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COLO. I 



IOWA 



KANS. 




Vmo. 




3> 






Rural 

Credit 

Unions 



General Report 94 
August 1961 



U.S. DEPT. CF AGRICULTURE 
II P R " R Y 

AUG 2 2 1961 

CURRENT SERIAL RECORDS 



in Nine Midwestern and 
Great Plains States 



by Arthur H. Pursel 



( MONT. 



NEBR. 



s 



Farmer Cooperative Service 
U.S. Department of Agriculture 



N.DAK. 



S.DAK. 



FARMER COOPERATIVE SERVICE 
U. S. DEPARTMENT OF AGRICULTURE 
Washington 25, D.C. 
Joseph G. Knapp, Administrator 



The Farmer Cooperative Service conducts re- 
search studies and service activities of assistance 
to farmers in connection with cooperatives engaged 
in marketing farm products, purchasing farm sup- 
plies, and supplying business services. The work of 
the Service relates to problems of management, 
organization, policies, merchandising, product quality, 
costs, efficiency, financing, and membership. 

The Service publishes the results of such 
studies, confers and advises with officials of farmer 
cooperatives, and works with educational agencies, 
cooperatives, and others in the dissemination of 
information relating to cooperative principles and 
practices. 



Contents 

Page 
Highlights v 

Early interest in rural credit unions 2 

Policy on credit. . 2 

Policy on rural credit unions 2 

Activating the program 3 

Regionwide development of rural credit unions 4 

Development in Kansas 4 

Development in other States 10 

Organizational structure 10 

Operating capital , , 12 

Methods of raising capital funds 12 

Major reasons for saving 13 

Thrift emphasis continuous 13 

Two types of members 13 

Member understanding important 14 

Lending operations 15 

Credit extension problems 15 

Cash trading advantages 15 

Special lending methods 16 

Budget loan plan 16 

Prepayment loans „ 18 

Estate loans 18 

Rural credit union and farmer cooperative program 19 

Opportunities for improvement 20 



Highlights 



This report covers the operation of rural credit 
unions in nine Midwestern and Great Plains States. 
It is the second in a series of studies by Farmer 
Cooperative Service on the operations of rural 
credit unions sponsored by regional cooperatives. 

The first dealt with the operations of such credit 
unions in Indiana. This report looks at the operation 
in the area served by the Consumers Cooperative 
Association (CCA), Kansas City, Mo. In its area, 
both farm supply cooperatives and credit union 
operations are of more recent origin and serve a 
different type of agriculture. 

The report summarizes briefly the methods 
by which a large regional farm supply cooperative 
has aided its member associations in their efforts 
to organize rural credit unions and examines the 
results obtained. Particular attention is given to 
Kansas, where growth and development have been 
most rapid. 

The first two rural credit unions in this area 
were organized in 1938 — one in Kansas and one 
in Colorado. By 1959, 115 were operating in the 
area — 58 in Kansas and 57 in 8 other States. 

Combined membership of the 115 credit unions 
reached 26,500 in 1958. Savings totaled $9.2 
million by the end of 1958 and loan volume out- 
standing amounted to $9 million. Loans were 
made to meet both farm and home needs. For 
example, 25 of the oldest rural credit unions in 
Kansas had $5.3 million in loans outstanding by 
the end of 1958. Of this amount 40.6 percent were 
for farm production supplies, 17.8 percent for 
facilities and equipment including farm machinery, 
5.9 percent for real estate, and 35.7 percent for 
consumer service loans, including automobiles. 

Some of the rural credit unions in this group 
were using the latest methods in lending — such 
as budget, prepayment, and estate loans. One 
helped finance a special prepayment plan offered 
to farmers by the cooperative. Experience shows 
that rural credit union lending helps reduce ac- 
counts receivable on the books of many cooperatives. 
This, in turn, helps the local cooperative maintain 
a better schedule in meeting its obligations. Thus, 
these rural credit unions help both the farmer 
and the local cooperative keep operations on a 



sounder financial basis. 

Rural credit unions covered in this study also 
provide members with a safe, convenient, and re- 
munerative place to invest surplus funds. Member 
savings are kept on a demand basis, earn dividends 
annually or semiannually, and are usually covered 
with savings or "share" insurance. A group policy 
is carried on the entire membership, and in case 
of death, claims are paid in proportion to the 
member's account — maximum $2,000 per account. 
There is no extra charge for this service. Similar 
insurance coverage is carried on member loans 
outstanding — up to $10,000 per loan. These 
features encourage members to save and borrow 
at the credit union. Frequently the insurance on 
member savings represents the only insurance 
the member has. 

Interest rates vary from one credit union to 
another and sometimes within the credit union, 
from one type loan to another. Credit unions 
are nonprofit organizations and interest overcharges, 
if any, are returned to members in the form of 
increased dividends on savings, liberalized ser- 
vices^ such as the insurance services, or in the 
form of patronage refunds on interest costs. 

Rural credit unions, through member education 
and continuous emphasis on sound financing, have 
helped many farmers improve and enlarge their 
operations. 

The loss ratio for this group of rural credit 
unions was very low. A record of safe operations 
helps to build member confidence and understand- 
ing. The close working relations with members 
of farmer cooperatives was also a contributing 
factor to this low loss record. 

This study shows that where cooperatives and 
rural credit unions work together, the program 
of each supports and strengthens that of the other 
and members benefit from the improved services 
of each. It also points up the need for additional 
member education and member services, general 
improvement in operating efficiency, long-range 
planning and more organizing, and continued close 
cooperation on the part of cooperative and credit 
union officials in CCA region. 



Rural Credit Unions 

in Nine Midwestern and Great Plains States 



by Arthur H. Pursed' 
Farm Services Branch 
Purchasing Division 

This is the second in a series of studies by 
Farmer Cooperative Service that relate to the 
organization and operation of rural credit unions 
affiliated with farmer cooperatives. The first study 
published in 1958 covered the operations of 43 
rural credit unions in Indiana affiliated with county 
farm bureaus of that State. 2 This study includes 
only rural credit unions affiliated with member 
cooperatives of Consumers Cooperative Association 
(CCA), Kansas City, Mo. 

CCA is a regional wholesale supply cooperative, 
with member associations in 13 States. CCA 
actively supports and encourages the organization 
of credit unions among its members — as it has 
during the past 20 years or more. In 1943 and again 
in 1956, CCA employed for a short period of time 
a full-time fieldman, who was experienced in both 
cooperative and credit union operations, to co- 
ordinate and assist rural credit union development. 



Kansas program. The more rapid development in 
Kansas provided a basis for observing the results 
of effective leadership and a continuous, close 
working relationship between the State credit union 
league, local cooperatives, and Consumers Coopera- 
tive Association. Also these organizations, working 
jointly, have carried on an aggressive educational 
and promotional program. 

