HELPING THE FARMER.

Taranaki Daily News, 22 July 1922, Page 12

HELPING THE FARMER.

RURAL OR AGRICULTURAL BANKS. AS AUSTRALIAN MOVEMENT.

(By

T.C.L.)

It may be regarded as an axiom that no country with great natural resources such as Australia or New Zealand can develop very rapidly without adequate capital and credit facilities. That the present system of banking and finance in both countries does not fully meet the needs of those on the land, or are desirous of going on the land, is at present being brought home to many who in the past have given little heed to the subject. Mr. Massey stated the other week that he had been collecting information for some time regarding the establishment of agricultural banks, and that he proposed to take an opportunity during the present session of submitting the proposal to Parliament. In Australia the settlers, in conjunction with commercial men, are taking the matter in hand themselves, not being desirous of having Government backing or State control or interference in any form. My purpose in this article is to describe what is being done in this connection.

COMMERCIAL CONCERNS. Before doing so, however, I may be permitted to remark that the need for extending credit facilities to the producers is quite as great here as in Australia, but that we should be very careful that we make a beginning on safe and sound lines. Our banks, as at present constituted, are purely commercial. proprietary concerns, aiming as such at making big profits and taking no undue risks. The securing of profits more than the development of the resources of the country is their chief aim, indeed their ‘-'raison d’etre.” They trade chiefly on the funds of their depositors, and .consequently they can only do so within defined limits, preferring, naturally enough, to keep their money in such forms of investments that offer a quick and profitable turnover. Their capital, belonging chiefly to depositors and subject to short call, causes them to make their advances also subject to short call. Thus in times like those we have been passing through the banks will demand a reduction of an overdraft or the complete payment of the overdraft, at a time when it is most inconvenient for the borrower, who may be subjected thereby to sacrificing loss or complete ruination. It is therefore not surprising that the banks prefer doing business with business than with country interests. The bank managers are more closely in touch with the business heads, whose ability they have opportunities of guaging. The commercial concerns keep books that are audited and mav be inspected at any time. The ordinary farmer is in a different category. Neither his ability nor his security can be so readily assessed. Then the commercial man works on temporary credits such as bills of exchange and promissory notes of short date, whereas the farmer requires an entirely different form of credit, and for much longer periods.

THE COMMONWEALTH BANK. Before the war the Australian Federal Government established a Commonwealth Bank, which was placed under the control of a Governor with autocratic powers. The hope of the Labor Government responsible for its establishment was that the Bank would relieve the man on the land from many disabilities and help him to greater production. Thin anticipation has not been fulfilled. The bank has been conducted on the same lines as the proprietary banks, making big profits, but not concerning itself particularly with promoting the interests of producers and developing the resources of the country. The Commonwealth Bank had practically no initial capital, and is making at present a clear profit of £7OO 000 a bVear. Tn the seven years of its existence it has in fact, amassed a profit of £3 750,000. This is enlightening, as are the operations of the various commercial banks operating in Australian and New Zealand. The average net profits of these banks is over 16 per cent, on their paid up capital, and most of them have increased their reserves during the past 10 years by over 125 per cent. As a consequence of these fat profits the shares in the banks have increased greatly in value, showing the original investor a handsome profit. According to the Stock Exchange reports, the Union Bank of Australia shows the original investor 130 per cent, profit with a 15 per cent, dividend; the Bank of Australasia 120 per cent, with a 13 per cent, dividend: the Bank of N.S.VV. 76 per cent, with a 10 per cent, dividend; the Commercial Bank of Australia 134 per cent, profit with a 15 per cent, dividend; Bank of New Zealand 158 per cent, profit with a 15 per cent, dividend.

PROFITABLE INSTITUTiqNS. These figures prove that banking is indeed a profitable business. They are, of course, made by handling, or dealing in, other people’s money. In Australia the huge sum of £280,000,000 is lent them by the public, on nearly half of which no interest whatever is paid. When interest is paid it seldom exceeds 4 per cent.,- in some cases as low as 3 per cent. It is loaned out at seldom under per cent., whilst in New Zealand, by agreement amongst the banks, the minimum rate on overdrafts is 7 per cent., and traders and farmers are asked to pay from 7% to 8 per cent. Bank company chairmen hasten to say that the heavy taxation is largely responsible for the high rate of interest, but you will notice that the banks’ substantial earnings and dividends are still maintained. whilst the same huge sums are placed to reserve. Last year some men. mostly connected with farming pursuits in N.S.W., took up the matter of founding a producers’ bank, and after studying the rural bank systems on the Continent and in Canada and the United States they launched a “farmers’ and country merchants’ bank.” The initial capital was £60.000. which was soon increased to £250,000. most of which has now been subscribed. It is proposed to increase the amount as needs necessitate. MAIN PLANKS OF PROPOSED RURAL BANKS.

