The encyclopedia · Strategy & Leadership · Strategic decision · 1900
Desjardins made rural borrowers own the bank that lent to them
Desjardins made rural borrowers own the bank that lent to them, eliminating the lender's profit motive.
Caisse Populaire de Lévis (Alphonse Desjardins)
the move
Alphonse Desjardins worked as the French stenographer for the Canadian House of Commons, and on April 6, 1897 he transcribed a bill against usurious lending brought by MP Michael Joseph Francis Quinn, who cited a Montreal man sentenced to pay $5,000 in interest on an initial loan of $150. Chartered banks of the era had no branch presence and no interest in small rural loans, leaving farmers and workers dependent on moneylenders who could charge whatever a desperate borrower would sign for.
Desjardins spent the following years studying cooperative credit models already running in Europe — Raiffeisen's German rural credit unions, Italian people's banks, and American mutual savings and building societies — looking for a structure that could survive with no capital of its own and no professional banker to pay.
On December 6, 1900, roughly 100 residents of Lévis signed a social pact and approved the by-laws of the Caisse Populaire de Lévis: a cooperative savings and loan society, owned by its own depositors, with limited liability and "fluctuating capital" — members bought five-dollar shares they could redeem on notice, rather than committing fixed permanent capital the way a bank's shareholders would. Members' pooled savings were lent back out to other members, and any surplus stayed inside the cooperative rather than flowing to an outside owner. Because the people the caisse lent to were also the p
why it works
- Borrowers as owners removed the separate profit-seeking lender.
- Surplus stayed inside the cooperative, not paid to outside owners.
- Members set rules, so no conflict of interest remained.
- Trust and pooled savings created a self-sustaining capital base.
what transfers
When one party profits by charging another more, make the disadvantaged party a co-owner to remove the incentive to extract.
what came after
By November 1901 the first caisse had 721 members; by 1920 the movement held 140 caisses, 30,000+ members, $6.3M in assets. The caisse populaire structure became the template for the modern credit union movement across North America, and Desjardins Group is today one of the largest cooperative financial groups in the world.
references
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