Emphasis in this study was on: (1) Methods 
used by cooperatives to aid and encourage their 
members to organize credit unions, (2) effective- 
ness of such credit unions in building pools of 
local capital, and (3) extent to which such capital 
resources were used to finance farming operations. 

Farmer cooperatives like other types of busi- 
nesses have credit problems. This is particularly 
true of cooperatives handling farm supplies. Farmer 
members of these organizations frequently ask for 
credit until a crop is harvested or livestock is sold, 
when purchasing fertilizer, seed, feed, or other 
farm supplies. The smaller farmer needs credit 




If&Miifr 



<<-. 




Home of Consumers Cooperative Association, Kansas City, Mo. 



Since rural credit union development has been 
greater in Kansas than in other States of the 
region, this report was based primarily on the 



Appreciation is expressed to officials of Consumers Coopera- 
tive Association, Kansas Credit Union League, local associa- 
tions in Kansas, and managing directors of credit union leagues 
in other States for their assistance in this study. 

Pursell, Arthur II. Rural Credit Unions in Indiana. Farmer 
Cooperative Service, U.S. Dept. of Agr. Gen. Rpt. 47. June 
1953. 



to survive; the large ones to expand operations. 
Cooperatives should not use capital to extend credit. 

Experience has shown that credit sales tie up 
a cooperative's working capital, increase its operat- 
ing costs, and otherwise handicap its operations. 
Because of this, some farmer cooperatives have 
attempted to operate on a "strictly cash basis." 
And some of them urge their members to obtain 
their credit needs from the Production Credit 
Association (PCA's), a local bank, or another 
financial institution. 

Some cooperatives have encouraged their farmer 
members to organize credit unions to mobilize and 



pool local resources as one way to deal with this 
problem. These funds can then be used to pay 
for farm supplies and farm services that otherwise 
might have to be bought on credit. This not only 
helps reduce the accounts receivable problem for 
the cooperative but also strengthens the overall 
financial position of the farmer. 

Personal interviews with officials of the regional 



and local cooperatives in Kansas, the Kansas Credit 
Union League, and local credit unions provided 
information and data for this report. Information 
for other States included in this study — Colorado, 
Iowa, Minnesota, Missouri, Montana, Nebraska, 
North Dakota, and South Dakota — was supplied by 
the credit union leagues that are organized in these 
States. 



..:iA'5 IJ:i --J 




Home of Kansas Credit Union League, Wichita, Kans. 



Early Interest in Rural Credit Unions 



Interest in rural credit unions by Consumers 
Cooperative Association and affiliates stemmed 
from their desire to help farmers meet their credit 
needs locally, and keep their business on a sound 
basis. These problems are very closely related. 
Once a farmer has found a method of handling his 
own financing, he presents much less of a "credit 
problem" to the cooperative. CCA based much of 
its support for rural credit unions on this premise. 

As a basis for examining the relationship of 
CCA to rural credit unions in the area studied, 
brief consideration is here given to its credit 
policy and its policy on credit unions. 



Policy on Credit 



Granting credit to patrons is a problem that all 
cooperatives have to face sooner or later. Usually 
it is considered a policy matter for the board of 
directors to decide. 

CCA issued the first policy statement on credit 
extension as early as 1938. Highlight of the state- 
ment was the provision for cash discounts for 
prompt settlement of accounts. Discounts ranged 
from 1 to 2 percent. An interest charge of 6 per- 
cent was made for accounts, or any portion of 
accounts, unpaid after 30 days. The membership 
fully approved this policy that year. It was designed 



to keep the association's program on a "cash trad- 
ing" basis as completely as possible. With minor 
revisions it is still in effect and is actively supported 
by local associations. 

This credit program did not stop, however, 
with the issuance of a policy statement. It was — 
and still is — carried aggressively to the local 
cooperative and the member patron level. Credit 
extension — and the problem it raises — is a much 
discussed subject at annual meetings, management 
training institutes, area finance conferences, and 
college short courses on cooperatives. CCA holds 
finance conferences and institutes in cooperation 
with agencies of Farm Credit Administration, State 
cooperative councils, and State credit union leagues 
of the area. 

Policy on Rural Credit Unions 

CCA also formulated a policy on rural credit 
unions by 1945. It was summarized for this report 
as follows: 

"Farmers in the Midwest have found credit 
unions to be of real value. They offer a place 
for farmers to pool their capital and in turn 
they provide a source of funds at a reasonable 
rate of interest. In many instances they have 
been a real help to retail supply cooperatives. 



We are doing all we can to encourage their 
growth." 3 




Many cooperatives sponsor rural credit unions as an additional 
service to farmer members. 



This policy was further developed in a brochure 
entitled "Twenty Reasons Why Every Farm Co-op 
Should Sponsor a Credit Union for Co-op Members." 
The 20 reasons review the mutual benefits derived 
from rural credit unions by the farmers and the 
local cooperative. For the most part they are based 
on the actual experience of local cooperatives which 
have successful rural credit unions. The "twenty 
reasons" listed are: 

1. Builds cooperative spirit and understanding. 

2. Increases the co-op's patronage — builds 
co-op sales volume. 

3. Reduces accounts receivable. 

4. Helps keep co-op capital working. 

5. Helps the co-op keep on a cash basis. 

6. Helps reduce the co-op's operation costs. 

7. Enables the co-op to buy at cash discount. 

8. Offers a sound investment program for co-op 
members. 

9. Offers life savings insurance to members. 

10. Offers insurance on loans. 

11. Develops the habit of thrift 

12. Helps co-op's members meet emergencies. 

13. Offers low cost credit. 

14. Is a safe investment. 

15. Offers convenience and simplicity to bor- 
rowers. 

16. Enables members to withdraw savings when 
.needed. 

17. Keeps its members' loans and investments 
confidential. 

^Letter of November 12, 1958, from Howard A. Cowden, former 
General Manager, Consumers Cooperative Association. 



18. Offers an insured prepayment plan for co-op 
merchandise purchases. 

19. Increases opportunities for leadership de- 
velopment. 

20. Helps build the co-op's membership. 

Activating the Program 

Through group meetings of member cooperatives, 
through cooperation with other interested organi- 
zations, and through printed material, CCA has 
worked consistently at building a better understand- 
ing of credit and also a better understanding of rural 
credit unions in its region. 

Talks on credit problems, technique of handling 
credit, sources of credit, and the possible use of 
credit unions are made at local membership meet- 
ings, credit forums, workshops, and management 
training programs. 

CCA's membership publication provides infor- 
mation to members on credit and credit unions. The 




Scottsbluff, Nebr., home of Panhandle Cooperative Federal 
Credit Union. Organized in 1951, it was the first to be started 
in a CCA member cooperative in Nebraska. 



regional also issues special literature and publica- 
tions to help member cooperatives understand credit 
unions and the use farmer members can make of 
them. 

