RURAL INTERMEDIATE CREDIT BOARD

Hokitika Guardian, 5 April 1928, Page 1

RURAL INTERMEDIATE CREDIT BOARD

The first meeting of the "Westland District Rural Intermediate Credit Board, established under the Rural Intermediate. Credit Act of last session was held on the 3rd instant in the Public Trust Office, Greymouth. There were present:—Messrs T. R. Say well (District Public Trustee) Distiiet Intermediate Credit Supervisor (Chairman), W. T. Morpeth (Commissioner of Crown Lands), C. S. Neville (Inspector of Stock), AY. Clayton (tanner, Ahaura), G. A. Perry (merchant, Hokitika). At the commencement of the proceedings the Chairman read tho following statement from Mr J. AV. MacDonald" the Commissioner of Rural Intermediate Credit, AVellington : On the occasion of the first meot;n-. v ot the AVestland District Rural Intermediate Credit Board, I desire to convey to the members of the board both on behalf of the Rural Intermediate Credit Board and myself a sincere welcome, which is given with a full sense of the value their services will he in the administration of this new scheme of rural finance. The occasion of the first meetings of tho various district hoards throughout th<? Dominion is an important one in the development o‘

the scheme as it marks tho real com mencement of the practical side of th Board’s lending business. Although provision has been made ii the legislation for the advance from tin Consolidated Fund of a considerable sum which will give the Board a goo: commencement in its lending husines: the ultimate test of the success of tin scheme will ho the ability of the Boar: to comand a flow of capital from tin investing public of the Dominion am investors abroad for the development o! its lending business, thus providing ar uninterrupted supply of funds for tin

.farming community. To gain and keep Hie confidence of all investors it will ho necessary to maintain n sound standard of lending and it, is in this regard th." the Board looks with confidence to the assistance and co-operation of the dis trict hoards. The benefit of the sellerto the farming community will ho the provision of funds at lower rates than those which have of recent years been charged for loans of the class with which the Board will he dealing, i.e., mainly chattel securities, hut in each loan transaction there must he a sound security for the amount advanced. If any other attitude were adopted in regard to tlie Board’s lending transactions it would naturally follow that little confidence would be placed in the debenture issues of the Board. I may mention here that it is anticipated that tho Board will at an early date he issuing debentures for public subscription. From tho copies of the Rural Intermediate Credit Act, 1927, and the Regulations issued thereunder, already supplied to them, members of the district boards will he aware that there are four channels through which the fii nils of the Board are made available to or for the benefit of the farming community, i.e. to farmers either direct or as members of co-operative rural intermediate credit associations, to co-operative societies and by means of discounting. They will be interested to learn of tho decisions upon matters of policw which the Board has I'eached at its first two meetings. Tn regard to loans to members of co-operative rural intermediate credit associations, the Board has decided that the rate of interest payable by associations or amounts advanced by the Board is to lie six per cent. ]>cr annum hut the rate payable by a member to the association is to ho 6’ [icr cent, and the margin of J- per cent, is to lie applied as follows: (a) Not more than -J per cent, towards expense of management of tho association.

(h) Balance to build up a reserve fund to provide against contingencies. 'file continuance of this rate of interest and other rates of interest and the Board’s discount rate mentioned later, will of course lie conditional on the Board’s ability to raise funds for lending purjioses at a cost which will enable its lending business to Ik? conducted at those rates upon sound lines. Part HI of the Act relating to. the making of loans direct to- farmers without the intervention of associations did not appear in the Bill as originally submitted to the House of Represen-

tatives and provision for loans of this description was not contained in the recommendations of the Royal Commission of 1925 on Rural Credits. Tt

has been suggested in some quarters that the introduction of the direct system of making loans would operate against the formation of associations. In view of this criticism it is interesting; to note that an association has already been formed in the South Tarannhi district and the formation of two further associations in the Hamilton district is well advanced, while there has been enquiries from several other quarters regarding the procedure to Ik? adopted in forming associations. I desire also to emphasise the fact that the report of the Royal Commission did not contain any suggestion of the repeal of the State Advances Amendment Act 1922 in so far as it authorised advances upon the security of stock and chattels so that the introduction of the present Part 111 into the itufal Intermediate Credit legislation simply reproduces the system in operation in the State Advances Office. It modifies it, however, in two ways. In the interest of farmers desirous of obtaining loan®, the maximum amount which mav 'he granted to any one borrower under the present scheme is £IOOO whereas the limit under the State Advances legislation is £-500. Moreover investors are safeguarded by the provision of the Act which requires, in addition to a security over stock and chattels, a guarantee of at least 20 per cent, of the loan by a substantial guarantor. Turning to the subject of loans to farmers direct without the intervention of associations, the Act provides: (a) That at least 20 per cent, of the amount of any loan granted by the Board must 'l>e guaranteed to the satisfaction of the Board; there is no authority to waive the necessity of this guarantee under any circumstances.

(h) That every loan granted must be secured by a first mortgage of chattels (including stock) with or without some collateral security as the Board sees fit.

The Board has decided that as a matter of general policy it will require guarantees of loans under this part of the Act to lie from sound companies such as for example stock and station concerns, though it will agree in special cases to consider the question of guarantees from individuals whose solvency is established to its satisfaction. The acceptance of guarantees from private individuals is for the present reserved for the Hoard’s approval

The rate of interest for loans of this description lias been fixed at 0) per cent per annum. As regards loans to co-operative societies the Board has fixed its lending rate of interest at Of per cent also. It is intimated that it will grant loans to such concerns for purposes connected with legitimate trading such as to enable the orderly marketing of the societies’ produce but will not grant loans to assist the speculative bolding of the societies’ stock or produce. In regard to its lending business (as distinct from its discounting activities) the Board has decided that repayments of amounts advanced are to be accepted at any times convenient to the borrowers without premium interest. Furthermore. it has decided that loans on chattel securities and all classes of securities other than seasonal produce will be granted on an instalment basis without prejudice, however, in the case of loans under Part 111 of the Act to the Board’s right to demand repayment of the loan at any time. The Board has considered the question of advancing on the security of growing crops. It has. for the present. decided to authorise lending on growing crops in appropriate cases provided that collateral security satisfactory to the Board or the district hoards concerned, is taken in the form of a first or second mortgage over land (in which case a sufficient equity iu the land for the Board s protection is to he disclosed) or such other form as may Ik? considered adequate for protecting ‘ it should the crops forming the security for the advance fail or he destroyed or otherwise disappear.

The Board has fixed its discount rate at the same as the general lending rate of interest, i.e. Of per cent per annum, hut it has stated that it will regard its discounting business as of secondary importance to its lending business under Parts TT. TIT and IV of the Act. It will therefore consider the question to what extent discounting will lie undertaken when it has learnt to what extent applications are received for loans and for discounting and what funds are a\ailable to meet- these applications. Preliminary matters relating to the Board’s lending operations were fully discussed and necessary decisions arrived at.