. r. is moral in nature, the religious element, which gives this higher norm precise and unequivocal content, not only may act as a stimulus to the implementation of the cooperative association from which the c. r. arises, but also continuously exerts the most effective influence in safeguarding its operation from possible deviations and insidious dangers.
IV. ECONOMIC CHARACTER OF THE C. R. — If, on the one hand, the foundation of the c. r. consists in their associative composition, their economic character is nonetheless connected with their nature as cooperative credit institutions. Not all cooperative credit institutions are, however, c. r., and it is therefore clear that they possess particular features distinguishing them from credit cooperatives considered in general.
Broadly speaking, credit cooperation is an economic association insofar as it operates a credit institution in the direct interest of those who constitute II. In practice, credit cooperation takes the form of urban credit cooperation and rural credit cooperation, depending on whether it is directed toward satisfying the credit needs of small independent entrepreneurs in the city or in the countryside.
It is appropriate to emphasize that the c. r. is a credit institution for small independent rural entrepreneurs, that is, artisans, small proprietors, and small tenant farmers who cultivate their holdings directly, in order to establish the principle that this institution must provide credit intended for production, and not for consumption; indeed, in the agricultural sphere, this function can best be expressed through the discounting of bills of exchange issued by members of the c. r. to the Agricultural Consortia when purchasing materials useful for running their farms.
The c. r. obtain the funds necessary for granting loans both through rediscounting operations on their portfolio with larger credit institutions, following suitable arrangements, and through the collection of savings in the form of deposits. In this eventuality, which is in fact the normal one, they are to be regarded as small cooperative deposit and discount banks; and, moreover, popular banks are also of this nature, although differing in size and social composition.
Small cooperative banks, and not small speculative banks: the importance of such a distinction is considerable. Small, because of their restricted territorial jurisdiction, the number of their members, the quantitative limits of their operations, and the amount of the deposits collected; banks, because they occupy an intermediate position between savers and those in need of savings, because their profits arise from the difference between passive and active interest, and because, finally, the duration of their operations is rather short-term than long-term; cooperative, because they are collective enterprises of persons in need of credit, who do not expect monetary profits from the society but rather the provision of services on the best possible terms and in a manner corresponding to their investments.
In short, the c. r., in their capacity as specialized credit institutions, are nothing other than a federative organization of small artisan and agricultural enterprises, having a direct and indirect integrative function; direct when each individual member immediately makes use of the services of the c. r., and indirect when he avails himself of them through other cooperatives in which he participates either as a purchaser of capital goods, as one who transforms intermediate products into finished products, or as a seller of both.
In this case the c. r. becomes the organic center of the economic life of a rural municipality. And when this occurs, it is a sign that the cooperative spirit has attained its fullest and most effective realization.
The c. r., insofar as they are established to satisfy special economic needs, cannot consoli-
date, develop, and flourish except where these needs are felt. If, for reasons of their environment, they were merely small cooperative deposit banks and not also discount banks, and vice versa, the conditions justifying their existence would be lacking.
Yet many areas still exist in Italy where the c. r. remain relevant, and these are the areas in which smallholder farming and small-scale tenancy are already widespread or can be introduced. In such localities the c. r. appear as a necessary and effective factor in economic improvement; an improvement, however, enlivened by moral factors, such as a professional association cemented by a common religious inspiration and by the scrupulous observance of the precepts of Christian ethics.
V. also: ISTITUTO CATTOLICO ATTIVITÀ SOCIALI.