RURAL CREDITS.

Press, Volume LX, Issue 18219, 1 November 1924, Page 17

RURAL CREDITS.

BILL HELD OVER. STATEMENT BY PRIME MINISTER ;rmss association tslegbav ) WELLINGTON, October 31. The Trime Minister issued lallowing statement to-night on the subject. of the Farm Land Mortgage Associations Bill: As there seems to be a good deal ef misapprehension on the part of people taking both sides of the question " ith regard to the Farm Land Mortgage Associations' Bill.( I have decided to hold the measure over for "lie present, in the hope that it may be carefully considered' in the recess. The Bill is intended to assist, the finance of farmers who require borrowed capital, and it provides the setting up of what arc called farm land mortgage associations. T\vent\ •or more fanners, intending to borrow money on the security of farm land from an association to be formed under the provisions of tiie Bill, may, by complying with t.he requirements of the Companies Act, 1908, in respect of registration, form an incorporated company with limited liability. The objects of the associations shall be: (a) The lending of money to farmers upon the security of farm land; (b 1 ) the raising of moneys by the issue and sale of bonds; (c) the receipt of moneys upon contract of deposit. The finance of tho associations will bo based upon au advance in each case from the Government,, for t.he first year's expenses of a sum not exceeding £.2000, free of interest- for a. term not exceeding ten years. Interest, however, is payable at 5 per cent, after the first ten years. The. Government may also lend to an association £50,000, without interest, for a term of not less than ten, but not more than twenty, years. The limit of lending in this way is to be not mote than £150,000. Permission is given to an association to extend its lending operations by authority to issue bonds of not less than five years' currency at 54 per cent.., although in Committee I propose to increase the maximum rate to 6 per cent. The Bill also provides for deposits, for not. less than five years, at a rate of interest not - exceeding 5 per cent. The auditors will be provided by the Government, and their salaries and expenses will be paid by the Crown. Farmers borrowing from an association will give mortgage deeds. Those will_ be held by the association, and against them bonds may be issued bearing- a face value of £ 10, or some integral multiple of £lO. The working'capital, therefore, of'an association is intended'to bo provided -by: , (1) Contributions from the Government; (2) money lent without interest by the Government; (3) deposits; (4) borrowers bccomo shareholders to the extent of one share for ev.ery complete £IOO advanced, and are liable to that extent for uncalled capital upon such shares until tho whole amount of such advance has been:repaid to the association; (5) tho Jssno of bonds. Tho amount that may. be [borrowed by any one individual, is, limited by the Bill to £SOOO, and no loan shall be made to an extent exceeding .70- per cent, of' the -Halue. of the lands to be mortgaged' as security. Experiments Abroad. Wo are often told of. what/the Governments of other countries have done to help these lending institutions, and wo are specially reminded that American banks doing; business specially withi agriculturists havo just passed through the most serious crisis in their history, during which, according to reports in l rehabloi uewspa.pers, hundreds closed their .doors. But this does not apply to those which were assisted by the State. Tho aggregate assistance provided by tho American Government tor land mortgage banks in which they wero concerned was £1,800,'000. This in itself, for a country which has a population ninety times that of Now Zealand, is not proportionately equal to £150,000 proposed to be provided by the Government of this country. And, b© it remembered, that in addition to the larger sum there are minor contributions for several purposes. '

