Consumer/Producer-owned Banks

Before the industrial revolution and the development of a modern, market-based society there were really only two types of bank; the private bank for the rich and the mutual aid society for the poor. Neither was what we would recognise as a formal organisation. The first was a set of private arrangements between investors, merchants and manufacturers. The second was a club that provided mutual savings and credit on the simplest of terms. Like the friendly societies it consisted of a group of people who regularly put money into a box and, depending on whether they wanted to provide loans or regular savings, took turns to borrow from it or shared it out at the end of the year. One of the reasons why cooperative banking has done so well in so many countries is that it builds on this almost universal tradition of box clubs, slates, tontines, sou sou, syndicats, kootu, and so on (MacPherson, 1999). The informal system is still important in developing countries where formal banking does not meet the needs of the majority, but in the developed world it has been overtaken by member-owned banks that offer the same kind of services, drawing on the same impulse to mutual aid, but in forms appropriate to a modern society.