The Raiffeisen Principles

Presentation by

Dr. Hans-Detlef Wülker,
member of the Board of Directors of the German Cooperative and Raiffeisen Confederation (DGRV),
Secretary General of the International Raiffeisen Union (IRU),

on April 6, 1995, at the Rabobank Nederland, Utrecht,
on the occasion of an IRU/ICA joint meeting

I. Preliminary remarks

  1. No country’s co-operative system can be duplicated by another country. Social, economic, historical and ethnic factors in individual countries require a corresponding adaptation.
  2. Raiffeisen never considered his principles as something rigid. They are much more crash barriers along which co-operative activities can orientate themselves according to the current economic, legal and social conditions. These principles are so flexible that they can extremely easily be adapted and put into practice.

II. Basic principles

  1. Self-help, i.e. people in the same or a similar situation join forces, raise the necessary financial means for a joint co-operative undertaking themselves and are prepared to give mutual support. They expect that membership in the Raiffeisen co-operative society will be compensating the lack of access to the market and the capital in competition, improving one’s own position on the market and satisfying economic needs better. They expect in the broadest sense access to the market, access to the capital.
  2. Self-administration, i.e. the members organize the internal conditions of the Raiffeisen co-operative society themselves. Thereby they protect the Raiffeisen co-operative society from external influences.This means that internally the Raiffeisen co-operative society is not subject to any third party’s orders. The members decide through their bodies on the economic activities of their joint enterprise. This internal democracy is a vital element of the Raiffeisen system.
  3. Self-responsibility, i.e. the members themselves are responsible for the foundation and the upkeep of the co-operative enterprise and also answer for it to third parties. Mutual joint liability establishes confidence towards other organizations in the economic life.
  4. Voluntariness, i.e. membership in a Raiffeisen co-operative society is voluntary, whoever decides to become a member can do so of his own accord only as he does not only assume rights in a co-operative but also essential duties. Everybody has the right to join or leave a co-operative. But as long as one is in the co-operative, one has the duty to co-operate with it.
  5. Members’ promotion, i.e. the activities of the Raiffeisen co-operative society focus on the member. The basic assignment of the Raiffeisen co-operative society is to offer the member the services needed by this member, i.e. the orientation to his needs stands in the foreground. The member gets promoted. In the long run, the fulfillment of the promotion task can only be achieved if market shares are kept and added to, growth is achieved and assets value and solvency are safeguarded. Therefore: The fulfilling of any socio-political, general interest economic tasks or even tasks assigned by the State can neither be the aim nor the task of a co-operative.
  6. Open membership, i.e. everyone who wants to joint a co-operative has the possibility to do so within the framework of the legal and statutory regulations. The Raiffeisen co-operative societies are not based on a restricted number of members so that the co-operative’s existence does not depend on members joining or leaving.
  7. The identity principle, i.e. the Raiffeisen co-operative society is at the same time an association of persons, an association of members and an enterprise. The enterprise is jointly owned and used. There exists a threefold connection beween a member and a Raiffeisen co-operative society. The member is financial owner, the member holds decision and control functions and the member is recipient of services. The business relations between members and the relations in the social group of the association of persons are interdependent: if the co-operative enterprise does not function, then the association of persons does not function either and vice versa.
  8. Link-up principle, i.e. Raiffeisen co-operative societies join within a link-up system because of their size, their decentralization and often of their regional orientation. This enlarges the principle of self-help. The link-up system increases the promotion capacity of each co-operative belonging to this link-up system. The carrying out of tasks by enterprises of the link-up system has as a result that comprehensiveness is retained and on the other hand competitivity is increased. These enterprise-oriented link-up systems which are created for operational reasons are supplemented by administrative link-up federations which have the task of advising them, auditing them and representing their interests. They have co-ordination, advise, guidance and training functions. The auditing function of these link-up federations is of vital importance for the co-operatives and their organisations. Link-up enterprises carry out only the tasks which cannot be carried out by the local co-operatives themselves. The co-operative principle of subsidiarity is also the basis of collaboration within the link-up system.
  9. Comprehensiveness – the regionality principle, i.e. it should be possible to comprehend a co-operative’s geographic range of action. The principle of decentralization bases on the fact that smaller units guarantee a high flexibility, more proximity to the market and customers – and therefore – strategic competition advantages. In this way a co-operative can fulfill the needs and satisfy the interests of its members. The exact knowledge of the conditions on the spot in the broadest sense make short chains of communication and short periods for decision-making possible. Therefore personal relationships and social control, proximity to members should be preserved, even if this locality principle is exceeded in the narrower sense.
  10. Principle of the independence of co-operatives from the State, i.e. Raiffeisen co-operative societies belong to their members and are committed to them, they are independent from the State. Raiffeisen co-operative societies are no instruments to realize social, socio-political or economic policy objectives. They cannot and do not want to replace governmental action. Raiffeisen co-operative societies only expect from the State to guarantee equal chances, no competitive distortion and a clear political and legal framework. Co-operatives fulfill social functions only indirectly. They contribute to the strengthening of their members through a wide spread of property. They embody democratic principles, they strengthen the self-responsible action of free citizens, they affirm free competition, they put the individual and his performance into the centre of their work. Co-operatives demand solidarity but they deny collectivism. They do not realize common weal objectives and have no public assignment, they only promote the economy and the income of their members. They are dominationally and politically independent.

III. Concluding remarks

  1. The principles of self-help, self-responsibility, self-administration are as valid as ever. Only the forms how these principles have been put into practice have changed. Concentration, industrialization, structural changes and globalisation of many economic activities force co-operatives the same as all other enterprises to adapt their own organisational structures in order to be able to face competition, to fulfill best the promotion task in favour of members, this as highest entrepreneurial dictum.
  2. Co-operatives from Raiffeisen’s time cannot be compared with the ones existing today. What is more important is that the Raiffeisen’s principles influence in spirit today’s co-operatives. However, regarding the practical way of pursuing economic affaires, these principles have to be steadily adapted to framework conditions, societies and national economies so that co-operative organisations are also able in future to serve the people they are bound with, the members.