Friedrich Wilhelm Raiffeisen

A leading figure in the development of financial cooperatives, both in Europe and around the world, Raiffeisen inspired many pioneers who set up banks or credit unions at the beginning of the 20th century. He created the first credit union in 1862 and went on to inspire many others across thw world. Here is a brief history of his work...

Born in 1818 in Hamm, Germany, Raiffeisen came from a family of small farm operators in the Rheinland. Working as a labourer from a young age, he was confronted early on by the suffering of the rural people, who were often subject to exploitative loan shark practices.

In 1845, after working as a civil servant with the Prussian government in Koblenz, he was appointed mayor of Weyerbusch, which was plagued by a severe economic crisis and famine from 1846 to 1848.

Bread and credit for farmers

In 1846, motivated by his official duties and his Christian beliefs, Raiffeisen founded a “society for grain and bread supply,” which involved building a communal cooperative bakery.

After being transferred to Flammersfeld in 1848, Raiffeisen sought to understand the credit needs of farmers and craftsmen. With the support of the wealthy class, he created a new association that helped small farmers acquire cattle so they wouldn't have to mortgage their assets and go into debt.

From cooperative principles to the first rural credit unions

This association quickly evolved into a credit society where farmers could borrow money at a low rate to buy their cattle directly.

Already back then, the credit society was administered according to principles that many financial cooperatives would later adopt: unlimited liability for members, volunteer directors, limited geographic area, and allocation of surpluses to an indivisible reserve.

In 1852, Raiffeisen was elected mayor of Heddesdorf, a manufacturing town. He founded a charitable association there, which in 1862 became a credit society where members' deposits served to provide loans for other members.

And thus, the first credit union was born!

The initiative gained a following in German-speaking areas and eventually made its way to Alsace, which was under German rule at the time. The credit union idea was copied in western France, spearheaded by Louis Durand in particular. Crédit Mutuel and Crédit Agricole are, in fact, direct descendants of Raiffeisen's initiative.

A work in progress

In 1863, Friedrich Wilhelm Raiffeisen retired from public service, but continued his work, visiting rural communities and neighbouring countries of Germany.

In 1869, after inspiring the creation of close to one hundred credit unions in Germany, Raiffeisen set up a central clearing house, and then a federation in 1877.

By the time of his death in 1888, "Raiffeisenverband" (Raiffeisen-inspired initiatives) were beginning to spread to the north-eastern part of France.

A legacy

Some of the largest and most influencial financial co-operatives in the world today can be linked to Raiffeisen's work:

  • In Canada, Alphonse Desjardin drew upon the instruction and guiding principles of Raiffeisen in founding the Desjardin Group.
  • In the Netherlands, Rabobank's history finds roots in Raiffeisen's ideas.
  • In France, Crédit Mutuel and Crédit Agricole are direct descendants of Raiffeisen's initiative.
  • Indeed, many "Raiffeisenbanks" can be found across Central Europe.

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