FINANCE FOR FARMERS

Manawatu Standard, Volume LI, Issue 183, 6 July 1931, Page 8

FINANCE FOR FARMERS

SCHEME DISCUSSED. PROPOSED REMEDY FOR UNEMPLOYMENT. A scheme aimed at re-establishing New Zealand’s prosperity, and relieving unemployment . by financing all producers with a suitable form qf finance, was discussed at a meeting of the Manawatu Provincial Executive of the New Zealand Farmers’ Union in Palmerston, North on Saturday afternoon. . . , The principal provisions of the scheme, which was forwarded as a remit from the Rongotea branch, were as follow: —The Intermediate Credit and Unemployment Boards to co-operate for administration purposes; to raise finance by borrowed money, the interest and sinking fund to be provided from the funds of the Unemployment Board; no free grants to be made from such borrowed money, the whole of it to be re-loaned to the producers at 2i per cent, interest and one per cent, sink-

ing fund; the maximum loan to be £SOO and six months’ interest to be paid in advance; district committees to be set up by the Unemployment Board, s'} 0 * 1 committees to haVe a local knowledge of the applications they deal with, and shall make recommendations for either a portion or the full amount to the central board; the applicant shall have an efjuity of 20 per cent, and a previous residental term of five years, or shall have a margin of security of 30 per cent, or a guarantor, and give a collateral security over all property, stock and chattels;. any loan granted shall be for immediate increased production ; it shall be allowable in the case of she£p, dairy, and poultry farmers, bee-keepers and orcliardists that 10 per cent, of the loan can liquidate a debt incurred in 1931 for fertiliser and stock, and another 15 per cent, to purchase more fertiliser and stock, or

a maximum of 25 per cent, of any loan to be expended in fertiliser and stock, but in no case shall more than 10 per cent, be expended in fertiliser; the remaining 75 per cent, of the loan shall be expended in permanent improvement and facilities to be approved bv the local committee and the board: all loans shall be gazetted and published in a local paper; all labour employed and paid for from loan money shall be drawn from the unemployment bureaux and no labour wagse shall be paid to an applicant or ordinary employee generally employed in the past; any borrower selling his property -■shall repay the loan in full and pay a retrospective interest of five per cent, for the time he has had the money. This shall apply for seven years only; after a period of seven years the balance of the loan shall be paid without the extra interest

charges; for the purpose of raising the finance for immediate use a loan be raised in New Zealand, such to be on debentures with a currency of six months. The Government to have the right of renewal for a further six months continuously, but not to exceed five years. SCHEME EXPLAINED.

“It will be seen that in this class of finance, there is a sufficient interest provided for any local currency. lor temporary arrangements,” said Mr H. Schreiber, of Rongotea, in explaining the scheme. “At the end of five years the world’s finance should be favourable to raising a suitable loan to finance the scheme. It is maintained that the scheme will increase production to compensate for the reduced prices ruling for exports. It will reduce the current rate of interest and will also improve the security of present mortgage holders. Further, it will ensure the permanent prosperity of New Zealand by absorbing tho unemployed in increasing production in rural districts. Present lenders of money will not be interfered with on account of the low margin of security, although tho Government will be well secured ngainst loss, and the producers will be provided with cheap finance, which is the only remedy for the present trouble. If £1,000,000 were loaned the first year and increased by £1,000,000 each year until £4,000,000 had been loaned to the producers, then all interest received reloaned continually for 12 years, the thirteenth year would produce enough income from the producers to pay four per cent, interest and one per cent, sinking fund on the £4.000,000, and would have provided a finance to tho producers of £5,700,000.” The scheme was aimed as a specific cure for unemployment, and would at the same time give the required measure of assistance to' farmers, the speaker continued. If the Unemployment Board borrowed £1,000,000 and reloaned it to the producers, it would deplete the unemployment fund by £50,000 per annum, this representing interest and sinking fund. This £1,000,000 would be loaned to the producers, and they would be obliged to spend 75 per cent, of the sums advanced to them in permanent improvements requiring labour, which would be drawn from the unemployment bureaux. This would account for £750,000 of the total borrowed by the board. The £250,000 balance would be advanced for the purpose of -purchasing stock and fertilisers. For the sums they borrowed the farmers would pay 2i per cent, interest and one per cent, sinking fund, so that tho only direct loss the board’s funds would sustain would be the difference between the rates of borrowing and lending, that is one and a-half per cent.

The advantage of his proposal was, the speaker stated, that whereas the board would, under-the present system of finance, pay out £50,000 and get no return, under the proposed scheme the farmers would be m a position to employ labour to the extent of £750,000. If £5,000,000 per annum were borrowed and loaned to the producers for four years, a total of £20,000,000, this would cost the board £1,000,000 per annum, and tire board would receive £700,000 by way of interest and sinking fund (3i per cent.) from the producers. If the board reloaned the interest and sinking fund received from the producers, at the end of the first 13 years the board would receive back £1,002,371 for the £1,000,000 expended, in addition to having provided the producers with a finance of £28,640,449 at 3} per cent, interest. This w'ould cost the board £11,500,000 spread over 13 years. To commence with £1,000,000 on .this scale, the net amount loaned would be about £5,700,000, and w’ould have cost the board approximately £2,100,000. Mr Schreiber contended that no finance institution catered for the farmer. Mr Kent; What about the Rural Credits Board? Mr Schreiber: That is useless to the average farmer, as a substantial measure of security is necessary. It means wiping off all the mortgages in order to secure to the* Crown. After a short discussion, in which Mr Schreiber elucidated points raised by members, it was decided to forward the scheme to the Dominion executive for consideration.