In the case of the Danish Associations; their members are. jointly and severally responsible" to the extent of th-o full assessed -valuo of their property. Provided that they have obtained a loan equal to three-fifths of that value their guarantee of interest is confined to ' special small associations which deal witb properties- valued at not more than £550, if of less than 2J acres, and £670 if of a groaber extent. The American law provides for two kinds of mortgage institutes, designated Federal Land Banks and Joint Stock Land Banks. The Federal Land Banks (or 'Mortgage Banks) were established by the' United States' Government with a maximum capital cadi of £350,000, most of* which came from tho Federal Treasury. The outside, or private, agricultural banks were those which suffered most in the recent crisis, and judging from newspaper reports, very few of thoso which were in business in tlte north-western States a few years ago are still in existence. In Canada, no special provision is made by the Dominion Government. The chartered banks do most of the business.in the, ordinary way. The province of Ontario has a Farm Loau Board, and their advances, on long term loans, aro less than £1,000.000 out of an estimated total of £88,000,000 on farm mortgages in that province. This province also provides a. slmrt tern; credit system, advances being limiteu to £4OO with interest at the rate of (ii per cent. Referring to the Danish pvstem,. it may be pointed out that the wholft of the system consists of credit associations which are co-operative ciations of. lajid owners formed ior the purpose of borrowing monev on the security' of their real property. it should" be noted that these credit asso-_ ciations are private institution!", ami that, except in the case of special associations for small holders (maximum valuo of property, £680). no assistance is given by tho State, cither by way oi lean or guarantee. . These small associations receive .-boon for establishment expenses, and interest guaranteed at . -11 per cent. The articles of the Danish associations must be approved by the Minister of Interior, and cannot be altered without his consent. The maximum loan to one person is three-fifths of the •valuation of the security. The issue of bonds cannot exceed the total of members' mortgages deposited. Members are jointly and severally responsible for the bonds issued by their associaThe minimum denomination of the bonds is £5. A member obtains a loan in the form of bonds, and must himself accept the risk of their selling 1 below par. Without a speca.il license associations cannot charge their members more than 4 per cent- interest. Loans sro repayable by amortisation ever a period of sixty years. | Danish Holdings. Sir H. Eider. Haggard, in his book entitled "Rural Denmark and Its Lessons," refers to'their credit system and save that "the largest loan advanced" bv the credit system Oj. the Danish Isies amounts to £94,400, but sums lent are sometimes as small as £33." There is some doubt as to the accuracy of this-statement, because there

(Continued, at foot-of next column.)

occurs the following paragraph. in ■ tho same book:— '' The following . table, published "in 1907,' •will '.sliow how Danish' properties wero divided as to number and sizo. It will be observed that at that time, and since 1907,' the proportion has varied little,'if at all. Tliero. were, only 2392 properties . that' comprised more than 270 acres of land, of which the total acreage amounted to 1,539,273. As against this there ' were 247,691 properties, varying from 71 acres 'to 270 acres, and .comprising. '6,637,896 acres of land. I may add that in. 19.06 out of Denmark's population of 2,600,000, over 54 per cent, belonged to the agricultural classes."' The. tab Id that . aocompanied this paragraph indicated that the average holding in Denmark was 32.7 acres. The author places the value of good agricultural land in Denmark at that •date at £33 per acre. 'The • average ■holding is thus valued at about .£IOBO. Tho average encumbrance i iii tho country has been estimated at 49: per cent, of the total value -of the landOn this basis the average loan would work out at about ££\3o. • • In Australia, There are several State Agricultural Banks in Australia. Now South Wales has what is called a Eural Bank, though it is really part- of the State-Savings Bank, advances being made to settlers under the Government Savings Bank Act. Advances may be. made on freehold lauds of not less than £SO, nor more than . £2OOO, to any one person, and on: Crown leaseholds. advances are limited to £SOO, and the loan ma.y not exceed the value of improvements.

In Victoria the Credit Foncior Department of tho; State. Savings Bank makes advances on first mortgage only. Advances must not bo less than £650 or more than £2OOO. In Queensland the State Advances Corporation makes advances up -to £I2OO, and in, South Australia tho State Bank makes advances up to £SOOO, provided that the amount docs not exceed three-fifths of the unimproved yaluc. In Western' Australia an Agricultural Bank makes advances up to £2OOO, and tire interest'must not .exceed 7 per cent. In Tastna.nia an Agricultural Bank makes advances up to £IOOO. Unreasonable Demands. In New Zealand some very, extravagant demands havo been made on tlio Government by persons asking for a ; bank with a nominal capital, of £20,000,000, of which £5.000,000 was to be guaranteed by the State. Tho maximum amount of a loan was to be £22,000. Such demands are not only unreasonable, but. if agreed to would most certainly end in disaster.

The State Advances Department is advancing money at the present time to farmers and workers and local bodies, the rato of interest ranging from 4} to i'i per cent. The following return shows the extent of the operations of the Department from April Ist, 1923, to the present date: Loans authorised, 11,564, £10,332,752;-. paid over, 9472, £8.608,426. This Department is no.w established on a very solid basis,, with a capital a little short of £25,000,000. -and is growing steadily. My own opinion is that, no other organisation can compete successfully with it., arid if ncces-. sary I would prefer to increase its capital still further from time to time. If farmers want, a lending institution 'on lines similar to . those existing in other countries, -so- f3r-, as I am personally concerned*they« aro.Ayclcomo to it. ' But ttic "last -word"' rests, with Parliament. ; .. -