The contribution to rural credit unions by CCA 
through its field force has been extensive. For 
example, each fieldman carries a kit which includes 
general credit information, information on the as- 
sociation's credit policies, and general information 
on lending organizations in the area such as local 
banks, PCA's, and rural credit unions. 

The kit is also conveniently equipped with credit 
union charter application forms. If, during the 
course of a meeting of directors the question of 
rural credit unions is discussed, fieldmen are pre- 
pared, by prior training and experience, to advise 
directors on rural credit unions and their possible 
use by cooperatives. If a decision is made to 
sponsor a rural credit union, these fieldmen can 
provide official charter application forms and even 
help execute them. 



Then the group submits the application for 
charter, with the proper supporting recommendations 
to the State department of banking, or the proper 
issuing agent of the State government if the credit 
union is to be incorporated under State laws. The 
group submits the application to a regional office 
of the Bureau of Federal Credit Unions if the credit 
union is to be incorporated under Federal law. In 
most States, credit union groups have a choice of 
State or Federal charters. 

Fieldmen may also be helpful in getting new 
rural credit unions organized and operatingproperly. 
While the technical details of setting up anew credit 
union are usually handled by officials of the State 
credit union leagues, fieldmen in their regular work 
have been helpful to many new groups. The field- 
men are in a unique position to reach and work 
effectively with many cooperatives which otherwise 
might never get around to seriously considering 
the addition of a rural credit union to their member 
service program. 



Regionwide Development of Rural Credit Unions 



On January 1, 1959, 115 rural credit unions 
were serving the membership of CCA member co- 
operatives in nine Midwestern and Great Plains 
States. These credit unions had 26,486 members, 
$9.1 million in member savings, $9 million in loans 
outstanding to members, and $10.4 million in assets. 
Figure 1 gives the location of these credit unions 
while table 1 shows these totals by States. 



The second rural credit union in Kansas was 
organized in 1939 in Hutchinson, Kans., to serve 
the membership of the Reno Consumers Co-op 
Association, the Ark. Valley Co-op Dairy Associ- 
ation, and the Ark. Valley Electric Cooperative 
Association. The third rural credit union, also 
organized in 1939, was sponsored by and serves 
the members and employees of the Dodge City 



TABLE 1. --Rural credit unions, by State, reported for Midwestern and Great Plains States, January 1, 1959 * 



State 

Colorado 

Iowa 

Kansas 2 

Minnesota 

Missouri 

Montana 

Nebraska 

North Dakota 

South Dakota 

Total 



Number of: 



Credit unions 



Members 



Member 
savings 



Loan volume 
outstanding 



Total 



16 


4,153 


$ 860,621 


$ 862,280 


$ 984,691 


10 


1,151 


418,030 


442,537 


496,633 


58 


15,290 


6,581,606 


6,655,007 


7,538,623 


2 


110 


9,864 


9,314 


9,768 


3 


351 


74,873 


59,346 


76,893 


1 


100 


23,873 


14,507 


25,448 


5 


1,698 


316,164 


242,257 


343,614 


1 


853 


240,630 


210,990 


274,410 


13 


2,780 


652,568 
$9,178,229 


522.173 
$9,018,411 


710.069 


115 


26,486 


$10,460,149 



Additional rural credit unions were organized in these States and in Arkansas, Oklahoma, and Wyoming during 1959 and I960 but 
data on them were not available for this report. 

By January 1, 1961, Kansas had 60 rural credit unions with 19,402 members, $9,931,560 in member savings, $10,129,534 in loans 
outstanding, and $11,265,000 in assets. 



Development in Kansas 

The first rural credit union in Kansas was 
sponsored by and organized for members and 
employees of the Quinter (Kans.) Cooperative As- 
sociation. It was organized in 1938 and has become 
very useful in the credit program of this coopera- 
tive. As of January 1, 1961, this rural credit union 
had a total of $197,296 in member savings. 



(Kans.) Cooperative Exchange. The latter now 
exceeds $2 million in member savings. 

Additional rural credit unions were organized 
during the late 1940's and the early 1950's but it 
was not until 1956 that the Kansas Credit Union 
League and cooperative fieldmen began to co- 
ordinate their efforts in organizing rural credit 
unions on a large-scale basis. From 1949 to 1959 
the Kansas program increased in number of rural 



Figure 1 



Rural Credit Unions Serving Members of Affiliates of 
Consumers Cooperative Association, January 1, 1959 



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Figure 3 - Growth in membership and shares, 1951 to 1960, 
Kansas rural credit unions. 

MEMBERS (000) 




MIL 



1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 
LION DOLLARS 




1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 



Figure 4 - Growth in loan volume and total assets, 1951 to 1960, 
Kansas rural credit unions. 



MIL 




1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 
MILLION DOLLARS : 




1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 



credit unions from 7 to 58 (figure 2). During the 
1956-58 period, 34 new rural credit unions were 
organized in Kansas alone. 



member savings, $10.1 million in loans outstanding 
to members and $11.2 million in total assets on 
January 1, 1961 (figures 3 and 4). 




Quinter Co-op Federal Credit Union, Quinter, Kans., was sponsored by and serves members of Quinter Cooperative Association. 
It was the first to be organized in a CCA member cooperative in Kansas. 



On January 1, 1961, Kansas had 60 rural credit 
unions in operation serving members of CCA af- 
filiates. This was slightly over 50 percent of all 
rural credit unions covered in this report. From 
1950 to 1960 credit union members increased from 
1,878 to 19,402. This was an increase of over 900 
percent. Important increases also occurred in 
member savings, loan volume, and total assets. 
These 60 rural credit unions had $9.9 million in 



Nine of the older rural credit unions in Kansas 
showed substantial progress during this period. 
By January 1, 1961, this group had 10,586 members, 
$6.2 million in member savings, $6.3 million in loans 
outstanding, and $7 million in assets (table 2). Dur- 
ing 1959 and 1960 this group of rural credit unions 
had an increase of 28 percent in members, 48 
percent in member savings, 51 percent in loans 
outstanding, and 45 percent in assets. 



TABLE 2. --Nine of the older cedit unions of Kansas showing date of organization and present status on January 1, 1961 



Rural credit union 

Quinter Co-op FCU, Quinter. 

Reno Co-op FCU, Hutchinson 

Exchange FCU, Dodge City 

Moundridge FCU, Moundridge 

Ellsworth Co-op FCU, Ellsworth . 

