MONEY FOR FARMERS.

Shannon News, 13 August 1926, Page 4

MONEY FOR FARMERS.

RURAL CREDITS COMMISSION REPORTS. EXTENSION OF STATE ADVANCES. WELLINGTON, Last Night. In the irhouse or Representatives, this afternoon, the Hon. W. Downie Stewart laid on the table, the report- of the Royal Commission appointed to report on tne subject of rural credits. • Tne Commissioners >vere: Percy Harper Cox, James Jacob Esson, and William John Poison. For tne purpose of making - inquiries into the subject, the Commission visited Europe, Canada and America. The Commission was not able to visit Egypt, as originally intended, but lrorn inquiries made it is understood that the principles of rural credits as applied on the Continent,, have been adopted there, and applied, to meet the peculiar Egyptian conditions. As the result of their investigations, the Commission have come to the following conclusions: — (1) The administration of rural credit should be vested in a separate" branch ol' the State Advances Cilice, to he designated “The Fann Loan Branch,” with such further additions hi regard to respresentation or agencies, as may be found necessary to extend the functions of the said office in conformity with this proposal. (2) It is desirable to incorporate a system of intermediate credit for the use of agriculture. (Sj A Farm Loan Board, consisting of the State Advances Board, supplemented by three representatives of agricultural and pastoral interests, two of whom shall represent long term borrowers, and one of the users of the proposed intermediate credit, should be the executive body, to inaugurate and control the. extended system of rural credit. (4) Registered co-operative societies, the sum of whose capital and reserves is not less than £2500, and whose membership shall not be less than thirty, may on hypothecation of their securities, if the Farm Loan Board so decides, be eligible to receive advances for the purpose of intermediate credit, of not more than - SO per cent, of the value of such securities. ! (5) Bodies of bona hde tanners, if not less than twenty in number, who form registered co-operative Rural Intermediate Credit Associations, with a capital of not less thgn £SOO, may upon pooling their securities, obtain such advances, not exceeding 80 per cent, of the value of securities, as the Board may decide. (6) The amount of advance granted, and the margin of security, should be decided by the Board In each individual case. Valuation Upon Production. (7) The system and method of valuation adopted by the State Advances Office should be iol- ■ lowed for long-term loans, hut that valuation should be based ou the productive value of die land, ascertained over a period of at least live years, and the amount advanced should not exceed twothirds of the valuation. S It Should be the function _ot Farm. Loan Board to classify securities offered, and establish max- • c c mmints tier acre in the respective cTAerCn P J wl.icn advances “w* "S’ B 'a°nr£Sil2. star of Finance should be 6. «0.00? fo? preliminary expenses also to malke public advances of pub moneys to the Farm Loans 3i an for terms of not less than 'A-umii more than twenty years, upon no interest shall be Payable f°r the first ten years, but thereafter i

to be paid at the rate of 5 per cent, per annum, provided that the aggregate amount so advanced for both purposes, shall not exceed £500,000. (10) Local advisory committees should be established in connection with long-term loans, when and Where the Farm Loan Board may deem it advisable. (11) ' In case of any divergence of views regarding the value of securities, between such advisory committee and the Valuer-General, the decision of the Farm Loan Board should be final. (12) A provision should be made for loans to be increased on a basis of the improved condition of property, or in recognition of instalments already paid. , (13) In order to facilitate land settlement, the Farm Loan Board should have power to grant applicants for selection, in case of land which is ottered for closer settlement, an additional 10 per cent., based on the Board’s valuation of the land. (14) A borrower from the Farm Loan Board on long-term mortgage, should submit evidence" that he is twenty-one years of age, a British subject, and has been a resident in New Zealand for three years; that he has had three years experience of farming, and that he possesses average ability and capacity, is of good character, and chat he is actually in bona fide occupation, or intends to occupy the land upon which the loan is to be made; also, that his application may be favourably reported upon where applicant submits sufficient evidence that he has had three years experience of farming in the British Empire, the Board may reduce the i term of residence to one year. (15) The amount advanced to each borrower should not exceed £7OOO. (10) Preference to be given to applicants for loans of £IOOO and under. (17) The rate of interest on bonds or stock should not exceed sj| per cent. (18) The Fai’m Loan Board to be given power to authorise issue of mortgage bonds or stock, for varying periods, in consideration of the type of farming employed, and when considered desirable in case of virgin lands, to suspend amortization payments by borrowers, tor a period not exceeding five years, proviffeu that the area of the security does not exceed 200 acres, and that the mortgagor continues to duly work his land and to effect improvements. } (19) The issue of land mortgage j I bonds should not at any time exceed the value of the mortgages held as security therefor. (20) Interest charges to borrowers should not exceed the rate paid ou the mortgage stock or bonds, by more than 1 per cent. (21) Stock and bond holders should have first charge in priority to all other charges upon (a), all mortgages to the Board or to cooperative associations or societies; (b), the amount held by the Board upn loan from the Goverment; (c), capital liability of all shares in associations or societies, such charge to he a floating - charge until the winding-up of the association or society, taut not to prevent an association or society from dealing - , in the due course of its business, with properties and moneys subject to such charge, in accordance with the provisions of the • proposed law. (22) The Farm Loan Board may I borrow, with the consent of the Treas- | ury, upon the security of all or any j of its assets, for the purpose only of 1 providing funds to reedem bonds or deposits at maturity, if in the 1 ordinary account and reserve are insufficient, such securities to have priority to the floating charge previously created. i (23) All moneys so borrowed should be repaid out of the; first capital money received by the issue and sale of land mortgage securities, to . i replace those redeemed. ' I (24) Money borrowed under these i

provisions to be upon such terms and at such rates as the Farm Loan Board, with the concurrence of the Treasury, deems necessary and expedient. Status of Bonds. (25) Legislative provision to he made giving land mortgage stock bonds, or securities, the same favourable position as that accorded to State securities, and those of local bodies. (26) Borrowers to be given cash instead of bonds, and that the Dominion Treasury should be appointed to issue bonds and to act as fiscal agents for the scheme. (27) A borrower should be entitled to pay off the amount of his mortgage, or any portion thereof, by presenting to the Farm Loan Board, on any interest period after the expiry of" the first five years, debentures, bonds, or stock of the same series as those issued against his mortgage, and his mortgage indebtedness be relieved accordingly, and such bonds or stock duly cancelled. (28) The Farm Loan Board Should have the right at any time, to buy in the open mai’ket, its stock or debentures, and to cancel the. same, and thereupon to release a proportionate amount of mortgages securing such stock or bonds. (29) Securities issued at the instance of the Farm Loan Board, under authority of the sugegsted legisla--tion, should be deemed to be securities, in which public moneys may be Invested. (30) In the interest of bondholders, three custodians of mortgage securities and collateral deposited against the issue of land mortgage bonds, stock, ,or securities, should be appointed, the Superintendent of the State Advances Audit Office, and one to be nominated by the Minister of Finance are suggested. (31 Provision should he made for inscribing stock of £IOO and over, at the option of the investor, and that custody of small holdings of bonds for payment of interest to Savings Bank accounts,, be free of charge. (32) In order to promote and encourage thrift, bonds should he issued in denominations of £lO and upwards. (33) Savings Bank systems should be promoted for the purchase of bonds. (34) The annual report and balance-sheet of the Farm Loan Branch to be presented to both Houses of Parliament, if sitting, within six weeks of the end of the financial year, or if not sitting, then within ten days after the commencement of the next ensuing session. (35) Shares in co-operative associations, established for the purposes of intermediate credit, to be £1 and that shares in all new co-operative societies, taking advantage of, the proposed intermediate credit, shall, be limited to £l. (36) The Farm Loan Board to be given power to, at any time, demand and enforce the sale of intermediate credit securities. (37) In case of societies or associations using, intermediate credit the provisions of the \ Companies’ Act. 1908 should be applied where consistent. (38) An adequate system of warehousing produce is necessary, in order to simplify the process of making advances against produce. Legislation should be enacted to provide foi licensing and bonding of public warehouses storing agricultural products, under conditions tending to establish integrity of their receipts, and make them generally acceptable as security for loans. (39) The principles embodied in the draft of the suggested legislation submitted in the appendix, should be adopted and applied. Drafts of two suggested Bills, to give effect to the recommendations are attached to the report. New Zealand Must Come Into Line. , The report says that the New Zealand producer, in marketing his produce, is handicapped by distance and the costly delay, which must of necessity elapse before his saleable product can be disposed of. Higher transportation charges have also to be taken into account. If the New Zealand producer is to retain and improve his position on overseas markets, he should enjoy at least the same financial advantages that are open to his principal competitors. Dealing with the application of credit, the report says that credit machinery, properly administered', is an important and necessary part of the process of production, but the rise of agricultural credit must conform to economic principles. The problem is how to apply credit wisely and economically. The object of any reform should he to create confidence by establishing conditions which will make investment in rural securities attractive. Close investigation of different land mortgage credit systems, unmistakably discloses that their tendency is strongly in such a direction, and that once confidence is secured, capital flows freely. ,

In this connection, standardisation of land values is The basis of all satisfactory rural co-operative credit systems is ascertained productive value of land. The effect of adopting this principle has been to establish a check upon land speculation, and whilst not depreciating values, has prevented sharp disturbances of values, in these countries where conditions being normal cooperative, rural credit is largely used. After stating that there is need for a method which will not encourage speculation in land, but one which will make farming more attractive to those who are eager to work, the report says:— Stabilisation of Farming’ Conditions. “No better plan lias presented itself to tile Commission tlian a soundly administered system of rural mortgage, which provides capital for development of the farm at reasonable rates for a long term, with amortization provisions. Acceptance of this system) all over the world has been a most valuable factor in closer settlement of land. It has reduced charges for interest, given security to both mortgagor and mortgagee, and by its tendency to stabilise land values, lias diminished land speculation. It soon became evident, that Avithout seriously disturbing existing methods, settlement and production could be facilitated in New Zealand by extending the functions ol’ the State Advances Office, and .embodying in its administration, certain of those principles which are-being so successfully applied in other parts of the world, where under better organisation of securities, credit for agriculture is obtained on most favourable terms. The basic principles of land mortgage banks are Avell adopted to meet the needs of New Zealand agriculture, and the best method of cheapening agricultural credit. Is by emission of land mort-

I gage bonds. The State Advances Board, If supplemented by representatives of agricultural and pastoral interests, could efficiently inaugurate and control such a system at a minimum cost, but the establishment of a special division or branch for the administration of rural credit is desirable. The formation of long-term mortgage cooperative loan associations is not considered necessary in New Zealand, where producers already possess a sound and efficient system, designed to supply borrowers with capital at cost price. The fullest advantage, therefore, lias ben taken of the existence of the State Advances Office, which operates at a low administrative cost, and in conjunction with the Treasury, can obtain money on the host possible terms.” The Commissioners say that after investigating the short tenancy system in different countries, they led they cannot too strongly urge the importance of encouraging anil assisting small farmers in New Zealand, to become freeholders.