CORRESPONDENCE.

Poverty Bay Standard, Volume I, Issue 80, 20 August 1873, Page 3

CORRESPONDENCE.

[Our columns are open for free discussion; but we do not hold ourselves responsible for the opinions of our Correspondents.] TO THE EDITOR OF THE STANDARD. Sir, —I observe that in your columns is advocated the formation of, or an extension of an already existing Building Society for this district, and, concurring entirely in that cause, I think that had a little information regarding the working of such institutions been afforded as well, it might have awakened more interest in the matter. A Buildiug Society then consist of a number of persons, limited or otherwise, who, by periodical instalments of small amount over a term of years, contribute a certain fixed sum per man, or a paid up share when the company is dissolved, and the money returned to the depositors. But if no other benefit accrued them this it would be in no degree excel the old stocking-foot family exchequer for the balance of the Saturday night s wages. But the difference is this : The shareholder wants the use of a sum of money now which he is not worth, but which he could repay by instalments; he obtains that from the company out of the contributions, or calls of all his fellow-shareholders, paying interest on it, which interest, paid by himself and by others in their turn, goes to form the aggregate profit of the company, or in other words the very payers themselves and is retained to m ike up the fixed share—together with his own periodical instalments—in a shorter time than it would hod he to pay until his contributions amounted to the required sum. The sum total of these calls on each pay-day or two conjoined, is put up by auction to the shareholder who bids the highest rate of interest for its use, or for such part or parts of it aS may be fixed to suit best the means or requirements of the borrowers, who give security for it over the approved building they erect with it, and who either pay ou their instalments as usual until the company is wound up by the completed payment and closure of all shares simultaneously, and the difference between the money borrowed and the amount of the share returnable by the company then to the shareholder equalized by a money payment, or else by the payment in addition to the instalment of a periodical redemption payment of the money borrowed until it also is repaid at the same time, and then the share amount is returned and the company dissolved. The former method being better suited to the requirements of a poor and struggling district; whilst the latter necessitating higher calls is a better security for the Society generally. Thus A is a shareholder in a company of 500 who pays 2s per week for four years, thus making up a share of £2O 16s if he had to pay up to the very end in cash. But the month’s payments of 500 shareholders amount to £5O. A wants to build a cottage and offers the company 10 per cent, per annum for the use of half of this £25. He gets it, pays his calls regularly on his share from that time onwards, and in the one case a redemption payment as well of say 10s per week. B gets the other £25, so that on every month's contributed calls, interest is accruing to the company which, as it is paid year by year is posted in the company’s books to the credit of each shareholder’s payments to date, so that the actual sum of £2O 16s is paid up in say three and a-half years instead of four, and as then A has in the first case received £25 and paid £25 16s he has to pay £4 4s and is quits with the company, or in the other has received £25 and paid it back, and also his share amounting to £2O 16s ; he then has that sum returned to him.

Such generally are the principles which govern the working of such societies when terminable. There are many modifications capable of being introduced, such as admission of non-borrowing but simply investing members who have small sums of money coming to profit from time to time for which they want investment, and who as they thus by their shares contribute capital for profitable employment by borrowing members without benefiting thus themselves, are allowed a slightly higher rate of interest, superior to savings banks, not felt appreciably by the borrowers who are in a majority. And these can at any time be bought out by the Society, if it cannot invest its funds to better advantage than by extinguishing the higher interest they have to pay than that they can make on paying up their deposits and proportion of profits to date, less working expenses. There are also perpetual societies, when members retire when shares are paid up and returned, Ac. These,however, shortly, are the main principles, and if any settler shall be illuminated by this short statement, the aim of the writer will have been attained.—l remain, yours faithfully,

W. Steuart.