The main planks of the platform of the proposed bank were explained to me by one of the promoters, and may be summarised as follows: —(1) The central board or directorate will be composed of men elected from Victoria and N.S.V, In addition there will be a local 'fc**rd for each State, which it is the intention shall be as far as possible and autonomom. Further,

wherever there is a branch established there will be a local board, in close touch with the local manager. In this way he will be able to secure full information regarding the ability, the integrity, and the earnestness of each customer; in other words the bank will be able to command for its business that knowledge and acumen at present possessed by the local merchant and slock agent, knowledge which warrants him in assisting financially his customers to a far greater extent than any present bank, although he actually uses money for this purpose which has been advanced to him by them for that definite purpose. (2) It is proposed to pay 2 per cent, interest on current accounts. The farmer in Australia often has sums at current account, for reasons inseparable from the seasonable nature of his business. Yet all men on the land are not in credit at the same time, any more than they are in debit. This because of the variety of their pursuits as a whole. But while the banks pay nothing for the farmers’ current account money when they use it, the moment he wished to use some of theirs the overdraft interest commences. (3) Charges for keeping accounts and exchange between branches of the same bank will not be made. (4) All forms of banking, including exchange between different countries (a lucrative form of present business), mortgages repayable with interest by instalments spread over 15 years, trustee and estate management, etc., are to be undertaken. (5) First consideration is to be given to the advancement of money for productive purposes, because this principle has been the salvation of the farmer in other countries, and the strength of rural credit systems throughout the world. (6) It is the aim to deal with customers as partners, which they will be in point of fact, and with that full sympathy which can only be derived from complete knowledge of all 'the circumstances surrounding each individual case, at no time, however, eschewing the principle of sound banking.

CAPITALISING CHARACTER. From the above summary of the aims and objects of the proposed bank it will be seen that an effort is to be made to capitalise integrity and moral worth. This is done with successful results by similar institutions in Denmark. Germany, the Netherlands, and Canada. No attempt in this connection has up to now been made in Australia or New Zealand, except by the New Zealand Repatriation Board in making advances to returned men in order to set them up in business or on farms. The local experiment has proved quite successful. Each branch of the proposed bank will operate as independently as possible, and the local manager will have the advice and counsel of local shareholders and particularly of those who are chosen to act as his local directors.

Fi.ved and saving deposits are to be used with the capital paid up to make extended term or time payment loans to those who are recommended by the local branch manager, shareholders in every instance having first call on available funds. Ordinary commercial deposits are to be utilised in the usual commercial manner in carrying on a general banking business in all departments.

The country business man is to receive consideration. It is acknowledged he has been loyal to the interests ■which support him and rendered special service and valuable aid. sometimes with considerable embarrassment to himself, to say nothing of the risk and loss in individual cases. Much of the credit allowed by the country merchants is unsecured. except by the moral responsibility and integrity of the individual. Intimate association and past dealings allow the storekeepers to size up and estimate moral worth with fair accuracy. The additional relief this bank will render the man on the land will automatically relieve the country merchant.

THE PRODUCER AT FAULT. My informant, a gentleman well known in New Zealand, said in conclusion:— Remember, two-thirds of the income Australia is provided by the “man on the land”; he has probably provided the same proportion of the amount deposited in the banks, or nearly .£280,000.000, and of course that same proportion of the profits. Yet he growls vehemently at the manner in which the money is invested, claiming, and justly, that the investments made tend towards the further aggrandisement of the towns, and if not the depletion of the country districts, at least their retardment. Has he not the remedy in his own hands if he will but utilise .his tremendous financial strength by co-operation? Banks are well aware of the weakness of human nature-. Just as the administrators of all religious organisations have erected impressing edifices, temples wherein the notary is overcome by his insignificance, so the banks erect temples, the visible evidences of the ruling religion of the day. The ordinary client, even he who has lent his bank money (that is who has a credit to his account) enters the portals with some awe: never, anyway, with the some confidence as he would enter the premises of any other creditor.

A PYSCHOLOGICAL EFFECT. The whole surroundings, the spacious portals, the great hall, the high ceilings ail express power and mystery. And so the Joss, albeit invisible, is omnipotent. ■ “High finance” is beyond the cognisance ’of the ordinary mortal. Admitted. So it was beyond Mr. Fisher’s cognisance. But he knew where the knowledge could be secured. He did secure the brains. Hence the Commonwealth Bank and its success. May not the “man on the land'.” if so minded, follow suit? Through some organisation controlling his finance for his own benefit, might he himself not dictate how much of the annual surplus of Australia should be utilised in rural development? Thus he can ensure that possibly his own existence —certainly that of his successors —will become increasingly more pleasant. more profitable, and more attractive. He may him elf do far more to stem the steady stream of humanity toward the city than all the vaporings of the political theorist can effect. In other words, let him follow in the footsteps of most countries which depend on primary production and establish some co-operative system of dealing with his own finance, of handling his annual surplus to his own advantage and the advantage of Australia.