Thursday, 12 December 2013 13:54

Credit cooperation principles of F. H. Schulze-Delitzsch

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Franz Hermann Schulze-Delitzsch (29 August 1808 – 29 April 1883) was a German economist. He was responsible for the organizing of the world's first credit unions.

The fundamental principles of credit cooperatives developed by F. H. Schulze-Delitzsch:

  • 1. The credit cooperative is an association of urban artisans in order to obtain the money they need to meet production needs. The main criteria for admission to the cooperative F.H. Schulze- Delitzsch considered the efficiency and integrity of workers.
  • 2. Working capital of the cooperative is formed by the entry fees and shares of its members, reserve capital, deposits and loans. Size of working capital is the amount of savings and deposits, determined the number of members and the need for credit. When the marginal rate of working capital achieved, accepting deposits from individuals stopped, but the members of the cooperative have never refused to accept their savings. Reserve capital is formed by annual payments of a percentage of profits at the discretion of the general meeting of the cooperative. The reserve fund used to cover potential losses of the cooperative. To attract savings cooperative paid on deposits higher percentage than urban checkout.
  • 3. Cooperative member could only be a person who has made an entry fee and share. Through these contributions formed the initial capital of the cooperative. Installments to pay contributions not permitted.
  • 4. Credits are issued only to members of the cooperative – shareholders. This principle is consistent with the idea of co-operative credit. In cooperative united the people who know each other well. Therefore, the loan may be issued without collateral - in personal trust of co-op members.
  • 5. Area of credit cooperatives is not limited. According to F.H. Schulze- Delitzsch, a large area of cooperatives activity meant to enhance their prosperity.
  • 6. Cooperative members have limited liability for its obligations. In the event of financial claims against the cooperative, its members are responsible for them only in the amount of their shares.
  • 7. There are dividends on member’s share based on cooperative annual results. Their distribution was carried out in proportion to the size of the member’s share.
  • 8. Board members receive for their work remuneration. Any job, according to F.H. Schulze-Delitzsch, must be paid. 

Source: South-Russian Association of Credit Unions. Toolkit credit cooperatives. Edition 4. - Rostov- on-Don. 2009

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