The rationale and impact of Banques Populaires transformation from a cooperative to a commercial bank

II.7.3 RABOBANK IN PERSPECTIVE

Rabobank Group is the largest financial services provider in the Netherlands, with an extensive network of international offices. It is comprised of a diverse range of business units that began in the late nineteenth century as a collection of small agricultural cooperative banks. Although much has changed, some things have remained the same since the bank's inception - Rabobank's cooperative structure and its commitment to local involvement have remained the cornerstone of Rabobank's values and practices for more than a century( www.rabobank.com).

The history of Rabobank has always been characterised by its cooperative nature: people working together, banks joining forces and specialised business divisions combining their knowledge. A distinguishing feature of the cooperative structure - one that underpins every move that Rabobank has ever made (and continues to make) - is a primary commitment to serving the best interests of the customers ( www.rabobank.com).

II.7.4 RAIFFEISEN AND THE FIRST COOPERATIVE BANK

Friedrich Wilhelm Raiffeisen founded the first agricultural cooperative bank in Germany in 1864. As a rural mayor Raiffeisen had witnessed first the poverty suffered by some members of the farming community. In his first efforts to assist that community, Raiffeisen set up a charitable foundation that would provide financial relief to farmers and their families. However, over time Raiffeisen came to the conclusion that self-help was more likely to bring about lasting improvements in the farming community than charity. So in 1864 he transformed his charity into the first agricultural cooperative bank. This first cooperative - "Heddesdorfer Darlehnskassen-Verein" - collected the savings of rural citizens and used them to create a fund for providing loans to the local agricultural community ( www.rabobank.com).

II.7.5 THE EVOLUTION OF THE COOPERATIVEBANKS IN THE NETHERLANDS

In the late 1890s, the German cooperative movement got many followers in the Netherlands. One of the first Dutch sponsors of the new cooperative banking idea was the priest called Gerlacus van den Elsen. Van den Elsen established a number of local agricultural cooperative banks in the southern part of the Netherlands. The priest saw his work with cooperatives as a mission that was simultaneously exalted and down-to-earth. He viewed the role of the cooperatives thus: "To ward off the shylocks, stand by the farmer in his hour of need, as well as promote frugality, charity, industriousness and temperance" ( www.rabobank.com).

Following in the tradition established by van den Elsen, most of the earliest cooperative banks were founded on the initiative of clerics and other local notables, such as mayors, entrepreneurs and educators. Other proponents of the new cooperative banking idea were wealthy farmers who established cooperatives for the benefit of their less successful colleagues.

Although the driving force behind the cooperatives was idealistic, the working method that the banks devised was based on pragmatic business principles, including:

- Unlimited liability of members;

- Unpaid management;

- Profits reserved for further growth;

- A field of operation limited to the local area;

- Association with a cooperative central bank (whilst still retaining local independence).

It was largely these business elements - the practical pillars of an idealistic philosophy - that were responsible for the successful development of the agricultural cooperative banks. From their very first day of operation both cooperative banks were financially successful. Local member banks operated at the heart of the local community and consequently knew their customers personally. In contrast to lenders from the city, they were adept at selecting creditworthy farmers and keeping a close eye on their loans. As a result, the agricultural cooperative banks were able to provide the agricultural community loans with better interest rates and generate and retain a loyal customer base( www.rabobank.com).