FINANCING THE FARMER

Sun (Auckland), Volume I, Issue 236, 24 December 1927, Page 23

FINANCING THE FARMER

INTERMEDIATE CREDITS ACT

cOMES INTO OPERATION ON JANUARY 1

WITH the coming o£ the New Year the facilities offered bv the Rural Intermediate Credits Bill will be made available to the man on the land. Designed to give him cheaper money on better terms than those possible under existing conditions, the new Bill should do much to place the finances of the farmer on a sounder basis.

rOUGH not drawn up exactly in accordance with the recommenda-

tions of the commission which was ga nt abroad by the present Governnient to inquire into systems of rural credits abroad, the scope of the Intermediate Credits Act appears to b® quite as wide, especially where the individual is concerned. * Joint and several guarantee after a certain limit plays only a very small part, and individual beneficiaries are not to be liable for the failures of their fellows to the same extent that would be necessary under the terms of the agricultural bank previously advocated by the New Zealand Farmers’ Union. The Act provides that the Government may advance up to £400,000 to a Rural Credits Board, which will administer the funds. This will be left in the hands of the board for a period not exceeding 20 years, and will be free of interest for the first 10 years. In addition to this initial source of income the board may issue debentures to the extent of £5,000,000. provided always that the amount of debentures does not at any time exceed that re-

ceived from the Consolidated Fund and the value of the securities held by the board. Interest payable to the board in respect of loans made must not at any time exceed 7 per cent. Claims of the Government when the Bill was put through were that the interest would range somewhere between 6 and 6£ per cent. When it is realised that the average rate paid by farmers at the present time on money raised for the purposes covered by the new Act ranges from 7 to D per cent., its benefits can be estimated. The Act is designed to aid those seeking short-time credit, yet will be available on a sounder basis than that possible under loans from banks, or financial institutions working through the banks. The farmer will know that the money is available for a certain fixed term, not less than six months or more than five years, and will not 00 working in daily fear of having his overdraft called up. Its objects are to ai « in the improvement of farm property and stock, and. with that aim ■n view, advances will be made on stock ai )a chattels). Land does not come within the scope of the Act. That is to the State Advances Department and other mediums of finance. farming associations Individuals, groups of 20 or more jarmprs, fo med into what will be Known as "Co-operative Rural Inter-

mediate Credit Associations,'* and existing co-operative societies, will have the right to participate in the funds made available by the board. Tip to SO per cent, of the value of the security may be advanced with a limit of £I,OOO to any one person. •Any application for an advance must be accompanied by a bond from some reliable person, institution or firm, covering 20 per cent, of the risk. In effect this means that a farmer already holding land may approach a mercantile firm with a request that they stand bond to him while he makes application for an Intermediate Credits Loan. The firm so approached does not require to find cash to the extent of 20 per eeiit., but their bond will be called upon in the event of the Credits Board having to realise to recover and the proceeds of sale fail to reach SO per cent, of advance. Twenty or more farmers may form a Rural Intermediate Credits Association, the capital of which will be divided into shares of £1 each, and the subscribers to the memorandum of association will be required to take not less than 25 on which not less than

five per cent, is to be paid within one year. Such an association will have the status of a limited liability company, and will assume a direct responsibility to the board for loans made to members. SOCIETIES MAY BORROW Established co-operative societies may also borrow under certain conditions up to 80 per cent, of the securities offered. It is through this avenue that dairymen will receive the greatest benefit. During recent years the number of co-operative factories operating in the Dominion has increased to nearly 600, with 55,000 suppliers. In an effort to assist suppliers in the building up and establishing of herds, most factories have inaugurated credit departments. Money is borrowed from the banks at the existing rate of interest and lent out to suppliers at a rate of interest just sufficient to cover expenses. Under the rural intermediate credits system the dairyman should get finance at approximately two per cent, cheaper. The Act comes into operation on January 1 and it should'not be long before it is fully tried out. Even now there are critics who attack it. One thing is certain, however. It is a step in the right direction, and will go a certain way to providing cheaper money and placing the finances of the man on the land in New Zealand on a sounder basis.