WELLINGTON NEWS

Hokitika Guardian, 21 August 1926, Page 2

WELLINGTON NEWS

RURAL CREDITS. (Special to “ Guardian.”) WELLINGTON, August 16. Business men and others who have studied the report and the recommendations of the Rural Credit Commission are not very much impressedC-""*Y The recommendations are: (1) That a. V finance loan branch be added to the existing Advances Department, for the purpose of making advances to farmers on long terms, or the amortisation principle, such loans to ho limited to £7OOO, and the interest to ho charged is not to exceed 1 per cent more than the Board pays for its debenture issues. The Board is to be authorised to issue debentures carrying 5) per cent interest, and the Board is not likely to get the mondy at a .lower rato, which means that farmcjfs borrowing from the Board must pay ( O’ per cent. This is rather a high rate for a farmer to pledge himself to pay for say 36 years. The valuation of land for loans is to be based on tho productive capacity of the land to he ascertained over a. period of at least five years, and up to two-thirds of this valuation may be advanced. Ascertaining the productive value will he a difficult matter, because so few fanners keep any hooks of accounts, and productive value must lie therefore more •or less guesswork. Tn addition to the ( Farm Loan Board, for granting long term loans, a, system of intermediate credits is to he established. Under this section no individual farmer can obtain intermediate credit, which can only be granted to co-operative groups. Thus registered co-operative societies the sum of whose capital and reserves is not less than £2,500, and whose membership is not less than 30 may on hypothecation of their securities be eligible to receive advances up to SO per Tent of the value of such securities. Bodies of bona fide farmers of not less than 20 in number who form registered co-operative rural intermediate credit associations with a capital of not less than £SOO may, by pool- k " ing their securities, obtain advances up to SO per cent of such securities. These are the principal proposals and to put them into operation the Alinistor of Finance is to he given power to expend a sum not exceeding £20.000 for preliminary expenses, and is also to make advances of public moneys up lo a. limit of £500.000 for a period of not less than ten years and not more than twenty years, and no interest is to he paid on this advance for ten years, and thereafter the interest is not to exceed 5 per edit. The scheme is somewhat cumbersome and ill-suited to tho fanners of New Zealand. It has been damned with faint praise by ( all who have given it any consideration \

and the Government is not likely to endeavour to pass legislation this session to give effect to it. In point of fact the Afinister of Finance would bo hound to oppose the free interest loan which appears to he an essential feature of the scheme. The Commissionrs’ scheme is not nearly as good as the proposals of the Bank of New Zealand which does not- involve the State in any way, except that the Government must take up its quota of shares nil which 7£% interest is to be paid, and the total sum which the Bank proposes to use in its long-term loan branch is £5,625,090, tliree-fourtlis of which is to lie raised by tho issue of debentures. The Bank can find the money more readily than tho Advances Department for any issue of debentures that tlrtP Bank could put out would he welcomed by investors as providing safe investment. If the money is not procurable, in New Zealand the Bank could easily get it in Australia or even in London,

which is more than the Advances Department could do. Under the Bank’s scheme furthermore, all red tape is eliminated, and the working costs, would be comparatively small. The Bank proposes to charge borrowers 6 per cent for long term loans, wherea> V under ' the recommendations of the Commission the rate cannot he less than 6} nor cent. Tt is doubtful whether oven with a 1 per cent margin the Farm Loan Board, which is to run the scheme, will ho able to carry on. It is calculated that the Bank of New Zealand under its proposal will fail to make the branch pay its way unless its debentures are placed at 5}- per cent, and the taxation on this branch is based on a different basis to that on which the Bank’s general business is assessed. The Advances Department will not he called upon to pay income ' tax. !