RURAL CREDIT SCHEME

Waikato Times, Volume 125, Issue 20907, 12 September 1939, Page 2

RURAL CREDIT SCHEME

YEAR’S WORK REVIEWED REDUCTION IN SUMS ADVOCATED BOARD'S FINANCIAL POSITION In districts throughout the Dominion in which the Rural Intermediate Credit Hoard is transacting business, the branch officers of the State Advances Corporation have succeeded the Public Trust officials who acted as district supervisors for the Rural Intermediate Credit Board, and to facilitate this the branch organisation of the corporation was further extended, states the annual report of the board. There has been no alteration in the policy in regard to the granting of advances to farmers, and the amount of business transacted during the past year has been approximately the same as for the previous period. Financial assistance Is made available principally under the following head-

Advances to Co-operative Rural Intermediate Credit Associations lor the purpose of granting loans to farmer borrowers. (b) Direct loans by the board to farmers. c) Discounting of farmers’ promissory notes. Credit Associations The Co-operative Rural Intermediate Credit Association method of financing fanners has found favour in some districts, particularly in those where dairying is the principal activity. Associations were established in various parts of the Dominion, but those operating in the Waikato, North Auckland, Taranaki and Manawatu districts have been most successful, and the volume of business handled by these associations indicates that the farmers are fully appreciative of the advantages of having a local organisation with which to transact their business. The borrowers themselves become shareholders of the association, and a board, appointed by the members, controls the business. The members of the board are chosen for their ability' both as farmers and as business men, and it has been evident that their advice and assistance have been of considerable value to the borrowers in handling their individual problems. Direct Loans In those districts where there is not an active co-operative association the board has granted a number of loans direct to farmers on the security of their stock and chattels, but it has been the practice in the past *o require some collateral security or guarantee in connection with such loans. The recent amending legislation removed the requirement that such collateral security should be obtained as a definite condition to a loan direct from the board, and it is now a matter for discretion of the central board whether the loan should be granted on the security of the stock and chattels alone. At the inception of this scheme the Government made available the sum of £400,000 to be utilised by the board: (a) In making advances to farmers; (to) in establishing a redemption fund as a projection to lenders to the board, which was given authority to raise loan-moneys by way of the issue of debentures. The Act required that one-third of the advance by the Government should be. specially invested and held as a redemption fund, and at the date of transfer of the administration of the board’s business to the control of this board there was at credit of the redemption fund the sum of £210,086 13s 7d. This represented the initial amount of £133,333 6s Bd, added to which are accumulations of revenue produced by the investment of the fund and a half-share of the profits. The total accumulated fund after adding a half-share of the profits and income from the investments for the year ended June 30, 1938, was £220,601. Investment Funds The balance of tne advance received from the Government has been available for the purpose of making advances in terms of the Act, and during recent years the investments offering have not been sufficiently large to necessitate the raising of additional loan-moneys to augment the investment funds. At of the transfer of the business to the control of the board there were cash funds available for the investment in the board’s business amounting to approximately £126,950, and at the close of the past financial year the cash and temporary investments amounted to £155,878. The amending legislation under which the change of control was authorised made provision for the removal of certain restrictions which previously applied to loans made to farmer borrowers, the two most important being:— (a) The removal of the limit of £2OOO for any one loan made by the board direct to a borrower. (This refers only to loans granted under Part 111 of the Rural Intermediate Credit Act.) (b) The withdrawal of the condition requiring loans granted under Part 111 of the Act to be guaranteed as to part of the amount advanced. Apart from these amendments there has been no change in the board's policy in regard to the terms on which advances are to be made. Rate of Interest

The rate of interest on loans granted to farmer borrowers still remains at 5 per cent, whether the advance be made by the board as a direct loan or through an association to one of its members. During the past financial year advances have been made to members of associations for an aggregate amount of £45,131, and the total amount of loans owing by associations at June 30, 1938. was £124,114. This shows a reduction of approximately £10.296 compared with the figures at the close of the previous financial year. During the past, financial year advances have been made to borrowers for an aggregate amount of £3453. and the total amount of loans owing to the board under this section at June 30, 1938, was £16,495. This shows a reduction of approximately £6360 compared with the figures at the close of the previous financial year. It is apparent that farmers have been able to arrange for their requirements through local banks and stock

agencies on satisfactory terms, and another factor influencing the volume of business offering has. no doubt, jieen the operations of the Mortgagors and Lessees Rehabilitation Art. which has affected the nownal movement of land and stock sales. It is a little early yet.for the board to form any definite opinion whether the terms and conditions of lending could, with advantage, be varied, but the working of the system is being closely observed and it is proposed to give further consideration to this aspect of the business at a future date.