Mutual banking began life in the Rhineland as the brainchild of Friedrich-Wilhelm Raiffeisen. A farmer’s son, born in Hamm on March 30, 1818, Raiffeisen initially embarked on a military career but had to abandon it due to problems with his eyesight.

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After joining the local administration, he became mayor of Weyerbusch in 1845. A man of profound Christian beliefs, he set himself the goal of helping his constituents, mainly farmers. With no access to a financing system that would enable them to improve their farming equipment or cope with disasters such as the 1846-47 farming crisis caused by appalling weather conditions, these farmers often turned to moneylenders, which more often than not merely increased their misery.

On December 1, 1849, with the backing of 60 people, Raiffeisen founded an aid society for the support of impoverished farmers in Flammersfeld (where he was mayor from 1848 to 1852). The goal of this society was to enable farmers to buy livestock on affordable terms. It also granted direct cash loans. In 1852, Raiffeisen was transferred to Heddesdorf, a larger town where he set up a new aid society in February 1854.

However, Raiffeisen wanted to go further. While these benevolent societies helped combat rural poverty by charging lower interest rates, they did not create any real community of interest between lenders and borrowers. In this respect, they did not fully match Raiffeisen’s vision of strengthening the cohesion of local communities and giving everyone the opportunity to participate.

Therefore, on July 24, 1864, he founded his first real cooperative bank, the Heddesdorf Loan Society. This was rapidly followed by the creation of other banks.These banks were founded on the principle of shared responsibility and a strict equality of power between members. Every member, whether a lender or borrower, a well-to-do property owner or a poor farmer, had one vote and could be elected as a director of the bank. All members were therefore entirely equal in their status and level of responsibility. The basic principles were thus laid down, particularly those of lending solely to members, remaining within a small geographic area, establishing inalienable reserves, paying no dividends, and having directors who received no payment for their functions. As Jean-Marie Says points out in his biography of Raiffeisen, “1864 marked an important step in the history of the Raiffeisen system. It marks the shift from benevolent society to a quasi-cooperative.

Faced with this rural misery, Raiffeisen did not look for theoretical responses; above all he took practical realities into account. Firmly convinced of the worth of mutual aid and cooperation, he understood that what a person cannot achieve alone, can be achieved by several people as long as they adhere to the precept of “All for one, one for all”. This is the theme explored by André Gueslin in his book about the origins of Crédit Mutuel: “Raiffeisen’s style of mutual cooperation means above all adapting to the social and economic realities [...] It is above all a philosophy of mutual action, a way of viewing the problems. [...] Pragmatism is very present in its way of working. [...] More strongly than the doctrine, insofar as there really is one, it is the determination to always offer the best services that guides the future.

The success of this innovative approach triggered the development of the Crédit Mutuel local banks. Raiffeisen began to travel to encourage the creation of new cooperative banks. By 1871, 75 such banks had been set up in Germany and Austria, almost exclusively in rural areas.

JULY 24, 1864

Creation of the first real credit union at the initiative of Frédéric-Guillaume Raiffeisen.