INTERMEDIATE CREDIT

Hokitika Guardian, 15 November 1929, Page 2

INTERMEDIATE CREDIT

LOAN LIMIT RAISED.

REASONS FOR EXTENSION

An amendment to the Rural Intermediate Credit Act, increasing the maximum loan to farms to £2001). in each case, was agreed to by the House of Representatives recently. Interesting comment on the extension of tho scheme was made by the Commissioner (Mr W. J. Macdonald) in his annual report, which was presented to Parliament last week. “In estimating the prospects of future business, it must he borne in mind that many valuable points of contact have been established by the board with the farming industry, and that from these a steadily increasing volume of business may he anticipated,” states the Commissioner. “Up to the present the scheme has been almost exclusively utilised by the dairying industry, the loans granted to other classes of farmers, such as sheep farms and grain-grow-ers, being very limited in number and amount. ° This result is attributable to a number of special causes. “In the first place, the limit of £ICOO fixed under the existing legislation, has proved inadequate for the requirements of sheep-farmers and grain-growers during the ‘dead’ season of the year, when no revenue L being obtained and expenses connected ’with farming operations, including the planting of crops, have to be mot. In the second place, it would appear that the same facilities have not been at the disposal of th-slieop-farmers as was the case with the dairy-farmers in obtaining guarantees of loans to enable the provis-ions-of Part 111 of the Rural Intermediate Credit Act to be utilised. The third cause is probably to he found in the fact that, whilst a fixed loan to he liquidated, over a period of years is usually suited to the iequirements of the dairy-farmer, who is able to pay his interest and the instalments of principal required bv the board by deductions from his milk cheques throughout the productive season, such a loan is not equally applicable to the circumstances of the sheep-farmer, whose indebtedness steadily increases during the major portion of the year, and is then rapidly liquidated either in whole or in 'part driring the production season.

CONDITIONS OF CREDIT FACILITIES.

“The present practice of such farmers is to have an overdraft limit fixed by the hank or stock and station agents with which they transact their, business,'and this limit drawn against as required. It has been clear to the hoard that if these classes of farmers are to be encouraged to use tile facilities provided by the hoard, it will be necessary for the board to make provision for the fixing of limits up .to which such farmers may borrow, so as to enable them to finance their operations during the ‘dead’, season of the year, only the moneys actually required being made available from time to time. The board lias considered the adoption of this practice, and it is intended to make credit facilities of this description available immediately any increase is authorised in the limit for loans granted by the board or by associations. Reservations of the nature set out below will probably be made in regard to loans of this description :

“(a) The limits fixed will not exceeed the amounts to which the board would be prepared to lend on xhe usual margins on the proffered security. i» All existing encumbrances on the security will require to be discharged from the amount made available by the board. (c) The charge on stock, crops, and/or land will be registered against the security to cover present and future advances. (d) Reasonable notice is to be given by the borrower of additional, advances required from time to time, up to the limit fixed by the board. (e) The board will not be able to adopt a system of cheques or orders similar to those used in the case of stock and station agents. A maximum of one withdrawal a month, or, in the case of more frequent payments being required a minimum of £SO per withdrawal, has been fixed as regards the amounts to be received at any one time to meet living and current expenses. The amounts paid over by the board can be. lodged bv Hlie borrowers to the credit of their banking accounts and cheques drawn in the usual, way until the amounts are exhausted, when further payments can -be made available within the lindt authorised. (I) Interest will be charged only on the amount owing to the borrower from time to time, (g) The position of each borrower will be

reviewed annually by the Board, which will then decide whether the limit should be varied.

“Prior to considering the adoption of this practice the members of all district boards and associations operating throughout the Dominion were approached for an expression of their views as to the desirability of adopting the practice, and for. any suggestions which they might desire to offer with the object of making the proposed system of the fullest use to the classes of farmers affected. All views expressed and suggestions made will be carefully considered hv the hoard prior to its final decision being reached.”

INTEREST IN AMERICA. That the operation of the Rural In. termediate Credit Act is being watched with clo«o interest in places outside the Dominion is shown by tin following editorial Comment on an article in the rural intermediate credit scheme, which was contribute! by the Commissioner (Mr J. W. Macdonald), to the. “Trust Companies Magazine,” New York: — “Inasmuch as ‘farm rejief’ was tlm keynote issue in the last Presidential campaign, and is the prime subject 0/ the present special session of Congress, the article is o-f timely inter est,” states the editorial. “Whip' this problem suggests aspects which are peculiar to economic conditions in the United States, there are valuable lessons to be obtained in. stnd--ing the experiences of other countriens regards governmental agencies to provide rural credits and encourage either voluntary or government agencies for co-onerative financing as well ns marketing. New Zealand fins been foremost in developing a government system of rural credits, and -n the formation of co-operative associations.” In commu’-’icating with the Commissioner subsequently, the editor the magazine stated: “I have had quite a number of requests for copies of the April issue of ‘Trust Companies. Magazine,’ containing vo"r article on ‘llm-al Intermediate Credits in New Zealand,’ and also have had occasion to send several conies to members of our Congress who have been active m formulating the Agricultural Relief Bill which has recently become a law.”