RURAL CREDIT SCHEME.

New Zealand Herald, Volume LXV, Issue 19916, 9 April 1928, Page 11

RURAL CREDIT SCHEME.

INDIVIDUAL BORROWERS. COMPANY SECURITY ASKED. POSITION OF DAIRY FARMERS.

A development in the administration of the Rural Intermediate Credit Act, fraught with concern for dairy companies, has arisen through the refusal of the supervisor of the Waikato District Rural Intermediate Credit Board, Mr. F. J. E. Moore, to accept the guarantee of a private individual for a dairy farmer's direct application to the board for a loau of £4OO.

Mr. Moore has informed a dairy company, of which the applicant is a supplier, that all applications for loans made direct to the board by individuals must be supported by a guarantee given by a substantial company or firm. Only under exceptional circumstances would the guarantee of a private individual be accepted. This, it is feared, may seriously embarrass dairy companies if their suppliers continue as individuals to look to them as guarantors, rather than band themselves into credit associations.

"Obviously a dairy farmer will immediately apply to the dairy company he supplies and request a guarantee," the secretary to the company concerned stated. "At the moment quite a number of our suppliers have requested us to supply returns of their butter-fat over a period of 12 months, and it is their intention to make similar applications to the local branch of the Rural Intermediate Credit Board for financial assistance. Restricting Applicants' OhancdS. "If applications of this nature are rejected by dairy companies the applicants' chances of obtaining loans will be very remote. This is placing dairy companies in an unfair position." After mentioning that the applicant in question appeared to have a bona fide case for a loan of £4OO and had secured as guarantor a man of good financial standing, the company secretary said it appeared as if the credit board was laying down a general rule as indicated without reference to the individual circumstances of cases. He termed it an unreasonable attitude of "playing safe at the expense of companies like ourselves." The directors of the company will consider the position at a meeting next Saturday.

Intermedite credit was primarily designed to bridge the gap between short .and long-term credits, the Royal Commission having recommended that such credit should bo based on personal and collateral security to handle farm credits for a longer period than ordinarily might be extended by lending institutions, but falling short of the long-term farm loans. Originally it was suggested by the commission that advances should be made only to co-operative rural intermediate credit associations, and co-operative societies and companies of persons engaged in producing and marketing staple agricultural products, on the security of a first charge over produce, chattels, livestock, growing crops, and other assets. Before the bill became lav/ (the Act has been operative from January 1, 1928) there were added to it provisions for individual farmers to fake advantage of its operations apart from the group system. Value of Individual Loans. This section was described by the Prime Minister, Mr. Coates, during a discussion in the House of Representatives as a most vuluablo portion of the bill, and in an addi'ess at Awakino on December 19 last he said that through it, the individual producer would be able to obtain short-term rtedit either with the backing of his friends or through the medium of stock and station agents cr banks.

The Act provides that any person engaged in farming operations on his own account, whether a member of a rural credit association or not, might apply to the district intermediate rural credit board for a loan. All such loans made by the district board should be secured by a mortgage of chattels, with or without such other security [iven by the borrower. In addition to this personal security every such loan "shall be collaterally secured by . . , a guarantee signed by one or more sureties approved by the district board .... being not less than 20 per cent, of the amount of the loan." Any company, it is provided, may guarantee the repayment of any loan or interest on any loan granted under this part of the Act. Spirit of tha Act.

It was deduced from Parliamentary debate on the bill, that this provision was designed more to assist those settlers in isolated districts than in quarters where there were sufficient to band together for their mutual advantage and form co-operative credit associations as has already been done in at least one instance —that of the South Taranaki Rural Intermediate Credit: Association.

Although the Act has been in force only since January 1 last, the instance brought to notice serves as a reminder that the co-operative avenue of exploiting the Act, through the formation of credit associations, has been tardily explored. Dairy companies, now that a general recourse to them as guarantors is envisioned, will the more anxiously look toward the formation of such associations. As yet there app.ears to have been little of a tangible character done in this respect in t.he Auckland district. A member of the Auckland district credit board said that while unable to speak of the merits of the Waikato application. he desired to emphasise that the whole measure was yet in its infancy and on trial. The Auckland board had, as a matter of fact, not yet held a ingA solution of the difficulty which has arisen in the Waikato would, of course, be the more rapid formation of credit associations. In the meantime, the determination of the attitude of dairy companies toward the existing position will be awaited with interest.