29

8.—14

of the system in that it will ultimately be in the best interests of farmers to develop the co-operative spirit in regard to their financial requirements and that the existence of a means of direct application will have the effect of limiting the development of the co-operative or association method of obtaining loans from the Board. This expectation has not been borne out by the experience of the Board up to the present. Already thirty-seven co-operative rural intermediate credit associations are in operation and have transacted a substantial volume of business of a satisfactory character, and the fact that sixteen of these associations have been formed since the 30th June, .1929, and the formation of several additional associations is assured, indicates no lessened interest upon the part of the farming community in this method. Moreover, for the reasons already stated, a comparatively greater development is anticipated in future in the business transacted under Part II of the Act than in regard to the direct method. In practice also the expansion of the direct method of application has been attributable to co-operative effort upon the part of farmers, as the major portion of the business recorded under this heading has been transacted upon the guarantees of co-operative dairy companies and the utilization of the direct provisions by the companies has had the same practical effect as the formation of associations among their suppliers. The procedure for a company desirous of assisting its suppliers to secure loans direct from the Board is to submit evidence of its financial position, mainly in the form of the company's audited balance-sheets and profit and loss accounts for the last three complete financial years of the company. This information is investigated by the Board, which decides to what limit it will accept the guarantees of the company, the limit being subject to review from time to time in relation to alterations of the company's financial position. Frequently a company desires to discount promissory notes with the Board in addition to guaranteeing loans and suitable limits will, if required, be fixed for the company in respect of both classes of business. All information supplied to the Board is treated as confidential and if the companies prefer it they may submit it direct to the head office of the Board. Once a limit has been fixed for it a company may, within the scope of the limit, submit applications from its suppliers, which will then be considered by the central Board or the district board upon their merits. The members of the Board are kept fully advised of the position of guaranteeing and discounting companies by periodical reports setting out the position of the companies as ascertained from a perusal of the annual accounts submitted by the companies and any other information which is essential for the purpose of ascertaining the value of the guarantees. With a view to facilitating the submission by dairy companies of the applications, which have in the majority of cases to come before the directorates of the companies before their guarantees are given, the Board has been approached in several cases to accept the valuations of directors or employees of the companies who are experienced in valuing dairy stock and farm machinery for security purposes. The Board has made it a general rule not to accept such valuations, unless the loans are fully guaranteed in every case by the dairy company concerned. Where applications are submitted in these circumstances with the full guarantees of the companies the same standard of security is required as in the case of applications by members of co-operative rural intermediate credit associations and the general requirements of the Board in other respects are not departed from. Up to the present fifty-seven companies have concluded arrangements with the Board for the acceptance of their guarantees of loans. A number of companies which had already arranged limits with the Board found it necessary to apply for increased limits, in order to cope with further requests upon the part of their suppliers for guarantees, and in the majority of these cases it was possible to grant extended limits in view of the financial positions of the companies concerned. The accounting records relative to this class of loan are kept in the Board's local offices, and the accounts are under the immediate control of the District Supervisors. Applications for such loans are dealt with largely by the district boards.