RURAL CREDIT SCHEMES

Dominion, Volume 16, Issue 107, 22 January 1923, Page 5

RURAL CREDIT SCHEMES

Sir, —There is an old saying that an ounce of practice is worth a pound of theory, and when 1 saw the summary in Tuesday’s Dominion of the paper read to the Science Cong"osi* on rural credit by two learned professors. I realised more than ever the truth of the adage. “The scheme for rural dredit associations, -while admirable within limits,” those gentlemen are reported to have stated, “could do little or nothing to assist the present difficulties.” I assume that they are referring to the Farmers’ Union scheme, because, although the statement is literally true of the Act passed by the Government last session, that measure has not been taken seriously enough by anyone to warrant the. attention of such an important gathering as the Science Congress. So far as lam aware, there is no other scheme receivin'* consideration from the public at the present time. If lam wrong in this sunposition, I can only express regret; but if I am right, the professional experts have an entire misunderstanding of the whole position. The necessity for agricultural banks -—and the Advances to Settlers Department, which the Government is at present busily enlarging, is an inferior form of agricultural bank, with the doubtful addition that it lends on comparatively ricketty chattels security—exists largely because of the nature of the credit which in the n.-st has bo-n extended to farmers. Will the learned professors defend the three to five rears’ mortgage system so prevalent in New Zealand against an amortisation system? 'Pho opponents of agricultural banking, recruited chiefly from the financial element of the community. have adduced many remarkable arguments, but there has ro'-cr boon one of them audacious cnoimh to attack tlm principle of .uiktl kafioa.

But the most cogent ar' T i’” l e’’t i” favour of flic immo'linte ostehl : slimont of ner’cultura.l bankin" has boon eni’rrlv overlooked b” tlm nrofossors — t'>o moratorium. ft ’s dilbcuir to estimate how many ir'Hions will b° required when tho me atorium is lifted.

by borrowers anxious to renew; but it is undoubted that the amount will be enormous. Does anyone suggest that those loans should not be renewed? They must bo renewed if tho mortgagors aro to survive, and tho learned professors will surely not suggest that it will help the situation to abandon them to their fate. Have these scientific men studied the rural credit system of tho world in comparison with our present mortgage system? Do they realise that not only is the present system very much more costly to tho borrower, but that it deprives him of tho opportunity, of making his land his bank by paying off his mortgage in instalments ? We have had ■ experience of what happens when times aro good. The farmer becomes the possessor of a credit balance, and he buvs a motorcar or shares in a so-called co-onera-five company or increases his obligations bv purchasing more land —because tho mortgagee won’t allow him to pay off his mortgage when it suits him. That is why we want an amortisation system in New Zealand, and amortisation is the secret of the success of agricultural banking, although that success is greatly enhanced by the cheapness with which the banks are worked, the elimination of profit and the additional safety crested by the pooling of securities. With agricultural banking triumphantly successful all over the world, and even next door in Australia, where in eighteen months it has created conditions for the producer of New South Wales such as he never hoped for under the old system, it is a trifle late for academio discussions and theoretical treatises on the disadvantages of rural credit. —I am, etc., W. J. BOLSON. Mantirewa. Forjclril. January 17, 1923: