Raiffeisenism abroad: why did German cooperative banking fail in Ireland but prosper in the Netherlands?

Abstract

Why did imitations of Raiffeisen's rural cooperative savings and loans associations work well in some European countries, but fail in others? This article considers the example of Raiffeisenism in Ireland and in the Netherlands. Raiffeisen banks arrived in both places at the same time, but had drastically different fates. In Ireland they were almost wiped out by the early 1920s, while in the Netherlands they proved to be a long‐lasting institutional transplant. Raiffeisen banks were successful in the Netherlands because they operated in niche markets with few competitors, while rural financial markets in Ireland were unsegmented and populated by long‐established incumbents, leaving little room for new players, whatever their institutional advantages. Dutch Raiffeisen banks were largely self‐financing, closely integrated into the wider rural economy, and able to take advantage of economic and religious divisions in rural society. Their Irish counterparts were not.

Rural transformation, inequality, and the origins of microfinance

“…In our theoretical framework, banks and microcredit institutions serve segmented markets of individual lenders due to the presence of collateral requirements. For borrowers at the threshold, one would expect banks credit and micro credit to be substitutes (Cull et al, 2014;Colvin and McLaughlin, 2014). However, individuals founded cooperatives partly to access bank loans as a group, in which case both institutions would exercise complementary roles (Ahlin et al, 2011;Périlleux et al, 2016).…”

Money, Banking, and Old-School Historical Economics

“…Numerous studies have followed: Wandschneider (2015) on Prussian mortgage cooperatives, Gelderblom, Jonker, and Kool (2016) on direct finance and notaries in the Netherlands, Colvin and McLaughlin (2014) on credit cooperatives in the Netherlands and Ireland, Monnet (2018) on public credit institutions in France, etc. As Cull et al (2006), Monnet (2018), and Hoffman, Postel-Vinay, and Rosenthal (2019) and others point out, lending institutions different from banks and stock markets are still very important today in emerging markets (where peer lending and government credit still account for a large share of total lending, especially long-term lending), although their role has diminished in Western economies.…”

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

“… 10 As was the case elsewhere in Europe, these banks were modeled on the cooperatives of Rhenish Prussia instigated by Friedrich Wilhelm Raiffeisen, a politician and social reformer. See Colvin and McLaughlin (2014) for a comparison between the early histories of Raiffeisen banks in Germany, Ireland, and the Netherlands. …”

“…While the 1876 law permitted cooperatives to limit the liability of their shareholders, this option was never taken up by Raiffeisen banks. In practice, the difference between these two forms was therefore small (Colvin and McLaughlin 2014). The legal debate that occupied the contemporary banking literature was not which form of cooperative organization these banks should take, but whether they should be cooperatives at all (see, for example, Verrijn Stuart 1931, pp.…”