LOANS TO FARMERS

Evening Star, Issue 19893, 15 June 1928, Page 14

LOANS TO FARMERS

RURAL INTERMEDIATE CREDITS DISCUSSED

WIDER RISKS AND HIGHER INTEREST SUGGESTED

Speaking on tho Government’s establishment of a Rural Intermediate Credit Board to; make loans to farmers on the security of farm produce and Jive stock, Sir George Elliot, chairman of the Bank of New Zealand, at the annual meeting of the bank proprietors to-day expressed tho hope that the public, and particularly tho farmers, would assist the movement by taking up the bonds as they were issued. ‘‘ It has been reported, however,” ho said; “ that the board’s intention is to lend its funds only upon such_securities as the ordinary prudent business man would accept; but if this intention has been correctly reported and is carried out in practice it will bo found that loans will bo granted onlv to persons and associations who could quite easily obtain assistance elsewhere .at little above tho charge made by the Intermediate Credit Board. A difference of oven 1 per cent, would not be sufficient to pay the income tax, apart altogether from other rates or taxes that private lenders arc subject to. “My colleagues and I arc strongly of opinion that it would be m the best interests of the dominion if the board altered such intention, look wider risks, and charged a higher rate ot interest on account of those risks. Borrowois whose security is not of high order havo tho greatest difficulty in raising money at any price, and these are the pepolo that stand most in need of assistance at tho present time. Whether tho rate of interest charged is 0 or 8 per cent, is not of vital importance; what is of importance is that these borrowers should be assisted to the greatest extent possible and given a chance to win through, even though their security may not be of a choice nature, provided, of course, their chuiijcter and ability are satisfactory, lu tno linaiicial stress of recent rimes borrowers who had first-class security to offer had not the slightest difficulty in obtaining loans, and the position is better to-day. If the board pays particular attention to this class of borrower the only thing that call happen will be a reduction of interest rates at the expense of the community, for little, if any, taxation will be paid by tho board, and the struggling settler, to help whom the system was surely designed, will be left in his original plight. Lenders who are prepared to take a reasonable risk, even if they charge a somewhat high rate of interest for tho risk involved, do more for the advancement of New Zealand than those who coniine themselves to gilt-edge business at a low rate of interest. If there is any necessity for a Government Rural Intermediate Credit Department,, and I think there is, that necessity lies in the direction of help for the struggling settler. Such help can bo given only by Government, and not by the stock and station agents, financial corporations, and private lenders who, having to pay high rates and taxes, cannot afford to take the risk involved in this class of business without charging a very high rate of interest.

“I may say the Bank of New Zca/land will gladly render every assistance to the Intermediate Credit Board that lies in its power, financial or otherwise.

“It-lias, been suggested that Government should consider _ the advisability of exempting from income tax all revenue derived from mortgages on farm lands and advances against the security of farm stock and produce. If it be considered advisable in the interest of the industry that the Rural Credit and Rural Intermediate Credit Boards should have special advantages in regard to taxation on income from such advances, surely all lenders on this class of security should bo put on the same footing. If such a courco were followed it would mean, of course, that the loss of revenue from ono section of taxpayers would require to be made up by the others. Nevertheless, the suggestion is worthy of careful consideration.' It is well known that all over the world thero are farmers in a sad plight owing to the fall of values since '1920-21, and much consideration is being given to this subject at tho present moment. In Now Zealand for some years prior to that period rural land had been purchased, often by men of inadequate means, at a price far beyond its productive value. Many of these purchasers have had to abandon their holdings; others are still carrying on a more or less hopeless struggle, and how to help these to win through without undue sacrifice on the part of tho mortgagees is a difficult problem to solve. Tho New Zealand Government, as lessor of Crown lands, has done much to meet the misfortune of its tenants by concessions of rent, etc., but whether enough has yet been done in this way is a matter of speculation.

“There is no doubt that much'''Crown land thrown open for settlement during the last twenty years should have been left in its virgin state, and that the rental of other areas, particularly bush land, has been fixed at too high a level. No settler is so mnch entitled to consideration as he who sets out to bring virgin land into productiveness and few taxpayers will complain of a maximum of consideration being extended to him by the State, either by reduction or rent or by loans through the Rural Intermediate Credit board.

“ Fortunately the great majority of Mew Zealand farmers are not impecuniAs a matter of fact, it is doubtful if oven 10 per cent, of them are in that condition at the present noment. Many, especially those who acquired their farms before the war, are now doing, and have been doing all along, particularly well. .