A Failed Institutional Transplant: Raiffeisen′s Credit Cooperatives in Ireland, 1894-1914

Horace Plunkett′s Irish cooperative association introduced credit cooperatives into Ireland in 1894. The Irish cooperatives were modeled on the very successful Raiffeisen credit cooperatives of rural Germany. Credit cooperatives were never successful in Ireland, in contrast to other branches of Irish cooperation. Irish bankers argued that credit cooperatives failed simply because there was no need for such an institution. Several observers, including parliamentary bodies, came to the opposite conclusion: credit was expensive for smallholders, and credit cooperatives were a potential solution to the problem. This essay argues that several features of the Irish economic and social environment undermined the cooperative′s operation. The Irish credit cooperatives never attracted as members the more prosperous locals who provided crucial monitoring and expertise in Germany. The Irish cooperative movement was also never able to develop the strong central auditing federations that supervised and certified German cooperatives. Finally, rural Irish people seemed reluctant to force their neighbors to repay loans or face adverse consequences, which undermined the monitoring and enforcement advantages that cooperatives potentially have over commercial banks. This episode illustrates both the importance of timing in institutional development and the difficulty of transplanting institutions from one social and economic context to another.