Farmers’ Finance.

Hauraki Plains Gazette, Volume XXXIX, Issue 5262, 13 April 1928, Page 4

Farmers’ Finance.

RURAL INTERMEDIATE CREDIT. ADDRESS BY MR. SAMUEL, M.P. An interesting address on “The Rural Intermediate Credit Act” was delivered by Mr A. M. Samuel, M.P., at the Soldiers’ Club, Paeroa, on Wednesday, April 4. As this address is of great interest to the farming community wc are publishing it in full, in serial form, the first portion appearing in our issue of April 4. Following is the second series: — 1925 ROYAL COMMISSION. "In practical expression of its desire to explore all modern systems of lural finance, so that equal opportunities might be orovided to the

farming community of the Domin'on with those enjoyed by primary producers abroad, tihe Government, in 1925. set up a Royal Commission on rural credits, composed of the late Mr P. H. Cox,' a retired banker of the highest standing, Colonel J. J. Esson, ex-Secretary to the Treasury, whose valuable services after his retirement from that position have been, retained by the Government in the capacity of financial adviser to the Treasury and who is now the chairman, of the Rural Intermediate Credit Board, and Mr WJ. Polson, of Wanganui, the president of the New Zealand Farmers’ Union. The commission made extensive investigations of the systems of rural finance in the American and. European Continents, and tihe results of their investigations and their consequent recommendations are set out fully in tlieir exhaustive and informative report of 1926. In reading this report one is immediately impressed with the fact that in. other countries, of which the United States of America is perhaps the outstanding example, the individual lender of moneys upon rural securities is yielding place to the finance corporation., which secures .funds for loan purposes by the issue of bonds secured upon tihe aggregate of mortgages investments, As will be demonstrated later, this principle is followed in the, present' Rural intermediate Credit Scheme. CLASSES OF RURAL CREDIT. By way of introduction to the next succeeding remarks, it is necessary to explain that rural credit is divided into three classes —firstly, long term mortgage credit; secondly, intermediate credit, and thirdly, short term credit. Long term .credit means farm mortgage, credit for tdrms of five years or over for the purchase or improvement of land or its necessary equipment. Credit of this nature is secured by a mortgage over land. Intermediate credit is credit for a longer period than is contemplated in commercial banking transactions and of shorter duration than the usual mortgage term. It therefore means credit of from' six: monthfe to live years. The security for credit of this nature is generally Hive stock or nonperishable farm products. Sort term credit is the ordinary banking credit of not more than six months. SHORT; TERM C.REDIT. The Commisision reported that during its investigations abroad it did not discover anything better in the way of short term credit, that is, credit up to. a maximum period of six months, thaii the banlang system already in force in the Dominion, and therefore it had no recomniendations to make in this connection. LONG TERM MORTGAGE CREDIT. Its recommendations in regard to long term mortgage credit were given practical effect by the. < Rural Advance Aqt of .1926, which set up a special branch.of the Sftate'Advances Office The fundamental principle of the new system is , that' funds are to be raised by means of debentures issued on tile security of the assets of thig, branch, which are kept distinct from the other assets otf the department. Securities issued: do not form part of the public debt of the Dominion, and aret not secured upon the public revenue. This is in accord wfith the developments abroad, referred to previously relating to corporate financing ; and alpo recognizes the principle advocated by the Commission, that rural finance schemes should be sb constituted that they do not result in 'any increase in. the public bndebetedness of the Dominion. T.lhe maximum amount which an individual borrower may obtain ' under this new system is £5,'500, taking into Consideration any other loans obtained by hSm from the State Advances (Office, except any loan up'on chattels security. The. Rural Advances Act restricts, the amount of the loan to two-thirds of the value of the borrowe r’s landAccor ding to statistics issued by the de partinent the rural advances branch of the department had up to the 30'6h Jupe, 1927, when the branch had been in. operation for three montl is authorised 112 loans of a total amount of £270,835, of wli’ch 22 advances totalling £47,260 had a.etlally b'een paid over. . This branch is at pr.esjent offering debentures rd the public for subscription.

INTERMEDIATE 'CREDIT ACT, t. 927.

