FINANCE FOR FARMERS.

Shannon News, 30 August 1929, Page 2

FINANCE FOR FARMERS.

FACILITIES OF THE RURAL CREDITS SYSTEM. The facilities for farmers' finance provided by the Rural Intermediate Credit Act are referred to by the Commissioner (Mr J. W. Macdonald), in a circular to dairv companies. He states that, in the "short period during which the Act has been in operation, these facilities have been utilised very extensively in most parts of the Dominion, where dairying is carried on. There are three ways in which a dairy company may assist its suppliers to obtain the benefits of the scheme: (1) It may guarantee direct loans from the Board to individual suppliers of the company. (2) It may organise the formation of a co-operative rural intermediate credit association amongst its suppliers. (3) In addition to the provisions which permit of the lending of moneys on the security of a mortgage of stock and chattels, power is given to the Rural Credits Board by the Act to discount promissory notes and bills of exchange given by farmers and endorsed to the satisfaction of the Board. During the early months of the Board's operations, it was thought that this mode of financing would be little availed of, but in the event it has, been shown that the system has appealed 'largely to the co-operative companies in many parts of the Dominion. It has been found that many dairy factory suppliers require temporary financial assistance during the ' winter months, when the milk cheques have •practically ceased, to enable urgent Outgoings' to be met, such as payment' of interest on mortgages, living expenses, cost of purchase of fertilisers, and similar expenses. The discounting system of the Board is in active operation amongst dairy companies in varj ious parts of the Dominion. It is the ' custom of these companies, .towards "the close of the production sea-sou, to invite applications from their suppliers for loans of amounts required to tide them over the winter months. These, applications are scrutinised by the \diI rectors, who select those cases which ' they are prepared to assist. Promissory j notes for the individual amounts are I taken from these suppliers and en- | dorsed by the dairy companies to the Board, and the total discounted value "of the notes so endorsed is immediate-

ly made available to the companies for distribution to their suppliers. In 'the early stages of the scheme, the limit which would be granted to any single borrower under the discounting provisions was £100; but the system has proved so useful and so popular that the Board has recently extended the limit, and an amount up to , £2OO may now be granted to each supplier. The notes are liquidated by deductions from the milk cheques in the next production season; and in practically every case the amounts outstanding have been repaid by the suppliers within < the first- few months of the season. This system is a most expeditious and economical way of raising loans of small amounts, as no valuation of the security is required, and the necessity of taking a mortgage .over stock and chattels is avoided.

As to the co-operative associations, there is one in the Horowheuua district, and it has done a steady business 'ever since its formation in November, The system of direct loans is one of which the use made by dairy companies has been particularly marked in the Waikato district. The Act makes provision for individual farmers to obtain loans direct from the Board, provided

that at least 20 per cent, of the amount advanced is guaranteed l to the satisfaction of the Board. It is pointed out by the Commission that, in undertaking to guarantee 20 per cent, of each loan, dairy companies are running little risk, since loans are made- by the Board only on sound lending margins and on valuations made by capable and experienced independent valuers. It is felt that, as the benefits of the new system become apparent to the dairy companies, they Avill be prepared to utilise the provisions of the Act to an increasing extent.