FARM FINANCE AND THE PROPOSED NEW BANK

Dominion, Volume 21, Issue 259, 2 August 1928, Page 10

FARM FINANCE AND THE PROPOSED NEW BANK

Sir, —Interest in “farm finance” —in all its bearings—is again stirred up throughout New Zealand on account of the recently published proposals in the direction of legislative sanction for the establishment of another bank. The original statements —as broadcast in the newspapers—alluded to a certain degree of preferences which the new institution is anticipated to exhibit in favour of the man on the land, and, with your kind permission, Sir, I propose to traverse the situation (as it exists today) from the point of view of the man in the street. Interest in the most recent of these discussions has been whetted by a Parliamentary reporter recording a statement (alleged to have been uttered. by the one-time member for Bruce) questioning—to my mind, in a querulous fashion —the necessity for any additional banking facilities, adding also that existing machinery is ample for all reasonable requirements, and with special reference, in this regard, to the rural credits legislation of 1927. Assuming that the. Parliamentary reporter presented a faithful record of the opinions, as quoted, a position of extraordinary interest to the writer is 'at once manifest when taken in conjunction with a member’s question in the Lower House, setting out the desirability for a more liberal interpretation of the regulations governing the control of advances to farmers under the new rural credits scheme. Then, again, is another broadcast view (Parliamentarian No. three)—but as old-fashioned as the day when he was on the footplate of El 74— that the rural credits boards are lending moneys to dud farmers —the rejected of the stock and station agents. With these observations in mind, it is, I consider, reasonable to describe each one of these opinions as half-baked (possibly inspired—in the initial instance, at any rate) and altogether ill-considered when confronted with the actual facts for reasons which follow: — 1. An advance application addressed to any one of our associated banks must be backed up by something more substantial than a proffered gazetted security over live and dead stock. This is not altogether to be wondered at, chiefly on account of the banks not employing men who can be all “eyes and ears ’ in the matter of effective supervision of these very mobile securities. . 2. If the country on which the stock are depasturing is already encumbered—be it ever so lightly—the application for current account advances unless surrounded with special circumstances—therefore fails. 3. Our farming friend would then enjoy quite a busy day or two “going his rounds” amongst the stock and station agents. Here he would receive every encouragement to lay all the cards on the table, and would almost be persuaded that “the mutual advantage business spirit” would be operative (for current account overdraft) forthwith. Assuming that these initial conversations were at. sav. Feilding, what would, perhaps, head office say? Something like this: ‘For the amount‘asked for. the business is decidedlv unattractive (this is, the collateral advantages derivable from. the new connection’), any ‘preferential rate of interest not allowable. Take up the account in consideration only of y° ur , n ®y customer arranging a guarantee, and registered security—in support of such guarantee—so that we do rely for cover on the stock to the extent of more than 50 per cent, of our A further stipulation must be that we handle —unquestionably —all business from the several. properties concerned with these securities.” Possibly another concern—with the lean period of 1928 prominently m view —would be glad of the new account, but could not see “any good business in merely borrowing from an existing bank to relend to the inquiring customer, further, the interest rate would undoubtedly be higher—in these circumstances—especially if the “institution” has not yet fully recovered from the effects of IJAI. More advance accounts would be incurring more lock-up of capital—a feature requiring prudential watchfulness, if any 1921 “duds” are still on the books and respecting which it is useless charging interest on the full amount of the respective obligations. 4. What about the rural credits scheme? Well, the financing of the scheme in embryo involves the acquisition of, say. 350 ewes. 120 hoggets, o 0 dairy cows, 30 dry cattle (besides plant, implements, etc.), for stocking 550 acres freehold, and 200 acres Maori Land Board lease. The limitation of advances to £lOOO blocks business straight away, and our inquiring friend has no chance in

the wide world of fixing a “good guarantC Now let us focus attention on the type of'man seeking advances for the purpose indicated—a thoroughly decent, forceful tvpe of farmer, one who has, say, ploughed from the “hills to the sea,” in past days, and, at deflated values,, is deemed to have sufficient working capital for the venture, to ensure success; anxious. to acquire an improved farm in a thriving locality, and hand on a competence to those he has trained up for the job. Alongside all this, summarise the various rebuffs : (1) The average bank —of the associated variety—does not want the account. 2. The stock and station agents foozle round with it 3. The Rural Credits Board cannot touch it, and the result, what? The farmer’s own free capital for the venture is diverted to some luxury-pro-ducing machine —the male members. . of the family continue ekeing out a living in garage or office, while the daughters no doubt must either go typing or “ladyhelping.” The picture is by no means overdrawn —it is a true state of affairs, duly verified in every respect, and the logical conclusion therefore is that the so-called “facilities” for the purpose I have endeavoured to describe leave very much room for improvement. As the writer’s knowledge of farm finance in New Zealand extends over a period of 25 years, he is emboldened to say that the producers will welcome the establishment of another bank with a great shout and tossing of hats; furthermore, the scope of desirable business — in all its ramifications—is practically , without limit in all corners of the Dominion, and the operations of a bank (on an up-to-date commercial basis) .will go a very long way in assisting to dispel a slowly receding financial gloom, from which this country has suffered for a term, already exceeding Pharaoh’s “seven lean years.”—l am, etc., JUNIUS. July 30.