United Co-op FCU, Norton 

Cross Roads FCU, Goessels 

MC Co-op FCU, Beloit 

Equity FCU, Garden City 

Totals 



Year 
organized 



Number of 
members 



Member 
savings 



Loan volume 
outstanding 



Total 
assets 



1938 


454 


$ 197,296 


$ 199,153 


$ 215,985 


1939 


2,338 


1,495,443 


1,643,150 


1,760,331 


1939 


2,937 


2,029,839 


2,036,150 


2,212,255 


1947 


996 


467,224 


593,136 


604,223 


1948 


416 


223,735 


243,384 


257,762 


1949 


419 


182,268 


170,648 


194,856 


1950 


506 


142,754 


195,983 


205,137 


1951 


1,566 


1,048,299 


861,621 


1,131,518 


1951 


954 


440,569 

$6,227,427 


455.389 
$6,398,614 


480,053 


— 


10,586 


$7,062,120 



Development in Other States 

During the late 1930's and early 1940's, several 
rural credit unions were organized to serve CCA 
member cooperatives in other States. In Colorado, 
the first one was sponsored by Adams County Con- 
sumers Cooperative Association in 1938. The first 
in North Dakota was organized at Ellendale in 1941. 

Following the war years, rural credit unions 
were organized in member cooperatives in six 
other States; in South Dakota, at Nunda, in 1948; 



in Missouri, at Kansas City, in 1949; in Iowa, at 
Mt. Pleasant, in 1950; in Nebraska, at Scottsbluff, 
in 1951; in Montana, at Ekalaka, in 1953; and in 
Minnesota, at Lismore, in 1957. 

State credit union leagues reported a total of 57 
rural credit unions operating in these 8 States as 
of January 1959 with 11,196 members. Share 
savings were reported at $2.5 million, loan volume 
outstanding at $2.4 million, and total assets at $2.9 
million (table 1 and figure 2). 




*^wvv wnv * 




Henry County Credit Union, organized in 1950, was sponsored by and serves members of Henry County Supply Cooperative, Mt. 
Pleasant, Iowa. 



Organizational Structure 



The Kansas rural credit unions included in this 
study were chartered under both Federal and State 
enabling legislation. Twenty-four have Federal 
charters and 36 have State charters. The legal and 
organizational structure of these credit unions have 
been kept simple and easy for members to under- 
stand. Figure 5 shows their basic organizational 
pattern and the relationship of members to the 
directors, officers, and committeemen. 

Rural credit unions are cooperatives in all 
respects. They are member owned, member con- 
trolled, and operate on a service-at-cost basis. 
Members elect directors and elect and appoint 
committeemen from their membership, and then 
delegate operating responsibilities to them. Members 
require regular operating reports from their officers 



and committeemen and meet at least once each year 
to handle elections, reports, and program policies. 

Farmer cooperatives sponsored most of the 
rural credit unions included in this study. For the 
most part they serve cooperative members. In some 
areas the field of membership includes all farmers 
of the county. In Dodge City, Kans., for example, 
Exchange Federal Credit Union serves all farmers 
in Ford County who want to join and use its services. 

Sometimes the "field of membership" includes 
the members of more than one cooperative. For 
example, Reno Co-op Federal Credit Union, Hutchin- 
son, Kans., serves members of the local farm 
supply, dairy, and rural electric cooperatives of 
Reno County. In each credit union the "field of 
membership" is specifically defined, and only those 



10 



persons so defined are eligible to join. This arrangement facilitated their close working 

The rural credit unions included in this study relationship with farmer cooperatives and, in turn, 
closely associated with farmer cooperatives enabled them to provide better service to rural 



were 



and most of them were located in the co-op building. people. 



FIG. 5 



Basic Credit Union Organizational Chart 



Credit 
Committee 



President 



MEMBERSHIP 



Board of Directors 



Vice President 



Secretary 



1 



Treasurer 
(Manager) 



Employees, if any 



Supervisory 
Committee 



Educational 
Committee 




The modern office of Exchange Federal Credit Union, Dodge City.Kans., is located in the co-op building. This rural credit union, 
Kansas' largest, serves 3,000 members in Ford County. 



11 



Operating Capital 



For the most part, credit unions are required 
to raise their operating capital from members. 
For some this is a real problem — especially 
the very new credit unions. In contrast, some of 
the older credit unions included in this study actually 
have a surplus of lending capital. 

Methods of Raising Capita! Funds 

When a farmer cooperative sponsors a rural 
credit union, the cooperative presents the new ser- 
vice to the members, explains its purposes and 
operations, and invites each family to join and 
invest in it. 

Investment in rural credit unions may be made 
in a number of ways. It may be by lump sum or 
scheduled over a period of time. For example, 
dairymen at Hutchinson and Hillsboro, Kans., were 
invited to save by authorizing deductions from their 
monthly and weekly milk checks. They liked the idea 
and still use it. A number of farmers at Hays, 
Kans., invest the equivalent of a load of grain or 
the price of a steer to increase their credit union 



account. Some farmers increase or maintain their 
share savings by making small deposits when 
making payments on loans. 

Other practices used by credit unions in Kansas 
include share drives with awards to those making 
the greatest investments in a given period of time, 
coin banks for use by children, reinvestment of 
dividends received from the cooperative or credit 
union, and investing an amount estimated to be the 
difference between the cost of a loan at the credit 
union and the cost of the loan elsewhere. Different 
groups use different means of raising their operat- 
ing capital. 

When a group of farmers in Mitchell County, 
Kans., oversubscribed for a new cooperative grain 
elevator in the early 1950's, they authorized the use 
of the extra funds to start the MC Co-op Federal 
Credit Union, Beloit. In this way the extra funds 
they had mobilized for building the grain elevator 
were used to build their rural credit union and thus 
made available to other Mitchell County farmers 
needing to borrow. 

Rural credit unions in Kansas have also been 




Young North Dakota farmer makes a deposit at the Portland Credit Union, Portland, N. Dak 



12 



successful in raising capital through group activity — 
the pie auction being an example. The MC Co-op 
Federal Credit Union reported raising as much as 
$8,000 at a single auction. Under this plan ladies 
of the membership contributed pies. They were sold 
to the highest bidder, with the understanding that 
the bid price on the pie would be deposited to the 
member's credit union share account. Many Kansas 
credit unions also use youth projects and activities 
to focus attention on the importance of young people 
joining and saving in the credit union. Figure 3 
shows growth in savings in Kansas credit unions 
over a 10-year period. 

Major Reasons For Saving 

Members may save in their rural credit union 
for various reasons — but findings of this study 
indicated they usually included one or more of the 
following: 

1. To build up a cash reserve for contingencies 
or for planned future expenditures. 

2. To earn dividends. Kansas rural credit unions 
paid dividends for 1958 ranging from 3 to 4-1/2 
percent. 

3. To secure additional life insurance. Under 
provisions of the life savings insurance program, 
members are automatically given life insurance 
equivalent to their investment in the credit union — 
within limitations. This gives them increased 
financial security. 

4. To keep local funds mobilized and working 
in the community. In the minds of members, their 
credit union provides a common meeting place for 
those with money to loan and those needing to 
borrow, supplying both needs in a businesslike 
manner. This is a useful service. 

Rural credit unions enjoy a high degree of 
member confidence. This is helpful in building 
capital funds. Officials are bonded — usually for 
100 percent of the true assets of the credit union. 
Losses are infrequent, and savings are kept on a 
demand basis. As of January 1, 1959, the three 
largest rural credit unions in Kansas had lost only 
$3,100 since organization in handling a total of 
$16.9 million in loans. This is an average loss 
ratio of one-fourth of 1 cent for each $1,000 loaned. 
For example, the oldest Kansas rural credit union 
has never had a loss and the second oldest has a 
loss ratio of only 0.0004 percent. 

Federal credit unions are permitted by law to 
borrow up to 50 percent of their unimpaired assets. 
This means that credit unions may borrow 50 cents 
once they have raised $1 and retain it unimpaired. 
Similar provisions exist for most State chartered 
credit unions. 

In addition, credit unions may discount with 
the Federal Intermediate Credit Banks of the Farm 
Credit System on certain farm production loans, 
but total borrowing and discounting can never exceed 
100 percent of unimpaired capital funds. Such 
limitations tend to be proportionally more restrictive 
on new credit unions, which must begin operations 
without accumulated reserves and usually with small 
member savings. 

In actual practice, it was found that only a small 



proportion of the Kansas credit unions ever needed 
to borrow, and still fewer discounted with Federal 
Intermediate Credit Banks. When the savings , 
lending , insurance , and service features of the credit 
union are brought together in one program, they 
comprise a rather attractive package for members. 

Findings of this study emphasize that where 
operations are handled efficiently and the program 
is promoted wisely, the joint endeavor of the mem- 
bers helps to provide the necessary impetus for 
raising operating capital. Additional funds may 
also be made available by deposits of association 
members such as a farmer cooperative or farm 
organizations. Group motivation seems to be a 
built-in factor with credit unions and helps them 
maintain their status of self-sufficiency. 

The nature of the credit union program enables 
members to become more aware of the direct 
relation of member savings to local credit require- 
ments, the dependence of loans on member savings, 
the relation of loan protection and life savings in- 
surance coverages to both saving and lending func- 
tions, and the importance of related member ser- 
vices to the overall credit union program. 

Thrift Emphasis Continuous 

The more progressive rural credit unions in 
this study continually emphasized member thrift. 
This was necessary to insure capital growth, and 
it is also beneficial to members in the long run. 
Some of them used the slogan: "Save systematically, 
borrow prudently, and repay promptly." This 
pretty much summarizes the operational policy of 
these credit unions. 

Member savings, when left in the credit union, 
are also increased by dividend accumulations. Divi- 
dends are matched by credit life insurance, may be 
withdrawn as desired or used as loan collateral, 
and enable the credit union to make loans to other 
members needing to borrow. While the average 
Kansas credit union share account was relatively 
small, the cumulative savings of the group was 
usually adequate to meet the need for lending capital. 

Two Types of Members 

Every credit union has members who save 
primarily but who borrow infrequently, if at all, 
and those who borrow regularly but never accumulate 
sizable savings. Credit unions are able to serve 
both types of members. The operations of Farmers 
Credit Union of Hays, Kans., illustrate this rather 
typical membership practice (table 3). 

This credit union had 442 members on December 
31, 1956, and $226,176 in member savings. Sixty- 
four members, or 15 percent, had savings of $1,000 
or more per member, the average being $3,226 
each. Three hundred and thirty-four members, or 
76 percent, had less than $100 each in savings. 
Their average was just over $6. The upper 15 
percent of the membership of this credit union 
contributed 91 percent of its total share capital. 

At the same time 288 members, or 85 percent 
of the membership, had loans outstanding totaling 



13 



$247,441. Of this number 179 members, or 41 
percent, each had a loan outstanding of $1,000 or 
over. The average loan was $1,152. Thus 41 per- 
cent of the members were borrowing 83 percent of 
its total loanable funds. 



rural credit unions as of January 1, 1959, was $430. 
This study showed each year brought additional 
members, additional savings, and a little better 
understanding of the program — one year pyramid- 
ing on the other. That was the story — and in 



TABLE 3. — Member savings and loans outstanding, by size, December 31, 1956, for 

Farmers Credit Union, Hays, Kans. 



Member savings classified 
by size 



Number of 
members 



Percent of 
members 



Total 
member 
savings 



Average 

saving 

per member 



Percent of 
total savings 



Less than $ 100 
S 100 to $ 249 
$ 250 to $ 500 
$ 500 to $1,000 
$1,000 and over.. 



334 


75.6 


$ 2,078.53 


$ 6.22 


0.9 


16 


3.6 


2,281.54 


142.60 


1.0 


8 


1.8 


2,925.78 


365.72 


1.3 


20 


4.5 


12,408.62 


620.43 


5.5 


64 


14.5 


206,481.05 
$226,175-52 


3,226.27 


91.3 


442 


100.0 


$ 511.71 


100.0 



Member loans classified 
by size 



Number of 
members 
borrowing 



Percent of 
members 
borrowing 



Total loans 
outstanding 



Average loan 
outstanding 



Percent of 
loanable funds 



Less than $ 100 
$ 100 to $ 249 
$ 250 to $ 500 
$ 500 to $1,000 
$1,000 and over.. 



13 


2.9 


$ 721.84 


$ 55.53 


0.3 


14 


3.2 


2,433.35 


173.81 


1.0 


48 


10.9 


15,869.80 


330.62 


6.4 


34 


7.7 


22,262.24 


654.77 


9.0 


179 


40.5 


206,153-92 

$247,441.15 


1,151.70 


83.3 


288 


65.2 


$ 859.17 


100.0 



This credit union had, as of that date, $12,000 
additional funds for lending should members have 
needed them. 

This is a typical pattern found in most credit 
unions and illustrates how they serve both types of 
members — the man with money to loan and the 
man needing to borrow. Both needs are met in a 
businesslike manner. 

Member Understanding Important 

Where farmers understand the credit union 
program and have confidence in its leadership, 
adequate operating funds are usually available from 
local resources to meet all demands. To illustrate: 
The combined share capital (member savings) of all 
rural credit unions covered in this study totaled 
$9.1 million as of January 1, 1959. Of this amount, 
$6.5 million was in Kansas, and $3 million was in 
three of the largest of Kansas' rural credit unions — 
Reno Co-op FCU, Hutchinson; Exchange FCU, Dodge 
City; and MC Co-op FCU, Beloit. These three rural 
credit unions had an average saving per member of 
$585. 

Compared with these 3 older, well established 
credit unions, the 10 newest ones (those organized 
in Kansas in 1957-58) had an average savings of 
$53 per member. The difference in average savings 
per member between the old and the new was $532. 
The average savings per member for all Kansas 



general the pattern for development — of most 
rural credit unions in Kansas and the other States 
of CCA region. 




Member understanding is important in a rural credit union. 



