DANISH LAND BANKS.

Taranaki Daily News, 25 May 1921, Page 5

DANISH LAND BANKS.

SUITABLE FOR NEW ZEALAND. INCREASING PROSPERITY. Palmerston N., Last Night. In his address to the WellingtonWairarapa Provincial Conference of the Farmers’ Union yesterday, the president stated:— At such a time of unexampled financial stringency I may be pardoned for referring briefly to the Danish land bank system, a method of finance which has brought amazing relief to- that country and prosperity to thousands of struggling farmers. The system has been explained by Rider Haggard in his well-known book dealing with Denmark, but the best and simplest explanation is contained in the memorandum prepared by Mr. Waage, a leading Danish statesman and incorporated in the work in question. Mr. Waage says:— A credit union is formed with the object of securing for its members mortgages on their properties. It is done thus. A landowner who desires to obtain a mortgage on his property gives a bond to the Union and receives the loan not in cash* but in bonds issued by the Union. The receiver of these bonds must realise them by 'selling them on the money market. Therefore, the person to whom the loan is granted must bear the risk of the bonds not realising on account of the fluctuations of the market as much as he expected to receive when he decided to take up the loan. The interest and the sinking fund charges that every member has to pay on his loan are used to meet the payments and to cover the sinking fund on the bonds issued by the credit union. The regulations of the credit unions must be approved by Government, and the Government appoints an auditor to inspect the affairs of every credit union. The credit unions will advance loans up to half the assessed value of any given property. The person who obtains a loan has to pay a certain amount towards the reserve fund of the credit union by which it is granted; also, he must pay a small sum towards the administration expenses of the union. In case of any losses being incurred such losses are met out of the reserve fund. If the reserve fund should not be sufficient to cover the losses these must be met by the members, the liability being equally divided among the members. The members are jointly and severally responsible for the obligations of the union, but only their real property is, however, liable; their other possessions are not liable. These credit unions are specially adapted to a country where small holders are numerous. Mr. Waage added that no capital is required to be put down on the formation of such a union, and that the losses incurred are rare and insignificant. Rider Haggard adds that the terms obtained by the borrowers are so advantageous that very many, if not most of the land-owners in Denmark, appeared, as (far as he could gather, to take up mortgages on their real property in order to furnish themselves with floating capital. The investment of capital in the bonds of the Credit Union is considered in Denmark to afford a security of the highest class, and loans can be obtained from the union for sums ranging from £94,000 down to £33. For the benefit of the very small holders, some of these societies are more or less supported by a State guarantee. The reserve fund has not only met the trifling losses sustained, but the surplus has materially benefited members in the reduction of their debts. This is one of many subjects that tho Fanners’ Union has failed to make any investigation of, and it is one which, in my humble opinion, would repay close and careful study. I believe the application of the Credit Union and Laud Bank system to New Zealand is not only possible, but would add enormously to our prosperity, and to the stabilisation of our finance under such conditions as oppress us at present.