Lending in Russia has a rather long history. Banks got a great development in the middle of the 19th century along with the abolition of serfdom. Of particular importance, among others, were the Noble and Peasant land banks, the last of which issued loans to peasants who had recently been freed from serfdom.
Reasons for the emergence of new state-owned banks
Serfdom, according to some historians, has long held back the economic and technical development of the Russian Empire. With the decree of 1861 on the abolition of Serfdom, a real economic boom began - more and more banks were created, ready to give loans to peasants, skilled traders and speculators, beginning traders and industrialists, immigrants from the peasant environment. Their work was extremely difficult to regulate and restrain state bodies.
Such consequences of the decree had both a positive and a negative side, and, of course, the lending sector needed state supervision.
In this regard, the ministers N.P. Ignatiev, M.N. Ostrovsky and N.Kh. Bunge in the early 1880s were tasked to develop a regulation on the Peasant Bank. It took almost two years to develop the document and, finally, the position was approved by the king. Thus began a peasant land bank.
Important dates in the history of the bank
Work on the bank's project began in 1880. The establishment of a peasant land bank took place a little later - on March 18, 1882, together with the signing of a decree by Emperor Alexander 3.
The bank opened its doors to all comers a year later, and in 1888 its branch opened in the Polish Kingdom, at that time belonging to the Russian Empire. Later, Peasant land banks began to open in the Baltic states and Belarus.
By 1905, there were 40 branches throughout the empire, half of which were merged with the Noble Bank.
Thanks to the bank maintaining stable land prices, in 1905-1908 it was possible to avoid an economic crisis and a revolutionary outbreak, which undoubtedly would have followed the deterioration in the quality of life.
The bank closed in 1917 with the advent of new power and the overthrow of the monarchy.
Bank Supervision and Management System
The Peasant Land Bank was under the supervision of the Ministry of Finance. Local branch managers were appointed by the minister himself. To create a stable economy, a peasant bank issued loans only on condition that the peasant bought land, which immediately became a guarantee, seized in case of default on the loan. Loans were usually given at a large percentage (7.5-8.5% per annum) and for a long term - from 13 to 55 years.
Functions of the Peasant Land Bank
The main function of the bank was to issue peasants long-term loans for the purchase of land. Together with the Noble Land Bank, they made up the state credit system. The bank received funds for mortgage lending by issuing and selling securities.
Initially, the bank granted loans mainly to agricultural partnerships and peasant societies, and the share of sole recipients of land was negligible (approximately 2% of the total number of recipients of loans). In the future, the situation changed a little, but the bank still involuntarily remained a conservative of the old type of relationship, when peasants were forced to live as a community, and not act as independent owners of the land, because a rare peasant could pay interest on a loan alone.
The bank also provided loans to displaced people who are leaving to develop new lands, and in every way encouraged a resettlement policy.
Another important direction in the work of the bank was the purchase of noble land for subsequent sale to peasants. In a crisis, the bank continued to buy and sell land at set prices, and a similar measure helped to overcome the difficult economic period and avoid depreciation of land.
The fate of the bank after the revolution of 1917
By 1906, when the Peasant Land Bank was established as one of the most important instruments for expanding private ownership of land, it was a powerful economic tool in the hands of the state. During the reforms of P. A. Stolypin, the bank stimulated the creation of farms and cuts and in every possible way encouraged the peasants to leave the community. Most of the bank's borrowers belonged to the number of landless peasants, for whom the new policy of the bank became a real salvation.
By 1917, the Peasant Land Bank was among the first lending institutions in terms of the number of transactions. A huge role in Russia was played by bank securities. Almost 77% of all land transactions went through the bank. Finally, a result was achieved in the field of private land ownership and the percentage of sole buyers exceeded half.
Despite the great importance of the bank and the economic achievements it accomplishes, along with the coming to power of the Bolsheviks, its work was curtailed. By a decree of the Council of People's Commissars of November 1917, the Peasant Land Bank was abolished.