Plea For More Risk Capital

Press, Volume CIX, Issue 32253, 23 March 1970, Page 28

Plea For More Risk Capital

“The amount of security offered for a loan may have absolutely no connection with the profitability of the loan to the borrower or to the nation,” Professor B. P. Philpott said at a Chartered Institute of Secretaries seminar in Christchurch on Saturday.

“For this reason, possibly; good projects get turned down and poorer ones accepted,” Professor Philpott said. “Though financiers and bankers usually shudder at the mention of lending on the basis of the potential profitability of the project rather than on security offered by the borrower, I think it is fair to say that if interest rates were allowed to go high enough to provide adequate reserve funds for failures, a 1 lot more lending of this type would be done than is the case at present with interest rates screwed down.” Professor Philpott said he felt that the provision of this higher-risk capital for likely developments should be provided by the Development

; Finance Corporation, perhaps using World Bank money He had thought this was what the corporation had been set up for, but he would be surprised if the Government had done very much in this respect. The retiring president of the New Zealand division of the Chartered Institute of Secretaries (Mr H. E. Read), agreed that the corporation was filling a conventional role rather than providing development capital which could not be obtained elsewhere. Mr Read gave as an example the loan to a private company of corporation money over 10 years at 8 per cent. The security had been a commercial trading bank’s guarantee.