Credits core? Lending by local credit cooperatives in the Netherlands, c.1900-1920

Abstract

The common view is that the emergence and growth of credit cooperatives in the Netherlands is a success story. The explanation hereof is debated still. This research examines four early established credit cooperatives with a focus on their primary aim of existence, that is their lending business. The research question is which mechanisms explain the lending activities and resulting loan portfolios of local credit cooperatives in the Netherlands, c.1900-1920. The early established local banks in Borne, Bornerbroek, Heeze, and Westerbork, located in three different geographical regions of the country, are used as case studies for this purpose. The central cooperatives, Centrale Banken, offered a foundational framework with the governance, products, accounting, and oversight for all their local banks. Intentionally, the local banks all operated within a certain bandwidth thereof. Reality was very different; the narrative of the early credit cooperatives in the Netherlands was marked by diversity. The main drivers for this divergence were first and foremost, the fully autonomous local credit cooperatives all implementing their own interpretation of the cooperative structure without their Centrale Banken in the position of correcting this. Secondly, the framework was incomplete which urged the banks’ boards to make critical choices about credit- and risk management issues. Finally, the local credit demand varied considerably amongst the banks. This resulted in very differently sized loan portfolios with each very dissimilar characteristics. Though all banks examined pursued their main reason for existence, the common view of the success of the early credit cooperatives in the Netherlands must be nuanced. It was not one narrative of steady and successful growth, but many and very different local tales.