The Evening Star FRIDAY, OCTOBER 28, 1927. CREDIT FOR FARMERS.

Evening Star, Issue 19699, 28 October 1927, Page 4

The Evening Star FRIDAY, OCTOBER 28, 1927. CREDIT FOR FARMERS.

The diversity of opinion on tho usefulness of tho Rural Intermediate Credit Bill, as shown by tho discussion in Parliament on tho reappearance of that measure after being recast by a special committee, is remarkable. Alter all, this is not surprising, for so much depends on tho lenders and so much depends on tho borrowers. One object of the Bill is to try and make rural Industry attractive onco more ns an investment security. It was attractive at one time, but that was during a long period of rising prices for Jam products as a whole. With the termination of that era the security is necessarily loss attractive. Tho Government is evidently not willing to risk backing an enterprise which has to contend with an adverse factor such as this, for beyond advancing a free loan of £360,000 to give the scheme a start it is not guaranteeing it in any way nor providing capital out of imblic funds. What tho Government is doing is legalising the arrangements under which it is hoped to attract the necessary working capital from the private investor. The amount so aimed at is £5,000,000. Apparently there is some doubt as to this being freely forthcoming in New Zealand, for provision is made for the issue of debentures in London, besides which any moneys under tho control of a State Loan Department or of a savings bank may he invested in the debentures. As the London money market not long ago hinted that it was averse to providing our Government with loan money to advance to settlers, the prospects of debentures being readily taken up in London do not appear brilliant, despite the tax-free provision in that case. Some very pointed criticism has been levelled by tho chairman of the Associated Banks of New Zealand against the clause in the Bill authorising the debenture issue by tho board. According to this authority the underlying principle is entirely wrong, in that the power of the board to borrow should depend upon its assets and not upon its liabilities. Another criticism from the same source, which ought to bo peculiarly chilling to tho fair number of people inside and outside Parliament who profess to attach importance to the construction of channels for investment without ascertaining how and whence they arc to be kept flowing, runs as follows: —“After all is said and done, the loans made are simply secured by the mortgages and charges granted by tne ultimate borrower, the intervention of tho various bodies contemplated by the Bill not really adding substantially to tho amount of the security.” It is also pointed out that the type of advances contemplated by tho Bill is by no manner of means a class which can be described as gilt-edged, and banks and other lending institutions here and elsewhere have found that a percentage of losses is inevitable when transacting business of that type. There are reasons enough to justify Sir Joseph Ward’s prediction that the board would not be able to get its working capital cheap enough to lend to farmers at a rate that they would be able to pay, for probably 7 per cent, would bo the rate for rural intermediate credit. Finally there is undoubted truth in what Mr Adam Hamilton said as to many a borrower having conic to grief through too much credit being given, and that it would often do good if credit were tightened up.