The other- recommendations of the Coinin.isstton, relating to intermediate credit, have bqen carried into effect, with .some mo<lific fitions. by the Rural Intermediate Cradiit Act of 1927. This impo rtant 'mesasune represents a very sincere effort upoji the part of the Government to pirovide the means for. farmers to obtain security of finance of the; pa rticular description dealt wiflli! by jthe . &.ct, at more reason; f/ble rate's oi ’ in terest than those which: have lii thertb prevailed in that connection. ? The; . means have now been provided by the Act, and it is now up to the fa: rmers in their turn to take full at Ivai itage- of the system which has bet ?n made available for them", antj to pi lay their part in ensuring the sweeess of." a scheme which, if property. s-wiM’i ’teiT. A& likely to. confer

extensive benefits upon thci farming community. The scheme is a practical one, based as it is upon the examination and experience of similar which have been successfully conducted in othqr countries for many yqars past, and with unity of effort on the part bf thoae mainly concerned the farming classes of the Dominion, there is no reason why it should not be an equal succeps in this .country. The main features to be remarked are thiq financing by means of debentures secured upon the aggregate of the assets of the scheme, involving no State liability for the debentures, and, secondly, the scope which the legislation gives for collective and individual action upop the part of the farmers. The Act will now be, considered from the point of view of, firstly, the administration of the scheme ; then the provision of funds to enable it to be carried into effect, and, thirdly, the manner in which the funds are made available for the farming community. ADMINISTRATION OF SCHEME. The Dominion scheme, is controlled by a Board consisting of not more than seven, members, of Whom the Public Trustee by virtue of his office is one, and the other six, which the Act provides shall include at least one person; with practical experience in farming, are appointed by the Governor-General’s . warrant. The Public Trustee is the principal executive member of the Board, and as such is styled; the Commissioner of Rural Intermediate Credit. ,< The personnel of the Board announced by the Prime Minister on February 6, 1928, is as follows

Mr John Brown, of Lowcliffe, Canterbury, farmer ; Mr Thomas Eustace Corkiil, of Wellington, retired banker, formerly assistant general manager of the Bank of New Zealand ; Colonel Jamejs Jacob Esson, C.M.G., of Wellington, financial adlviser to the .New Zealand Government, formerly Secretary to the Treasury and one of the members of the Royal Commission of 1925 on Rural Credits.; Mr Norton Francis, C.M.G., of Christchurch, company Director ; Mr John Norman Massey, of Pun.i, in the provincial district of Auckland, farmer; Mi; William Waddel, of Wellington, Superintendent State Advances Office.* In addition, Mr J. W. Macdonald, the Public Trustee, is, as stated, a member exofficio of the Board. Colonel is the chairman of the Board.. It will be seem that although the Act requires the appointment of only one; practical farmer, two have been appointed to the Board, one from each of tlje two islands. Under the Act the Board is to define districts for the purposes of the administration of the scheme, to appoint in respect of each such district a district board, which is to carry out itch functions as the Board, may prescribe from time to time;; and 1 , the Board is also to appoint a representative in each such district under the designation of “District IntermediateCredit Supervisor.” The Board has headquarters, in the following districts :— , .

Nor.fh Auckland (Whangarei), Auckland (Auckland), Waikato (Hamilton), Poverty Bay (Gisborne), Hawke’s Bay (Napier), Manawatu’Wellihgton (Palmerston North), Taranaki (Ne.w Plymouth), Wanganui (Wanganui), Wairar.apa (Masterton), Marlborough (Blenheim), Nelson (Nelson), North Canterbury (Christchurch), South Canterbury (Timaru), Otago (Dunedin.), Southland (Invercargill), and Westland (Greymouth). The personnel of these; district boards as announced on March 16, 1928, is shown in tlie attached l extract from the Zealand! Gazette of that date. District intermediate credit supervisors have been, appointed at the headquarters of each of the dis,tricts named and also at Hawera (in the Taranaki district), Dannevirke and Waipukurau (in the Hawke’s Bay district), and Wellington-(iii the Manawatu-Wellingtoni district). The Statute gives: the Board power to utilise, .with the 'consent of the appropriate: authority, the services of any State Department for the purpose generally**of 'carrying out its dutiejs under the’ Act. The Board will operate clUqfly. through the Public Trust Office, the existing organisation of Which is extensive andl efficient, but the duties associated with the administration of the scheme will’not form part of the ordinary business of the office and will be kept quite distinct ■from it. By this means the Board will receive a great initial benefit, as the difficulties and expense associated with the establishment of a new organisation throughout thq Dominion are avoided. THE FUNDS OF THE BOARD. The funds of the Board are to be provided from two sources : (a) Tlie Consolidated Fund, by way of authorised. advances or grants; (b) the investing public, by way of debenture issue.

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