Abilene weekly reflector. [volume], May 13, 1915, The Monthly Magazine, Page 19, Image 19

About Abilene weekly reflector. [volume] (Abilene, Kan.) 1888-1935

Image provided by: Kansas State Historical Society; Topeka, KS

                
THE MONTHLY MAGAZINE
7
How to Build a Rural Credit Loan Association
THE American local building and loan as
sociation is a type of mutual co-operative
society that originated in the Far East
and followed the Star of Empire westward
to the New World. The Chinese had it in a
primitive form before the Christian era be
gan. It was in Europe before our Revolu
tionary war, and found a foothold in America
as far back as 1831. The city of Philadelphia
has the distinction of being its "home town"
in the United States. Reliable authority says
that sixty families out of every one hundred
in Philadelphia own the houses they live in.
In Europe, Germany is the strongest building
and loan association country, with France,
England and Austria-Hungary ranking next.
And when the terrible war now scourging
those countries is over, building and loan as
sociations will probably play a prominent part
in the rebuilding that must take place.
We had no accurate statistics relating to
building and loan associations in this country
until 1893, when the Hon. Carrol D. Wright,
then United States Commissioner of Labor,
caused a careful canvass to be made through
out the country and published the results in
his Ninth Annual Report. At that date the
number of associations in the United States
was approximately 5,500 with a membership
of 1,350,000 and assets amounting to $473,
000,000. In 1903 the figures were: Fifty
three thousand associations, 1,567,000 mem
bers and $580,000,000 assets. In 1913 the
figures were : Six thousand four hundred and
twenty-nine associations, 2,836,000 members
and $1,248,000,000 assets. Reliable authority
estimates an increase of ten per cent in assets
at the close of 1914 over 1913.
The 1913 statistics show the old Keystone
state, Pennsylvania, at the head of the list
with 1,710 associations and $233,000,000 as
sets. Ohio ranks second with 649 associations
and $224,000,000 assets. New Jersey ranks
third with 643 associations and $118,000,000
assets. In the matter of associations some
other states rank as follows: Illinois 591;
Indiana, 323 ; New York, 241 ; Massachusetts,
169, Missouri, 139; North Carolina, 127; Ne
braska, 70; Kansas, 69. Every state in the
Union today has local building and loan as
sociations, and they have appeared in several
South American countries within the past ten
years.
We give the foregoing data to show that
building and loan associations are not modern
institutions in the sense that they are new.
There are several associations in Kansas that
are over 30 years old and still growing.
Approximately 97 per cent of the gross as
sets of the associations in the United States
is loans on real estate, made for the express
purpose of purchasing or building homes. An
analysis of state reports shows that the aver
age real estate building-and-loan loan is a lit
tle kss than $1,000. Put it at $1,000 for con
venience and we have over one million homes
in the process of purchase by monthly and
weekly payments in the United States today.
These are practically all town or suburban
homes, and account largely for the greater
number of town homes owned by the occu
pants over the number of farm or country
homes owned by the occupants.
The town-dweller, as a rule, is able to "turn
over" his capital that is, his labor or the
product of his labor daily, or weekly, or
monthly, and can invest a portion of his net
By T. B. BROWN
SECRETARY KANSAS BUILDING AND LOAN LEAGUE
earnings in a home with some degree of reg
ularity. But the farmer is rarely able to
"turn over" his capital more than once a year,
and he cannot keep up a monthly saving ac
count or make monthly payments on a farm
loan. Therefore, the problem has been, and
still is : How can the advantage of long-time
amortized or installment loans enjoyed by the
city dweller be extended to the farmer?
A variety of plans have been suggested,
but practically all of them are based on gov
ernment aid. The American spirit is not in
clined to lean on Government for support, but
regards Government as a protector rather than
as a provider, except it be at election time.
That spirit suggests to the American to find
a way to finance himself, and the Kansas leg
islature has said: Try out the building and
L ,
j ' i .
j I mBWN-; j)
loan association plan for saving and loaning,
modified to suit the farmer's situation.
The building and loan associations of the
United States have gathered more than a thou
sand million dollars from the working men and
working women through a model saving sys
tem, and have loaned that amount to work
ing men and working women to purchase
homes on small monthly or weekly payments
without agents and without commissions or
any charge for services. The true local build
ing and loan association is the one and only
financial institution in the world where the
depositor's interests and the borrower's inter
ests are mutual. It is simon-pure co-operation,
and the only modification necessary to
let in the farmer, or the rural dweller, is to
make the time and payments suit his con
venience. And that has been done by our new
Kansas statute.
Year by year the farmer is becoming more
familiar with the principles and benefits of
mutual co-operation, and we believe he will
not be slow to grasp the possibilities opened
to him by this new act. Money is a market
able product, as is wheat, corn, cotton and
cattle, except that money has the powerful
advantage of being a world-standard medium
of exchange. If the farmer could get his
produce to the consumer without the inter
ference of so many middlemen, both he and
the consumer would be benefited financially.
And if, when the farmer has converted his
produce into money, he could loan his surplus
to his neighbor without the interference of
middlemen, both he and his neighbor would
be benefited financially and the community
would be benefited physically and financially.
The first thing to do in the organization of
a "Rural Credit" building and loan associa
tion under the new law is to get at least
twenty-five persons interested. Get them to
gether. Hold a meeting and discuss the prop
osition and the primary steps. The first step
is to determine the par value of a share in
the association. One hundred dollars is the
almost universal par value of a share through
out the United States, but some associations
put it at two hundred and a few at five hun
dred. I advise $100 shares because they are
most easily handled, may be split into halves
and quarters, $50 and $25, which are popular
denominations with small savers.
Having agreed upon the value of a share,
the next step is to determine the classes of
shares that the association will issue. There
are only two classes of shares necessary, viz. :
installment and full-paid.
An installment share is one that is paid for
in installments, a stated amount every month
or every week, or any amount any time.
These payments are called "dues," and when
ever the dues paid in, plus the earnings cred
ited to the share, equals the par value, the
share is deemed "matured." It is then paid
off, taken up and cancelled, or it may be re
issued as a full-paid share.
The time required to mature installment
shares, when they are to be paid for in regular
installments of a definite amount, should be
determined at the outset, so that subscribers
may know what amount they must pay month
ly or weekly and know approximately when
they may expect maturity. The maturity of
a regular installment share cannot lawfully be
guaranteed. Maturity will depend entirely
upon the net earnings of the association; the
rate of dividend possible to distribute quar
terly or semi-annually. If it is possible to
distribute four per cent semi-annually, one
dollar paid monthly will mature a $200 share
in approximately 130 months; or fifty-five
cents paid monthly will mature a $100 share
in 120 months. The greater the amount paid
the shorter the time to maturity.
Nearly every association issues shares cal
culated to mature par value at the end of
three, five, eight and ten years. If par value
of the share is $100 of course $5 a month will
"mature" it in less time than $1 a month.
Understand that crediting dividends to the
book-value every six months is compounding
the dividends and the longer a share runs the
more dividends it accumulates. A snowball
rolled 100 feet will "pick up" more snow than
one rolled only fifty feet, and a dollar turned
over twenty times ought to pick up more pen
nies than one turned over only ten times.
Given the par value per share, the monthly
payment and the per cent to credit to the book
value semi-annually, the time to maturity may
be easily calculated. If the per cent available
(Continued on Page 9)