FINANCE -PtTBLIC AND PRIVATE

AGRICULTURAL CREDITS

BY ARTHUR W. KIDDY

Wrrnotrr any disrespect to the Department of Agriculture I should probably be right in saying that the City is inclined to regard the proposals for a Central Land-Bank, as being somewhat in the' nature of a political -s-tinit. It is not forgotten that shortly after the War, and when the Government of that time was naturally desirous of seeing our trade detivitieS fully reSuined, five had discourses from Mr: Walter ilunciman addressed - to the bankers urging them to a policy of more " adventdroiA-":banking. How far the invitation was accepted I shall -not stay now to enquire, but of one -thing there can be no -doubt, namely, that it was those lending institutions - whieh tended •' to- restrain speculative - commercial - activities immediately after - the -War, -rather than those encouraged -the great rise in prices and the over- capitalization of new industrial combines, which-performed the greater service to the community.

LOOICING BACKWARD.

At the moment, hoiVe-Ver; "Mr. Ituticiman's phrase caught on to -the popular Imagination: Instead Of stopping to enqUire whether "European nations were in a position to' purchase ft-Ont. us-their needs were unquestioned-or -whether; in the matter of domestic trade, prices had already gone far ahead of the capacity of the consumer to make payment, it was urged by. some that all that was required to make trade. bodin was cheap .and -ample.,loanahle capital. Accordingly, we had a_ trade " boom-" _of a sort, interspersed with. many strikes for still higher wages, and finally, we reached so unsound - a position that higher--Bunk • Rates -had to

• -!.. be imposed _to. cheek-the speculation that -was .proctedliag 'BANKS AND FARM PURCHASES.

In considering this problem of agricultural loans the plain fact has-to be faced at the outset that conditions of agriculture in Great Britain are so different frcim those prevailing in countries with huge wheat growing areas that demands for accommodation will never be upon the colossal Scale. Indeed, if they were, we should long ere this have seen some great Land Bank come into existence to meet the requirements of the situation. Latterly, of course, since there has been a breaking up of estates there have been numerous instances where farmers have been desirous of purchasing their farms, and not only has help readily been afforded by banks in all cases where the price asked and the other conditions were desirable, but considerable leniency has been shown with regard to reasonable methods of repayment. In fact, so far as the joint stock banks are concerned, it is not unlikely that the formation of a new institution might be regarded as a relief rather than otherwise, as farmers making their application to purchase estates would doubtless be referred to the new land bank. Whether; however, the same advantage would accrue to the borrower—that is to the farmer—is another matter.

OLD AND NEW METHODS.

_A point, in the Report of the Ministry of Agriculture to which considerable attention- hars been paid both by banks and farmers is the recommendation which, so far as can be gathered at present, seems to affect the present system of financing crops. In connexion with this financing, what is described in the Report as a. `"chattel mortgage " is recommended, the process' apparently being that the farmer will pay the corn merchant in cash and obtain the proceeds from the bank on a chattel mortgage which seen-is to amount to a kind of secret bill asale. Thus, the bank being in the position of a " secured." creditor, other directions from which the farmer might be pirchaSing -seeds would be un- secured and it ahnost lOokg, as though the farmers' credit in those: quarters* might be curtailed rather than expanded. in commodities, while British investors lost many millions invested in the shares of some of the industrial ventures issued at about this period which were hopelessly over- capitaliied. . . .

SUGGESTED ADVANTAGES.

It usually happens, indeed, that when there is industrial depression the causes are not one but many ; and so With regard to agricultural depression, while I am far from asserting that credit facilities may -not -play an important Part in aiding prosperity, there are other, and perhaps more . important, factors operating. In the Report on Agrieultural Credit, which has recently been issued, stress, however, is laid upon the for- Mation of a Central Land Bank, which, it is considered, should be empowered to handle the " intermediate " credit business in connexion with land improvements, &c. It is maintained by the expert appointed by the Ministry of Agriculture to prepare the Report that the scheme of the Central Land Bank would have the following advantages :—

(a) It would establish for the first time in this country a uniform standard system of long term mortgage credit for agriculture.

(b) It would give new facilities to farmers who wish to purchase their holdings, by providing mortgage credit at a reasonable rate of interest, in a standard and universally applicable form, and free from the risk of unexpected foreclosure.

(c) It would create a standard agricultural investment, thus opening up a new channel through which capital could enter agri- culture.

(d) It would be adminstered through the joint stock banks and would have the benefit of their knowledge and experience ; it would be simple and' secret. •

On the face of it, some of these suggested " advantages " • seem to be obvious Wit is only when they are examined in the light of the facilities already existing that the thought arises as to whether any material change is required in present methods. I do not doubt that instances might be cited where a farmer or a trader, as the case may. be, May have failed to secure front his bank, on reasonable terms, the loan facilities desired, but I venture to think that such cases are very rare. . • PRESENT CO-OPERATION.

In modern conditions; SO it is sometimes said, there is no' longer the dispoSition to consider the personal habits and character of a borrower, whereas in bygone days the character of the individual constituted one of the best forms of security in the opinion of the lending bank. While, however, there may be greater difficulty to-day, not merely because of the size of the bank, bi because of the greater complexity of social conditions, in appraising the merits and attributes of the individual borrower, there can be no greater mistake than to imagine_ that the old asset of personal character has ceased to operate in obtaining banking accommodation, and I have no hesitation whatever in asserting that many farmers and landowners would testify to the readi- ness of the banks to co-operate as far as is possible ,both in the financing of crops and in the purchase of suitable properties.

Of course, I am not suggesting that it would not be possible for a new land bank to perform many useful functions and to grant facilities--by a slightly different method of procedure—in the same way that they are now granted by the banks. Indeed, it can be admitted that, if the new land bank had large capital, and assuming that it did not take deposits repayable upon demand, the granting of loans for the purchase of estates would be more consistent with the character of its business than it would be in the case of the ordinary joint stock bank whose obligations to the depositors to keep its resources very liquid are imperative. Pre- sumably, the bank suggested by the Report of the Ministry of Agriculture might even be in the character of a subsidiary of existing banks, who might contribute largely towards the capital.

BORROWERS AND LENDERS.

Even so, however, very skilful management would be required if the business resulting were to be of a kind desirable both to borrowers and lenders, for it is too often forgotten that it is in the final results that the merit of the transaction has to be considered. The farmer or trader who obtains his desires with regard to financial accommodation may at the outset express complete satisfaction. It is not, however, until the transaction for which the money was borrowed has been consummated and the profit or loss has been determined that its merits can be fairly and adequately gauged, and the ultimate measure of gratitude on the part of the borrower will be determined by the success which has attended the operation for which the money was obtained. There have, indeed, been occasions when an intending borrower has generously acknowledged at a subsequent date that his banker was wise in refusing an advance on a particular occasion and for a particular purpose. Multiply one transaction by many thousands and it' will be seen that the sum total of prosperity as ministered to by credit facilities is not so much to be measured by the aggregate amount of such credit facilities but more by the results achieved. And those results in the main are determined by the skill and judgment exercised both by borrower and lender,