MONEY FOR SETTLERS.

Taranaki Daily News, 30 October 1922, Page 5

MONEY FOR SETTLERS.

RURAL CREDITS SYSTEM.

grants up to five hundred.

THE BILL PASSED. By Telegraph.—Press Association. Wellington, Oct. 28. The second reading of the Rural Credit Associations Bill was moved by the Premier in the House on Saturday night. Mr. Massey said it marked a new departure in this country, as the Bill proposed to establish what were generally called rural banks. The idea was new to New Zealand, but it was in operation in America and in European countries, with great success. Thousands were working in Germany, Denmark and America.

Mr. T. M. Wilford (Leader of the Oppoution) : “Not on these lines.”

Mr. Massey replied that there were many forms of credit association, and he was outlining what he thought the most suitable system for New Zealand. The Bill limited advances to £500; anything less would not be any use in this country. The basis of these associations was a joint and several guarantee. They were not banks in the ordinary sense of the word, but required larger institutions behind them. A member of an association could get an advance in the shape of credit, receiving not cash, but a bond which was negotiable in the open market. The Public Accounts Committee had gone fully into the proposals, and leading financial authorities had furnished much useful information on the working of similar institutions in other countries. MILLIONS FOR SETTLERS. The Prime Minister then quoted at length from the description of the working of such associations in Denmark and Germany. Any surplus front an association’s ; working must be added to the reserve fund i and no dividend would be paid. Each ■ member benefited when he needed assistance by having the credit or guarantee of all his fellow-members behind him. The Government had already made £2,000,000 available for advances to settlers, and within 12 months he proposed that another £3,000,000 should be available for this purpose. He believed the assistance so given would be productive of the greatest success and that no loss would result. This money would be available to finance these associations.

The proposed credit associations could not be established instantly. If one was in operation within a year, he believed its good results would lead to others quickly following. The Prime Minister concluded by expressing the belief that loan money would be obtainable more cheaply within the next few months, and this must naturally cheapen money in the borrowing country. The idea behind the Bill was to help the small man, and he believed it would do this.

Mr. Wilford said no rural bank could be of any real use unless it had the Government guarantee behind it.

Mr. Massey: “The Government will find the money, which is better than a guaran-

Mr. Wilford declared the limit of £5OO i was too small to be of any benefit to the small man. It would not build a house or pay off a mortgage. He contended the , joint and several guarantee was a fatal blemish. Why should not the country go in for a real agricultural bank with a State guarantee behind it? The primary producer could then be put on a sound financial basis, and with this result achieved any i country could be assured of its ability to jmeet all its liabilities.

1 Mr. Wilford quoted the experiences of such State-guaranteed banks in Ireland, Holland, Norway and other countries. He said the psychology of New Zealand people should be equal to that of the people in the countries mentioned, so they should be just as successful. What was needed was that we should go away from the present banking system and establish co-operative banks with a State guarantee at the back of them. BENEFIT TO DAIRY FARMERS. Mr. D. Jones (Kaiapoi) said the present State Advances Office provided all that Mr. Wilford advocated. All it needed was some extension. To establish a number of new banks would simply involve large overhead expenses and bring no advantage. If all our State lending departments were working on a table mortgage system with 1 per cent, sinking fund the country’s financial conditions would be stabilised. A rural credit association would be of benefit to men in the dairy industry, who in many cases could not always avail themselves advantageously of the existing sources of financial assistance.

Mr. IL E. Holland (Leader of the Labor Party) said the Labor Party would not oppose the Bill, but would offer criticism. The Bill was long overdue and it did not go far enough. It was not going to give much help to the real worker on the land, but would pave the way for a State bank with the sole right of note issue, which must eventually come. The Bill really proposed the creation of unlimited liability companies and the “joint and several” guarantee was therefore fraught with grave danger to the individual members. The principle of guaranteeing credit was good so far as it went, but the Bill did nothing to deal with the mortgage problem. Mr. O. Hawken (Egmont) thought the Bill would benefit dairy farmers by enabling them to borrow money at a cheaper rate on a joint and several guarantee, wihch was the mainspring of the scheme.

The Bill was read a second time and put through its final stages, and passed unamended.