RURAL CREDIT

Northern Advocate, 19 November 1929, Page 8

RURAL CREDIT

REVIEW BY COMMTSION,

A SATISFACTORY REPORT

LOANS SHOW LARGE INCREASE

The Commissioner (Mr J- W. MacDonald) of the Rural Intermediate Credit Board, has issued a comprehensive report covering the first complete year’s operations of the board for the period ended Juno 30.

The board was set up at the end of 1927 with the object of providing credit for farmers for periods ranging from six months to five years, on the security of stock -and chattels at reasonable rates of interest and liberal, terms of repayment.

The year under review was a prosperous one for the farming community and this naturally had a marked effect ou the business of the board. On the one hand increased returns enabled a number of farmers to carry on with less financial assistance than usual; on the other, money for investment was plentiful. A number of institutions, which formerly weie reluctant to advance money on security of live stock, were lending freely on that class of security. Both those factors materially affected the board, but the important aspect was that the farming community, to.assist which the board "was constituted, received the benefit both of increased returns and of cheap finance.

The great majority of the loans granted by the board were to dairy farmers and with a few exceptions the borrowers met their obligations in a satisfactory manner. The hoard, however, found itself unable to assist a large number of farmers, whose capabilities and personal qualifications were undoubted, but who were unable to offer adequate security. Criticism- had been voiced in that respect and the opinion expressed that the standard of of security should be reduced and »i higher interest rate charged. However desirous the .board was of helping such applicants its first duty was the protection of the funds entrusted to it by the Government and its debenture holders.

The lending operations of the board involved difficulties which were not generally realised. Almost the whole of the loans were made upon the security -of live and dead stock, and thus required .skilled and careful handling at every stage. Another factor that had to be considered was that the average amount of loans granted was about £3OO, which meant more expense and more work in the administration of the scheme. DAIRY COMPANIES. Reference is made to the proposal to extend the limit of advances to farmers to £2OOO in each case which will make the system more applicable to the needs of the sheep farmer and the grain grower than has been the ease under the present limit of £IOOO. This has been inadequate for the requirements of these men during the “dead” season of the year when no revenue was being obtained and expenses of cropping and other operations had to be met.

Dealing with the activities of the Co-operative Rural Intermediate Credit Associations, the report states that 27 of these associations have been formed to date, 23 of which were operating in the North Island and four in the .South. They had been formed mainly in the dairying districts, but if extension was made to the 'limit of advances it was expected that much greater interest would be taken in sheep-farming and cropping districts. In the 12 months loans totalling £68,828 were outstanding to (members of those associations after crediting instalments received during the year in reduction. Prom August 31, 1928, to August 31, 1929, loans -outstanding through associations increased from £13,655 to £89,530.

The provisions regarding direct loans had continued to make a substantial appeal to dairy companies and a larger proportion of direct-loan business had been transacted on the guarantee of those -companies. Forty-six companies concluded arrangements in this respect and the total loans outstanding during the year (excluding repayments) increased from £2034 to £92,334. The figures for the year ending August 31 were £15,979 and £117,987 respectively. STEADY INCREASE. Since the commencement of the year the board’s business had increased steadily although there had been nothing spectacular in its growth. At June 30, 1928, the investments excluding Rural Intermediate ‘Credit Redemption Fund investments, were only £2034. At the end of June, 1929, they amounted to £165,115, excluding temporary investments, £34,000. The income from the board’s investment? was £5940, apart from income from investments of the Rural Intermediate Credit Redemption Fund, which amounted to £1631 and was credited direct to that fund. The expenditure totalled £5379 and there was an excess of income over expenditure of £361, which had been transferred to the appropriation account and appropriated, one half to the redemption fund and the other to the credit reserve.

Advances totalling £197,000 were received from the Consolidated Fund under the statutory provision, which authorises the board to have advanced to it up to £400,000. The amount raised by the issue of bonds and debentures was £70,700, The total investments and accrued interest thereon amounted to £269,074. Of that amount, £67,329 represented the investments of the Rural Intermediate Credit Redemption Fund. One-third of all advances received from the 'Consolidated Fund required to be added to the Redemption Fund -and invested in Government securities. The interest received wafca also invested and added

to the Redemption Fund. The accretion to the fund by way interest! during the past year was £1630, and this amount, together with one-half share of the net profits, £2BO, had been credited to the Redemption Fund. DETAILS OF INVESTMENTS.

The total investments of the board j increased during the year ended August j 31, 1929, from £35,945 to £215,1711, an j increase of 600 per cent., in spite of considerable repayments in accordance with the policy of the board of placing every loan granted on a reducing basis. The total of loans paid and bills discounted from the inception of the scheme and up to August 31, 1929, was £2(54,496 and apart from that there were loans -amounting to £42,874< granted, but not completed and appli-j cations totalling £10,260 under conoid- 1 oration, bringing the total of the business actually completed, in prospect or under consideration to £3 1 7,(530. CONCLUSION. It will be recognised', it is stated in conclusion, that the new system of rural finance which the board is charged to administer is still largely in the developmental stage, and that, whilst a satisfactory amount of business has been transacted during the year under review, the board has also been largely concerned with laying down lines for future progress and establishing the necessary machinery to deal with the increased amount of business which .may be reasonably expected. In estimating the prospects of future business it must be borne in mind that many valuable points ot contact have been established by the board -with the farming industry, and that from these a steadily increasing volume of business may be anticipated. Up to the present the scheme has been almost exclusively utilised by the dairying industry, the loans granted to other classes of farmers, -such as sheep-farmers and grain-growers, being very limited in number and amount. This result is attributable to a number of special causes. In the first place, the limit of £IOOO fixed under the existing legislation, has proved inadequate for the requirements of sheep-farmers and grain-growers during the ‘ 1 dead” season of the year, when no revenue is being obtained and the expenses connected with farming operations, including the planting of crops, have to be met.. In the second place, it would appear that the same facilities have not been at the disposal of the .sheep-farmers as was the case with the dairy-farmers in obtaining guarantees of loans to enable the provisions of Part 111 of the Rural Intermediate 'Credit Act to be utilised. The third cause is probably to be found in the fact that, whilst a fixed loan to be liquidated over a period of years is usually .suited to the requirements of the dairy-farmer, who is able to pay his interest and the instalments of .principal required by the board by deductions from his milk cheques 1 throughout the productive season, such n loan is not equally applicable to the circumstances of the sheep-farmer, 1 whose indebtedness steadily increases during the major portion of the year and is -then rapidly liquidated either in whole or in part during the produe--1 tion season. The board has given 1 careful consideration to these disabilities, and arrangements are in hand which it is anticipated will make the scheme equally popular with the sheep and grain farmers as it has prov--1 ed with the dairy-farmers.