FARMERS’ FIVE-YEAR LOANS.

Evening Star, Issue 19664, 17 September 1927, Page 6

FARMERS’ FIVE-YEAR LOANS.

LEOiaiiATivß machinery for the provision of long-term loans to farmers was set up by Parliament last session. The Rural Advances Act was passed, but its usefulness is dependent on investors taking up the bonds which the Rural Advances Branch was empowered to issue. The belief was expressed that these,would find a ready market both locally and abroad. Lacking the security of the public revenues behind them, those bonds do not appear to have caught on as a popular investment, even within Nov/ Zealand, From time to time Ministers of the Crown advortiao them by mentioning them in their public utterances as a desirable investment. From time to time representations are made on behalf of the farming industry as to the difficulty of obtaining those long-term loans. So it looks as though there will need to be a greatly changed outlook before the

forty millions of fresh capital which Sir Joseph Ward said would lie needed in the next few years to help producers becomes available. There is thus not great encouragement for the Government to go on with the now scheme of providing limuice for the fanners of which last year’s Act was tho first instalment. Nevertheless tho second instalment of the scheme has now been placed before Parliament. This is for tho provision of intermediate

credit, to bridge tho gap between the ordinary short-term credit obtained through existing business channels independent of tho State and the longterm credit of last year’s enactment. Tho Royal Commission cm Rural Credits (Messrs Cox, Esson, and Poison) whoso recommendations after a world-wide investigation tho Government is closely, almost slavishly, following in its legislation found some such system to bo working well in America, and this favorable report has since boon endorsed by travellers from the United States passing through New Zealand. Tho principle of it is that capital is provided by tho issue of collateral trust debentures with a 'currency of fire years, based upon 11011j perishable farm produce aud live stock, with a maximum advance of 80 per cent, of its value. The Government is to give the scheme a start with a loan of a quarter of a million on very easy terras, hut presumably the bulk of the working capital to be used by tho new board to bo set up is to come from tho issue of 6 per cent, debentures of live years’ currency. Here again tho scope and success of tho scheme must depend on the reception accorded to these by the Now Zealand investing public. It is proposed that tho provision of crodjt should ho effected by the organisation of co-oporativo rural ' credit associations, with share capital I and liability, aud that bona fide co- ! operative societies should participate. ! Thus a certain amount of self-help is I expected from the farmer, both in respect of money and time spent in adi ministration. Public-spirited farmers i will bo needed who will bo prepared to give their services gratuitously as directors of tho local associations, and it is needless to stress that they should be men of ability and high i standing. Other experiments in cnj trusting the conduct of important busi- | ness to men whose training has boon j agricultural rather than commercial ■ have not been brilliant successes. The ' now proposal has certain elements of i possible weakness and even abuse. I Hut capable administration would cerI tainly mitigate an inherent weakness ! in tho existing ordinary chattel mortgage system, under which the mortgagee may, and very often does, exercise his rights of realisation at the most unfortunate time for tho mortgagor, the lender’s claim perhaps not | being fully satisfied while the borrower is crippled aud has his chance of recovery retarded or destroyed, which is bad business all round. The aim of the proposed legislation is that its system of intermediate credit shall cause agricultural wealth to bo stabilised and remain available during tho periods of greatest need. The objective is admirable, but it is not easy to see how 1 it is to be reached unless tho investing public shows more partiality to the necessary debenture issue for providing intermediate credit than it has so far shown to the long-term bonds.