The Press Thursday, November 3, 1927. Rural Credits.

Press, Volume LXIII, Issue 19148, 3 November 1927, Page 8

The Press Thursday, November 3, 1927. Rural Credits.

The Rural Intermediate Credits Bill has been passed by the House of Representatives, and since it contains appropriation clauses the Legislative Council 'will presumably be obliged either to pass it as it stands or to reject it. The intention of the Bill is unquestionably good—the provision of new finance for fanners through other means than State advances. The Board which is to administer the Act will have for its capital an advance of £400,000 from the Government on very easy terms, the value of all securities taken by it when giving loans, a proportion of the net profits, and the proceeds of debentures up to a limit of five millions sterling. There is theoretically no reason why the Board could not profitably carry on the business of making short-term loans to farmers, just as there is theoretically no reason why any person or company cannot profitably engage in any business. But there is this practical difficulty in the way of believing that the scheme will be certainly successful: that a State-created Board is not very likely to do well out of a class of business which banks and lending firms have not thought it profitable to cultivate. Any farmer whose position is fundamentally sound, however much,! he may be in need of money for de- : veloping his operations, can obtain ! advances at the present time. He will bo obliged, of course, to pay for the money at the full market rate for the kind of security he can offer, and this rate may be more than the amount — seven per cent. —which is tteated in the Bill as the maximum rate chargeable to a borrower. If the Bill finally becomes law, as one may assume it will, there is certain to be so large a demand for loans that the Board will soon find it necessary to issue debentures, and if the public will not buy the debentures the operations of the Board will be Very restricted, and its chances of making any profits will not be large. There was a time when investors found broad acres very attractive, and that time will come again. (If one had to. think it would not come again, one would be obliged to despair of the country's future.) In the meantime the investor prefers other forms of investment, and he will be likely to think that there is no magic in a State-created Board which will enable it to do what private enterprise cannot. The Government evidently hopes that if it starts off the Board with advances amounting to '£4oo,ooo—and this is the limit of the Government's liability, except for some minor initial grants—the co-operation of the farmers themselves will do the rest, with the help of. the investing public. The prime defect of the scheme appears to be the fact that it proposes to facilitate certain financial operations which, if they were sound and desirable, would not require any artificial aid.