In 1919, as the number of cooperatives was increasing in Lithuania, there was a need for a bank; however, private bankers often avoided assisting cooperatives. So, the Lithuanian Cooperative Bank was established to address this problem. However, it did not escape difficulties of its own. How did the Lithuanian Cooperative Bank develop and what strategies did it employ to improve its situation? This time — about the Lithuanian Cooperative Bank and its announced lottery.
“Power in unity”
The founding meeting of the Lithuanian Cooperative Bank took place on 16 August 1920. The first Chair of the Board was Stasys Digrys. The Bank’s aim, as stated in its articles of association, was to help its cooperatives and their unions grow stronger, as well as to help in the creation of new cooperatives. In the beginning, the number of bank members was only 20, and the initial capital stood at barely 32 thousand auksiniai. Another problem was that there was no room for expansion. Only in 1923 did the Lithuanian Cooperative Bank purchase a two-storey brick building in Laisvės Avenue (current address — Kaunas, Vasario 16-osios g. 2) at the former hotel “Levinson.”
In the same year, the building’s reconstruction works started – a third floor was added. On 6 March 1924, the Bank of Lithuania moved to the newly renovated building. The unique details of this building have survived to our time. Above the entrance from the side of Laisvės Avenue, there are rustic columns and two sculptures of children, created by Juozas Zikaras, symbolising the youth, vitality, and strength of the institution. The slogan was “Power in unity.”
The beginnings of other cooperative banks were similar. This made it difficult for them to compete with commercial banks and led to various measures to increase popularity and capital.
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Fig. 1 Building of the Cooperative Bank in Laisvės Avenue near Vasario 16-osios g., Kaunas. Auth.: Stanislovas Lukošius. Kaunas City Museum.
Lottery
In 1927, the Lithuanian Cooperative Bank announced a lottery, but it was quite different from lotteries today. The lottery rules announced by the Bank were as follows:
1. Contact the Lithuanian Cooperative Bank.
2. Upon depositing 15 litas, receive a box for saving money.
3. Put every coin that falls out of your wallet, or pocket, or is simply left over, in that box.
4. Do not forget to bring such boxes to your children, and they will always remind you of your duty – to put a few small coins in the box.
5. Every month, bring the box to the bank, and the Current Accounts Division will check how much you have won over the month and record that amount in your current account.
A comment was added to the rules: “For the winning money that you will keep in our bank, your current account will be paid at a percentage you want, from 6% to 10% annually.”
In short, the lottery announced by the Cooperative Bank was offered to save money, bring it to the bank, and place it in a personal account. So, the biggest benefit still went to the bank, and what the person gained — it’s difficult to say.
Rebirth
However, even such lotteries did not improve the financial situation of the Lithuanian Cooperative Bank. The first chair of the Board of the Bank of Lithuania, Vladas Jurgutis, highlighted the following issues: first, due to the bankruptcy of the Farmers’ Bank, a very unpopular responsibility for “potential losses” had fallen on the bank members, posing a threat to reduce the number of members, which only gradually decreased; second, the “weak” capital and overly complex conditions for obtaining credit for cooperatives; third, a relatively large number of lending institutions.
On 1 July 1933, the Lithuanian Cooperative Bank was transformed into a joint-stock bank and became the financial centre of all cooperatives. Thanks to the government, its capital increased from 0.5 million litas to 3 million litas. It is true that government intervention also reduced the bank’s autonomy – it had become controlled. On the other hand, free money management was improved, and the credit conditions of small credit societies were harmonised. This significantly improved the balance sheet position, which increased from 10.7 million to 20.9 million litas. Although the bank’s main client was cooperatives, it was later attempted to expand and provide services to private customers. Jurgutis stated that this was the result of a decrease in the demand for new credit in cooperatives; the increase in the number of short-term promissory notes should have led to a rapid increase in income and favourable conditions for the cost of credit to cooperatives. It should be noted that the Bank of Lithuania also sought to benefit itself – it wanted to reduce the influence of the opposition parties and to use the cooperative bank to achieve its goals.
However, reforms raised new challenges. Over-the-counter borrowing conditions led to complex loan recovery. As a result, the bank incurred a loss of 133.3 thousand litas in hopeless loans. The situation started to improve in 1937, when its profit increased to 116.3 thousand roubles. Two years later, the profit was 159.6 thousand litas. It is evident that the Lithuanian Cooperative Bank experienced numerous ups and downs, but over its short lifespan, it played a significant role in improving the cooperative economy.
The Cooperative Bank operated until 1940.
Literature
Jurgutis, V. Bankai. Kaunas, 1940.
Articles of Association of the Cooperative Union “Lithuanian Cooperative Bank”. Kaunas, 1926.
Articles of Association of the Cooperative Union “Lithuanian Cooperative Bank”. Kaunas, 1933.
Lithuanian Cooperative Bank. Kaunas, 1927.
Terleckas, V., Čepienė, I. “Kooperatinės bankininkystės sektorius Lietuvoje 1918–1940 m.” Ekonomika 47, 1999.
Šalčius, P. Lietuvos koperacijos bankas. Kaunas, 1924.
Šalčius, P. Kooperacija. Kaunas, 1931.
Terleckas, V. Lietuvos bankininkystės istorija. Vilnius, 2000.
Terleckas, V. Lietuvos bankininkai – gyvenimų ir darbų pėdsakai 1918–1940. Vilnius, 2001.