14 



Lending Operations 



Findings of this study stressed that one of the 
major functions of the rural credit union is to 
make effective use of member savings. This it does 
by making loans to those members who need to 
borrow. Bylaws permit loans to be made for any 
"provident or productive purpose" so long as they 
are handled properly. Rural credit union loans 
include production loans made for the farm opera- 
tions and consumer-service loans made for the 
home and family. 



Credit Extension Problems 

"One of the most common problems of farm 
supply cooperatives is to control charge sales — and 
then collect for them . . ." 4 Farmers, at times, 
look upon their cooperative as a place to get free 
credit, and cooperatives, too often, acquiesce in 
the practice. It is the responsibility of cooperative 
officials to keep their own — and to help keep the 
farmers' — business transactions on a sound basis. 





is* 



Self-propelled gleaner combines financed for members by the MC Co-op Federal Credit Union, Beloit, Kans. 



The new or small credit union must necessarily 
limit its loans in both size and number. In so 
doing, it tends to have a greater percent of its funds 
in consumer-service type loans. However, as lend- 
ing capital increases, loans increase in both size 
and number, and production loans tend to utilize 
a greater percent of the loanable funds. 

For example, when the Ellsworth County (Kans.) 
Farmers Cooperative Association decided to expand 
its propane gas program to an additional section 
of Ellsworth County, the rural credit union made 
loans to members for new installations. Rural 
credit unions in Reno and Marion Counties, Kans., 
made loans regularly to members of their dairy 
cooperatives for enlarging dairy herds, making bulk 
milk tank installations, and other production type 
loans. Dairy cooperatives assist members by per- 
mitting repayments through milk check deductions 
and also endorse the farmer's note if he needs 
such endorsement to secure the loan. 

Loan volume for Kansas rural credit unions 
increased from $718,000 to $6.6 million in the 
decade from 1949 to 1959 and to $10.1 million by 
January 1, 1961. Table 4 shows the distribution of 
loan volume outstanding (by purpose) for 25 of the 
older rural credit unions in Kansas on January 1, 
1959. 



This includes credit extension. 

When a farmer has open account credit privileges 
with no fixed or scheduled debt reduction payments 
to make, he usually makes none. But if he con- 
tracts for an obligation in good faith (with a business 
house or finance organization), he usually meets the 
terms of the contract or loan. The difference 
seems to be in his understanding of his obligation. 
The conditions of his contract seem to control his 
response and promptness in meeting it. In many 
instances, it is as simple as that. 

Cash Trading Advantages 

When a rural credit union, local bank, or PCA 
is available to provide adequate production credit 
the farmer needing to borrow, he is able to 
pay the cooperative cash for his purchases, take 
advantage of cash discounts as offered, do more 
long range planning, and practice better financing 
methods. At the same time, the cooperative is able 
to remain in a more solvent and better position to 

4 Bailey, John M. Credit Control in Selected Retail Farm Supply 
Co-ops. Gen. Rpt. 35- Farmer Cooperative Service, U.S. Dept. 
of Agr. June 1957. 



15 



serve members. The local lending institution or 

association is also strengthened by greater usage. 

Many Kansas cooperatives and rural credit union 

leaders believe that the solution to the "cash 



trading — credit extension problem" of cooperatives 
and their members is primarily a problem of recog- 
nizing its existence — actual or potential — and 
taking proper steps to meet it. 



TABLE 4. — Distribution of loan volume outstanding (by purpose) for 25 Kansas rural 

credit unions, January 1, 1959 



Purpose 



Number 
of credit 
unions 1 



Amount 



Average per 
credit union ' 



Percent 



Production 

Petroleum 

Feed, seed, and fertilizer 

Livestock and poultry 

Other miscellaneous farm supply 

Total 

Facility and equipment 

Hardware and building supplies 

Farm trucks and/or tractors 

Other farm machinery 

Total 

Real estate 

Total 

Other 

Automobiles 

Home repairs 

Home appliances and freezers 

Medical care 

Educational loans 

Loans to co-ops and other credit unions 
Miscellaneous 

Total 

Total — all purposes 



24 


$ 738,307 


330,763 


13.9 


25 


560,902 


22,436 


10.5 


19 


705,145 


37,113 


13.3 


8 


154.655 


19.332 


2.9 




12,159,009 


40.6 


15 


159,691 


10,646 


3-0 


17 


488,308 


28,724 


9.2 


12 


301,388 


25,116 


5.6 



13 



$ 949,387 



310,987 



$ 310,987 



23,922 



17.8 



5.9 



5.9 



22 


1,044,450 


47,475 


19.6 


12 


102,191 


8,516 


1.9 


21 


215,540 


10,264 


4.1 


16 


113,344 


7,084 


2.1 


10 


78,942 


7,894 


1.5 


9 


153,846 


17,094 


2.9 


16 


191,008 


11,938 


3.6 




$1,899,321 


35.7 




$5, 318,704 


100.0 



Not all credit unions made all type loans. 



Special Lending Methods 



Methods of handling rura 1 credit union loans 
may, and frequently do, vary from one organization 
to another. This is to be expected since credit 
union laws permit local groups some leeway in 
carrying on their operations. 

While most rural credit unions still follow 
established patterns of lending — making loans on an 
individual application basis — some rural credit 
unions included in this study have adapted such 
methods of handling member loans as: (1) Budget 
type loans, (2) loans to make prepayments for 
purchases at the cooperative, and (3) estate or 
special loans for reinvestment in the credit union. 
Each represents a trend in rural credit lending 
operations and reflects willingness of leaders to 
attempt new methods in their search for ways to 
render better service to members. 

These three plans are now discussed briefly. 



Budget Loan Plan 

Under the budget loan plan, the farmer submits 
his application for a loan to cover his foreseeable 
needs of the season or the entire year. The credit 
committee reviews it in light of the farmer's credit 
record, financial statement, collateral offered, 
ability to repay, and so on, much the same as for 
other loans. If the application is approved, the 
farmer may receive the full amount of the loan or 
be permitted to draw against it as needed during 
the year or period covered by the loan agreement. 

Interest is charged only on actual dollars used 
for the actual days used. Repayments must be 
made as scheduled. Some farmers schedule re- 
payments to fall due at harvest time or when live- 
stock is sold (table 5). At Hutchinson and Hillsboro, 
Kans., dairy farmers authorize regular deductions 



16 



TABLE 5. — Example of a budgeted loan 



Date 



Purpose of advance 

or source 

of repayment 



Amount 
advanced 



Amount 
paid 



Balance 

out- 
standing 



Days 
out- 
standing 



Interest 

at 6 1/2 
percent 



Jan. 10 
Apr. 5 

July 15 



July 20 
Aug. 15 
Sept. 5 
Dec. 10 
Dec. 20 



Fertilizer 

Feed 

Seed 

Fuel 

Labor 

Purchase of cattle. 

