Preliminary Programme

The reluctance of formal financial service providers like banks to fund small enterprises is not a recent
phenomenon. Official concerns about it sounded throughout the nineteenth and twentieth century. This
is because the revenues of lending to such enterprises are easily outweighed by the costs of monitoring
and administration plus the risk of default. Under certain conditions, societies can however find new
solutions, such as credit cooperatives, to small enterprise funding issues. This research contributes to
this literature by showing that, at least in case of the Netherlands, even these specially tailored financial
institutions were not a sustainable solution.
Dutch credit cooperatives were relatively successful at first: by the early-1900s there were almost 20
independent institutions with over 60 branches spread across the Netherlands. Their total membership
exceeded 35,000, and they accounted for approximately 25% of Dutch bank loans. By the late-1910s
however their importance rapidly dwindled, and by the mid-1920s they all but disappeared.
Via a detailed historical analytical narrative, I show that this pattern of growth and decline can be
explained by so-called mission drift. As credit cooperatives grew in size they increasingly catered to
clients who were better off than their original target group. Due to this mission drift, credit cooperatives
became increasingly akin to universal banks. After World War I the largest cooperatives were taken
over by regular commercial banks; the smaller ones gradually disappeared. Credit cooperatives lost out
because they could no longer rely on the efficiency advantages usually associated with cooperatives
while at the same time, they lacked the economies of scale of universal banks. (Show less)

Small and micro-firms often face severe obstacles to debt and equity financing. Financial service providers consider them to be opaque, making small loans costly and impractical while firms usually lack the resources to tackle these problems. The situation was similar in the Netherlands during the first half of the twentieth century. To overcome this issue and better serve small firms, the Amsterdam shopkeeper association innovated and founded the first public loan guarantee fund in 1915, which guaranteed the losses on bank loans to small firms. In turn, the fund’s losses were guaranteed by the municipal government. This institution halted a few years later, but the idea was revived during the Great Depression to prevent firm failures. This paper researches the functioning of these institutions in the period between their start in 1936 and reorganization in 1978. Initially, the institutions were limited in size and scope. After the Second World War the number of applications and granted guarantees quickly rose with a peak in the early 1960s. From the mid-1960s onwards there was a steady decline, both in the number and the total sizes that were being guaranteed. This raises the question what the impact was of these funds in the different periods of time, and why this solution was not durable? Lastly, what can this experiment teach us concerning modern day small firm finance? (Show less)

When in the seventeenth century the Dutch began building a colonial empire, they founded it on Dutch legal foundations and institutions. The case of Batavia shows how a well-known and long since established institution, the orphan chamber, copied from Holland, developed in a colonial context. The specific demographic and economic circumstances, caused a rapid growth of the orphan chamber’s capital and made it a relevant financial service provider. Local governance structures affected the orphan chamber’s functioning and enabled money to be diverted to the Dutch East India Company (VOC). (Show less)