State Backing for Farm Finance

Sun (Auckland), Volume I, Issue 152, 17 September 1927, Page 13

State Backing for Farm Finance

INTERMEDIATE CREDITS BILL BEFORE HOUSE (THE SUN'S Parliamentary Reporter) WELLINGTON, Friday. THE Government’s proposals for the provision of intermediate credits for the farmers, as ambraced in the Rura; Intermediate Credits Bill, follow largely upon the lines set out in the recommendation of the Rural Credits Commission which investigated the conditions abroad upon this subject. A separate board is established to control the lending of money for fencing, livestock, and general improvements, while co-operative rural intermediate credits associations, which would be answerable to the board, are proposed, entitling members to borrow money under the Bill.

Loans under the Act are intended to breach the gap between the short loans at present granted by banking and other financial institutions and the long-term loans secured by way of the mortgage of land. The minimum term of any loan under this legislation is fixed at six months and the maximum term five years. The Bill, which was introduced into the House and read a first time this afternoon, will be considered at a later stage) by a special select committee of the House, which the Prime Minister will move to have established. The Rural Intermediate Credit Board, which is to comprise five members with the Public Trustees as the principal executive member, is given power to define districts for the appointment of advisory committees, eac hof five members, and is also empowered to advance money to the associations and to co-operative societies under certain conditions.

The funds of the board will be provided from- the revenue of the Consolidated Fund, the aggregate not to exceed £2 50,000, this to be free of interest for the first 10 years of a 20year term, and interest at the rate of 5 per cent, for the remaining 10 years; also by money borrowed on debentures issued by the board. Money for preliminary expenses in the operation of the board and of the associations may be provided by the State.

The functions of the board are to provide funds for advances by way of loan to associations established under the Act and to co-operative companies (dairy companies and others apart from the Act). This has necessitated special financial arrangements in the establishment of the Rural Intermediate Credit Account, half the profits from which will be held in reserve and the other half applied to redemption. Associations incorporated under this Act must be composed of not less than 20 farmers, each of whom must take 25 or more shares, and must have paid 20 per cent, of their share value before enjoying the borrowing provisions of the association.

Every shareholder is required to give security (by way of promissory note or otherwise) for every loan received by him, and this security is endorsed by the association. Loans are limited to £I,OOO, or ten times the amount of the nominal value of the shares in the association held by the applicant. Interest on these advances must not exceed 7 per cent.

If there are sufficient profits, dividends will be paid to shareholders, but the first call on profits goes into reserve. A shareholder may surrender his shares after he has repaid his loan, and cease to be a member of the association, providing that his withdrawal does not bring the membership of the association below the 20 mark.

The Prime Minister explained in the House that the Government intended to make two amendments in the committee stages, one concerning the constitution of the board, and the other in connection with the £250,000 funds of the board for advances.

Mr. H. E. Holland, Leader of the Opposition, asked what was the necessity for another board.

Mr. Coates said that was a different type of work from that required by the ordinary Rural Credits Board.

j\Jr. Holland: Will it be the same as the Rural Credits in that the loans will not be part of the public debt? Mr. Coates: That is so.

The select committee which the Prime Minister will move to have appointed will comprise Mr. Coates. Mr. J. G. Eliott, Mr. G. W. Forbes, Mr. A. Hamilton, Mr. H. E. Holland, Mr. D. Jones, Mr. S. Reid, Mr. M. J. Savage, Mr. E. Walter and Sir Joseph Ward.