LOWER SECURITY

Sun (Auckland), Volume II, Issue 381, 15 June 1928, Page 13

LOWER SECURITY

BANKER’S VIEW ON RURAL CREDIT HELPING THE STRUGGLER (From Our Resident Reporter.) WELLINGTON, To-day. That credit should be extended to farmers on less security than is required by private lending institutions was the opinion expressed by Sir George Elliot, chairman, at the annual meeting of the Bank of New Zealand to-day, when speaking on the State’s rural credit scheme. Any scheme that will help the farming industry is most worthy of support, said Sir George. It is, therefore, to be hoped that the public, and particularly farmers who are in a position to do so, will assist the movement bytaking up these bonds as they are issued. It has been reported, however, that the board’s intention is to lend its funds only upon such securities as the ordinary prudent business man would accept; but if this intention is carried out, it will be found that loans will be granted only to persons and associations who could quite easily obtain assistance elsewhere at little above the charge made by the Intermediate Credit Board. A difference of even one per cent, would not be sufficient to pay the income tax, apart altogether from other rates or taxes that private lenders are subject to. WIDER RISKS It would be in the best interests of the Dominion if the board altered such intention, took wider risks, and charged a higher rate of interest on account of those risks. Borrowers whose security is not of high order have the greatest difficulty in raising money at any price, and these are the people that stand most in need of assistance at the present time. In the financial stress of recent times borrowers who had first-class security to offer had not the slighest difficulty in obtaining loans, and the’position is better to-day. If the board pays particular attention to this class of borrower, the only thing that can happen will be a reduction of interest rates at the expense of the community, for little, if any, taxation will be paid by the board, and the struggling settler, to help whom the system was surely designed, will be left in his original plight. If there is any necessity for a Government Rural Intermediate Credit Department, that necessity lies in the direction of help for the struggling settler. Such help can be given only by Government, and not by the stock and station agents, financial corporations, and private lenders who, having to pay high rates and taxes, cannot afford to take the risk involved in this class of business without charging a very high rate of interest. Taking character and ability into consideration, advisory committees might, with a reasonable degree of safety, advise the board to make an advance even though the margin of material security was not up to the level demanded by the private lender. TAX ON FARM MORTGAGES It has been suggested that the Government should consider the advisability of exempting from income-tax all revenue derived from mortgages on farm lands and advances against the security of farm stock and produce. If it be considered advisable in the interest of the industry that the Rural Credit and Rural Intermediate Credit Boards should have special advantages in regard to taxation on income from such advances, surely all lenders on this class of security should be put on the same footing. The suggestion is worthy of careful consideration.