He fills up an application form which states, among other things, what he wants the money for.

The rules provide--and this is the salient feature of the system--that a loan shall be made for a productive purpose only, that is, a purpose which, in the judgment of the other members of the association as represented by a committee democratically elected from among themselves, will enable the borrower to repay the loan out of the results of the use made of the money lent.
Raiffeisen held, and our experience in Ireland has fully confirmed his opinion, that in the poorest communities there is a perfectly safe basis of security in the honesty and industry of its members.

This security is not valuable to the ordinary commercial lender, such as the local joint stock bank.

Even if such lenders had the intimate knowledge possessed by the committee of one of these associations as to the character and capacity of the borrower, they would not be able to satisfy themselves that the loan was required for a really productive purpose, nor would they be able to see that it was properly applied to the stipulated object.

One of the rules of the co-operative banks provides for the expulsion of a member who does not apply the money to the agreed productive purpose.