RURAL CREDIT.

Otago Daily Times, Issue 19702, 1 February 1926, Page 13

RURAL CREDIT.

FARMERS’ REQUIREMENTS. PROBLEMS IN NEW ZEALAND. ' SPECULATION AMD BORROWING. The problem of rural credit in New Zealand was the subject dealt with by Mr W. J. Bora man a t the social science and economics section of the Science Congress on Saturday. Mr Boraman said that a survey of the main sources of rural credit in New Zealand indicated that wide provision was already existent for meeting the credit requirements of the farming community as a whole; this, however, did not necessarily mean that the present institutions met the legitimate credit needs of every class of farmer. The growing dependence of farming on credit and the part that credit had played in the development of the industry in the past had been next examined. The limits to the economic utilisation of credit in agriculture, as in industry generally, were determined by the power of the investment to return within a definite limited time sufficient extra product to pay for the annual interest charge for the use of the capital employed and to allow a margin of profit. The farming industry constituted a special case since, owing to fundamental causes, it was peculiarly liable to sudden crises and depressions. In New Zealand tire situation was still further complicated, especially by our dependence on distant overseas markets for the Kile of the bulk of our primary produce. What Would be the results of a reduction in the rate of interest? Unquestionably immediate relief would be afforded, but such cheapening of capital would stimulate borrowing until eventually the burden of indebtedness would increase until the total annual interest bill became approximately as large as before. This consideration however was not to be construed into an argument for the charging of exorbitant rates of interest by .moneyleading institutions. An ideal system must, while providing credit at once both cheap and easily accessible, at the same time afford some effective check, especially on land speculation: it must furnish cheap credit but yet deter borrowing. After an examination of the principle underlying the Eaiffeisen and SchulzeDelitzsch co-operative credit systems, the possibility of the establisliment of these forms in New Zealand was investigated, it having been suggested that the all too common practice of farming for the unearned increment, by causing our farming population to be largely a floating one, would preclude any reasonable hope of the successful establishment of the pure cooperative credit type of institution. Next followed a discussion of the alternative course, assistance by the State, and mention was made of the almost incredible success of the State-aided movement in India, where the limitation and eventual withdrawal of State aid by the administration presented no great difficulty. Still it was doubtful if any lesson applicable to New Zealand conditions could bo drawn from this, since what was easy of accomplishment in an autocracy was not practical in democracy. The speaker concluded by briefly suggesting certain directions in which existfng institutions might be altered so as to bring them more into conformity with the ideal system of rural credit. In the course of the discussion that followed, it Was pointed' out that, as shown in the paper, an immense amount of information was available in New Zealand. _ Consequently little more could be gained by sending a commission What was wanted was to work out in New Zealand, from 'information available, the actual details of a scheme to meet the needs of the farmer.