History of Raiffeisen Banking Group
The history of Raiffeisen Group banks dates back to mid-19th century when the first cooperatives and loan societies appeared in order to support farmers in times of famine and economic difficulties.
Raiffeisen Group was founded by Friedrich Wilhelm Raiffeisen (1818-1888). As the mayor of a number of villages in the German province of Westerwald in the mid-19th century, he concentrated his efforts on helping farmers in their fight for survival, starting by establishing charitable cooperatives.
However, F. W. Raiffeisen soon realized that the Christian principles of charity were not effective enough and that organized mutual aid would be more beneficial in achieving his goal. In 1862 he founded the first banking cooperative in Anhausen (Germany), which became a prototype for Raiffeisen banks.
The first Raiffeisenbank opened in Austria in 1886 and ten years later the total number of banks in Austria exceeded 600.
Today Raiffeisen Banking Group is the most powerful banking group in Austria, with the country’s largest branch network and representing approximately one-quarter of the entire Austrian domestic banking business.
When you help others, you help yourself.
F. W. Raiffeisen
Friedrich Wilhelm Raiffeisen was neither a hero nor a revolutionary, but practically every village or town in Austria has a square or street name after him. A bridge across the Rhine is named in his honor as well as a Raiffeisen museum in Weyerbusch. His name is associated with the organization he created to help people.
But that is today. Back in the second half of the 19th century, in the age of reform and the collapse of the old order, competition increased dramatically and farmers were badly in need of funds for development. However, no support was to be found; it wasn’t possible to count on help from the government, and given the high risk and administrative expenses, private lenders demanded high interest rates on small loans, exorbitant for farms.
Friedrich Raiffeisen knew firsthand about poverty. He was born on March 30, 1818 in the German province of Westphalia in the small town of Hamm to the family of a local farmer (the seventh of nine children). The boy’s godfather, a priest, helped him receive primary schooling in preparation for a military career. But in 1842 he fell seriously ill and his sense of vision worsened. He abandoned his military career and took a job in the Koblenz city administration. For his achievements, Friedrich Raiffeisen was appointed mayor of Weyerbusch and in 1845 married Emily Stork, the daughter of a Remagen pharmacist.
Like many other towns and villages in Central Europe, Weyerbusch lived in poverty. Farmers and craftsmen were short of money, and Raiffeisen understood their problems. He was aware of the various Utopian theories of those times but these were no more than pretty words. Raiffeisen’s relatives and friends were among the victims of the poverty and suffering, and he sought ways to help them.
In 1847 Raiffeisen began to use his modest means and donations from the wealthy to create loan societies to help his impoverished compatriots. It soon became obvious, however, that the organization intended to support its members could not succeed on the basis of charitable contributions alone. Raiffeisen believed that such a kind of organization should instead be based on the principle of mutual aid among its members, and this idea became the foundation of agricultural cooperatives: those in need must not rely on private donations or government support but must help themselves and others by creating unions and cooperatives which would also give them the opportunity to sell their products on more favorable terms and meet market competition. Raiffeisen founded the first credit union in 1846 providing banking services to its members, helping people consolidate their savings and granting loans to members on reasonable terms.
In 1872, in an attempt to reduce financial risks and improve the exchange of information, Raiffeisen united local unions into a regional cooperative credit union. A central office was opened in 1877.
Two crossed horse heads became Raiffeisen’s emblem; people attached this symbol to the attics of their houses and believed that it could protect them from misfortune.
When Raiffeisen died in 1888, there were 425 societies in Germany and about 120 in Austria founded by his efforts.
The system continued to develop, and in the 20th century Raiffeisen Group was founded, led by Raiffeisen Zentralbank Österreich. The group opened its first subsidiary banks in Central and Eastern Europe in the 1980s and now it is a leading financial group in the region. Raiffeisenbank has been working in Russia since 1996.
Friedrich Raiffeisen would surely be amazed by the current scale of his unpretentious undertakings. He just couldn’t ignore people’s suffering. And only few people know that he himself experienced many personal tragedies, including the death of two children and his beloved wife in 1863. At the age of 47 he was almost blind but continued managing his organizations with the help of his daughter Amalia, who became his personal secretary.
Friedrich Wilhelm Raiffeisen died on March 11, 1888 and was buried at the cemetery of Heddesdorf.