Banking on a Religious Divide: Accounting for the Success of the Netherlands' Raiffeisen Cooperatives in the Crisis of the 1920s

Abstract

This article investigates the impact of the socioreligious segregation of Dutch society on the asset allocation choices of rural bankers and the withdrawal behavior of their depositors during the early 1920s. Results suggest that cooperatively-owned Raiffeisen banks for both Catholic and Protestant minority groups could limit their exposure to a debt-deflation crisis, despite operating more precarious balance sheets than banks for majorities. Business histories demonstrate how strict membership criteria and personal guarantors acted as screening and monitoring devices. Banks serving minorities functioned as club goods, managing their exposure to the crisis by exploiting the confessionalized nature of Dutch society.

The origins of the (cooperative) species: Raiffeisen banking in the Netherlands, 1898–1909 1

“…All such banks confined their market to a single locality, or even to members of a single religious denomination within that locality. These Dutch credit cooperatives belonged to one of three networks, the central banks of which acted as clearinghouses, auditing authorities, and lenders-of-last resort for their network (Colvin, 2017).…”

“…They relied on deposits as their principal source of funding. Indeed, in practice, the managers of these banks aimed to attract and retain savings deposits wherever they could, and borrowed externally only when necessary (Colvin, 2017). The core business objective of these banks, then, was to finance the expansion of their loan portfolio to liable members, and the cheapest possible way to do this was to attract new savings deposits from existing and new customers, members and non-members alike.…”

“…The origins of this pillarisation have been analysed, among others, byKruijt (1974),Lijphart (1979),Stuurman (1983), De Rooy (1995, andLuykx (1996), and, in the context of risk-taking in the cooperative bank sector, byColvin (2017).…”

Historical Diversity in Credit Intermediation: Cosignatory Lending Institutions in Europe and North America, 1700s–1960s

“…As such, these institutions were able to overcome issues related to moral hazard and adverse selection, which plague small-scale lending, and which prevented conventional banks from reaching out to the rural poor. Later scholars strengthened the analysis of Guinnane by demonstrating that credit cooperatives' business form also allowed them to adjust to local circumstances and to weather financial distress (Colvin 2017) and by analyzing the variables that drove the spread, successor lack thereofand evolution of rural credit cooperatives (Colvin et al 2020;Suesse and Wolf 2020).…”

Ad maiorem Dei gloriam: Numeracy levels in the Guarani Jesuit missions

“…2007;Becker and Woessmann 2009). These works usually consider that religious institutions, in charge of providing education during much of the Modern Age, were providers of public goods and non-rival services such as the education of their members (Abramitzky 2011;Colvin 2017). Along these lines, and directly related to this work, 3 there are studies that show that missions had positive effects in the long term (Woodberry 2004;Gallego et al 2010), both in Africa (Fourie et al 2015;Baten & Cappelli 2016), and in the Americas (Waldinger 2017) and Asia (Calvi et al 2019).…”