Feed 

Fencing 

Supplies 

Sale of hogs 

Taxes 

Labor 

Sale of cattle 

Sale of hogs 

Totals 



Total interest cost 



S 225 
250 

215 
200 
325 
625 
360 
350 
250 

250 
450 



13,500 



515 



2,550 
435 



$3,500 



475 



1,215 



85 



101 



S 



7.19 



21.85 



2,800 


5 




2.49 


2,285 


26 


10.58 


2,535 


21 




9.48 


2,985 


96 




51.03 


435 


10 




.77 



$103.39 



from their share balance, and from it make regular 
payments on outstanding loans. 

Budget loans are advantageous to the farmer, 
the cooperative, and the rural credit union. The 
farm family has more latitude to do advanced farm 
and home planning. The farmer can utilize better 
farming practices without fear of inadequate funds 
and may be able to save more on cash discounts 
at the cooperative alone than he pays out in interest. 
He is usually able to save elsewhere on cash pur- 
chases also. The cooperative saves also on extra 
bookkeeping, billing, collecting, losses, and interest 
cost on operating capital, if borrowed to replace 




funds out on open account, when business is kept 
on a cash basis. 

By substituting one annual or seasonal loan 
for several small loans, as is done in Mitchell 
County, time is saved for both the farmer member 
and the rural credit union. Besides, the cooperative 
and the rural credit union usually increase both 
volume and membership from this type lending 
program. Each is strengthened in the process. 
The number of rural credit unions making budget 
loans at the time of this study was small but seemed 
on the increase. 

Where farmers have budget loans in operation 
and make regular additions to their account through 
deductions, they can arrange for regular payments 
to be made to the cooperative by executing a power 
of attorney in favor of the credit union and the 
cooperative, enabling the credit union treasurer 
to handle payments for them. When this is done, 
the budget loan becomes a revolving type account 
and is continuous. 




Bob Boiler uses line-of-credit through his rural credit union to finance livestock and grain operations on his Black Velvet Angus 
Farm, near Mankato, Kans. 



17 



Those rural credit unions making budget loans 
to farmers also carry loan protection insurance on 
borrowers equal to their outstanding loans and share 
insurance on their savings. This is a regular 
member service and is without extra charge. 




Max Porter, Mitchell County, Kans., produces quality "Porter's 
Porkers" on his year-round, "all weather" swine raising farm. 
Financing for the herd and facilities is provided by a $12,000 
line-of-credit from the MC Co-op Credit Union. 



Prepayment Loans 

Part of the cooperatives in the area studied were 
using their rural credit unions to help control 
accounts receivable. When they are used properly, 
this can be done effectively. 

In Garden City, Kans., for example, the Co- 
operative Equity Exchange uses its rural credit 
union not only for regular loans to farmers to clear 
up indebtedness at the cooperative but also for 
special loans, made to actually "prepay" co-op 
purchases. In 1954, this cooperative decided to 
go on a strictly cash basis. Accounts receivable 
were $51,000 at the time, and increasing. The plan 
agreed upon required farmers to pay up all old 
accounts — even if they had to borrow to do so — 
and make current purchases on a cash basis. A 30- 
day extension of credit was permissible only if 
adequate guarantees for prompt monthly payments 
were established in advance. 

The cooperative made an extensive educational 
effort to encourage farmers to use the prepay plan. 
Those who did became eligible for cash discounts 
(2 to 3 percent on most items), for deliveries to the 
farm whether they were at home or away, and for 
a few other advantages to make the program an 
attractive one. 

The plan had a number of advantages to both the 
farmer and the cooperative. Farmers otherwise 
unable to prepay were encouraged to borrow from 
the local credit union for this purpose. In some 
cases, the cooperative signed the note or orally 
agreed to underwrite the loan. 

Farmers could also qualify for the plan by 
making a special deposit in the credit union in lieu 
of prepayment to the cooperative and designating it 
to be used only for making regular monthly payments 
to the cooperative. Some farmers borrowed from 
the credit union and then reinvested it in the credit 
union for this purpose. This gave them the additional 
advantage of loan protection and life savings in- 
surance coverages on both their outstanding loan 
and saving balance. Farmers using the credit 
union for their prepay plan usually executed a power 
of attorney in favor of the cooperative and the credit 
union so that the credit union treasurer could 
make their payments each month. 

This plan, as used by this cooperative, was 
successful. By December 1955 — 18 months after 
it was started — accounts receivable were reduced 
from $51,000 to less than $5,000. The plan helped 
the cooperative keep its accounts current and the 
farmer to keep his business affairs in better 
condition, and it brought the credit union new mem- 
bers and new business. While this type of plan was 
somewhat unusual for the cooperative, it was little 
more than a normal operation for the credit union. 

Estate Loans 

A third type of special loan offered by a number 
of Kansas rural credit unions is commonly referred 
to as the estate loan or the share loan plan. It is 
made possible by combining loan protection and 
life savings insurance coverages in a single, special 



18 



transaction. Under this plan, a member borrows 
and reinvests the amount of the loan in the credit 
union. He then proceeds to repay it on an agreed 
upon repayment schedule. All estate loans are 
$2,000 or under, since $2,000 is the maximum 
coverage available per account per credit union 
under life savings insurance coverage. 

In 1957, eight farmers started the Ness (Kans.) 
Farmers Credit Union with $40 capital, and then each 
signed up for an estate loan of $1,000 to help launch 
the new program. Now this credit union has 152 
members, $62,000 in member savings, $70,000 in 
loan volume outstanding, and $78,000 in assets. 

Some farmers look upon the estate loan as a 
unique and profitable plan. The only cost is the 



cost of interest. It is easy to set up, and no collateral 
is required since the loan collateralizes itself. 
In return, the farmer receives insurance on the 
loan for the life of the loan, insurance on his shares 
for the life of his deposit, and dividends annually 
or semiannually, as earned. Most important, 
perhaps, is the self-discipline applied in forcing 
members to accumulate savings by repaying a loan. 
This it does rather effectively. 

Estate loans help provide insurance coverage 
for some farmers, known to have no insurance 
other than that secured through their rural credit 
union. Many are unable to get insurance except on 
a group basis. 



Rural Credit Union and Farmer Cooperative Program 



Many cooperative and rural credit union leaders 
in the area covered by this study have found the 
rural credit union to be a useful tool and have 
used it extensively. Some of these leaders are 
pioneering in new methods and techniques of making 
the rural credit union more useful to the farmer 
and the farmer cooperative. 

Farmer cooperatives are well adapted to sponsor 
and also use rural credit unions. They can provide 
housing, clerical, and managerial assistance and a 
field of membership that is organized and under- 
stands cooperative type operations. This is an 
initial advantage. 

In turn, the rural credit union may be helpful 
to the cooperative in a number of ways. The co- 
operative and the rural credit union may, by working 
together , provide a greater service to farmer- 
member-patrons than possible for each to do without 
the other. It is a joint program in every respect. 
The advantages to the cooperative, the rural credit 
union, and the farmer from a jointly operated pro- 
gram as is being developed in Kansas and the other 
States of CCA region, reflected by the study, may 
be summarized as follows: 

A. How the Farmer Cooperative May Help and Use 
the Rural Credit Union 

1. The cooperative may sponsor the credit 
union as a service to its members, join and help 
raise initial operating capital, and provide facil- 
ities and general assistance to the new organi- 
zation. 

2. Cooperative officers and employees may 
serve voluntarily on the board and committees, 
help in educational and membership relations 
activities, and otherwise assist with operations 
on a gratis or reimbursable basis. 

3. The cooperative may encourage farmers 
to use the credit union for systematic savings; 
for seasonal or lump-sum investments; for per- 
sonal, production, or mortgage type credit; and 
for keeping their financial operations on a 
sounder, more businesslike basis. 



4. The cooperative may use the credit union 
to help members finance cash sales, provide 
cash for cash discounts, and handle accounts 
receivable and line-of-credittype service, there- 
by helping build both membership and volume. 

5. The cooperative may use the credit union 
in helping farmers to better understand the 
principles of cooperative enterprise, the intri- 
cacies of "money management," and in establish- 
ing habits of thrift. 

How the Rural Credit Union May Help the Farmer 
Cooperative 

1. The credit union may enable the cooperative 
to go on and stay on a cash trading basis by 
providing cash for cash sales, for cash discounts, 
and by reducing or eliminating the problems of 
accounts receivable. 

2. The credit union may provide the coopera- 
tive with a ready source of investment for 
surplus funds (on a demand basis) and a source 
of ready credit when necessary at reasonable 
rates and on favorable terms. 

3. The credit union helps cooperatives build 
membership, volume, cooperative goodwill, and 
rural leadership, and increases member under- 
standing of cooperative enterprise. 

4. The credit union may enable cooperatives 
to be more versatile in handling farmer accounts. 
For example: 

a. Farmers borrow from the credit union 
for cash trading, to protect investments, 
meet emergencies, and to enlarge or carry 
on their farm operations. ( Loans are usually 
insured against death and disability, without 
cost to the farmer, thus decreasing risks 
of borrowing). 

b. Farmers, through the credit union, set 
up a prepay or line-of-credit type service 



19 



for easy handling of cooperative purchases, 
pledge credit union shares to stand for 
receivables, if any, or even withdraw sav- 
ings to pay accounts outstanding. 

5. The credit union may in effect serve as an 
independent finance division but without cost to 
the cooperative. 

How the Farmer Cooperative and Rural Credit 
Union by Working Together May Help Their 
Farmer Members or Patrons . 

1. The cooperative and the credit union enable 
farmers to own and control (as well as use) 
their farm supply and farm finance organizations. 

2. The cooperative and the credit union help 
provide quality products and sound financing; and 
help protect from poor quality products and un- 



sound or high cost financing. 

3. The annual return of cooperative and credit 
union refunds and dividends increases the farm- 
er's income (buying-spending power), and im- 
proves his financial position. 

4. The cooperative and the credit union help 
farmers to better prepare for the demands of 
modern day farming, and thus increase their 
chance for success. 

5. The cooperative and the credit union enable 
farmers to actually have more for less; have a 
higher standard of living, and exercise greater 
influence, collectively, over factors which affect 
their economic status. By working together , and 
with other farm organizations, they can contri- 
bute much to the farmer's financial security, 
success, and standard of living. 



Opportunities for Improvement 



Cooperative and credit union officials in Kansas 
have pinpointed five ways to help improve operating 
performance. They are as follows: 



1. Better Understanding . 



Findings of this 



study showed that where understanding prevailed as 
to the contributions that rural credit unions make 
to farmers and farmer cooperatives, their opera- 
tions were more successful. 

2. More Effective Know How . — The need for 
more field staff assistance to organize and service 
rural credit unions was pointed out. As cooperative 
fieldmen gain experience in rural credit union 
operations and credit union fieldmen become more 
familiar with the basic objectives of farmer coopera- 
tives, they will be able to pursue more effective 
assistance to each program. 

3. More Long Range Planning. — It takes time 
to build successful rural credit union programs. 
Those cooperatives that had the foresight to organize 
in the 1940's and 1950's now have successful, 
self-sustaining finance organizations to serve their 
members. More recently — 1956 to 1960 — other 
cooperatives have taken steps to set up rural credit 
unions. Cooperative and credit union officials need 
more long range planning, if this type of service 
is to be extended to more Midwest farmers. 

4. Close Cooperation . — In those instances 
where cooperative and credit union officials have 
worked together, they have demonstrated oppor- 
tunities for developing successful local programs. 
Close cooperation is advantageous to both programs. 

5. Proper Organizing . — When rural credit 
unions are set up with adequate groundwork and 
proper service follow-up to assist new officials, 
they have gone a long way in getting their program 
off to a good start. 

These five points emphasize the need for stress- 
ing performance and developing a more compre- 
hensive program if the best interests of sponsoring 



cooperative and credit union members are to be 
served effectively. 

In this, as in any rural credit union program, 
there is a premium on operating efficiency and on 
providing needed member services. These require 
and depend upon adequate training for officials as 
well as effective member education — both for 
existing programs and new ones as they are or- 
ganized. 

Where credit union and cooperative leaders — 
local, State, and regional — join efforts to provide 
proper educational and training programs, they 
provide the basic ingredients for successful rural 
credit unions. 




Farmers use rural credit unions to help finance the purchase of 
farm equipment and supplies. 



20 




OTHER PUBLICATIONS AVAILABLE 

The Story of Farmers' Cooperatives, Educational Circular 1„ , , 

Organizing a Farmer Cooperative, FCS Circular 18. 

Using Your Rural Credit Union, Educational Circular 16. Arthur H, Pursell. 

How Cooperatives Use Credit Agencies To Meet Patron's Needs, General Report 52. 
John Mo Bailey, Arthur H. Pursell, and Russell C. Engberg. 

Rural Credit Unions in the United States, General Report 49. Arthur H. Pursell. 

Rural Credit Unions in Indiana, General Report 47„ Arthur H. Pursell. 

The Rural Credit Union -- a Place To Save and Borrow, Rural Resource Leaflet 8. 

Retirement Plans of Farmer Cooperatives, Circular 21. French M. Hyre„ 

Making the Most of Your Co-op Annual Meeting, Circular 22. Oscar R. LeBeau and 
French M. Hyre. 



A copy of each of these publications may be obtained upon request while a supply is 
available from — 

Information Division 
FARMER COOPERATIVE SERVICE 
U. S. DEPARTMENT OF AGRICULTURE 
WASHINGTON 25, D. C.