§ 2. Co-operative credit.

Rural credit associations and agricultural banks are forms of cooperation which have not, so far, met with much favour in New Zealand. It is urged that there is little need of agricultural banks of the Raffeisen type, which grant short credit on the personal guarantee of the members, as very few of the New Zealand farmers are so poor that they have to club together to obtain the money to buy a pig or cow. The small farmers can obtain financial assistance from the farmers' auctioneering companies or from their own co-operative dairy companies; repaying the loan either on re-selling their stock, or by monthly instalments deducted from their milk cheque. On the other hand settlers requiring longer and larger loans, secured by mortgage, can readily obtain them at a reasonable rate either from private lenders or from the State.

Advances to settlers.—The government more than 20 years ago took up the position that it was the duty of the State to provide the country settlers with necessary capital, as every citizen in the dominion was vitally interested in the increase of agricultural production.

Accordingly in 1894 legislation empowered the government to borrow money and lend it to country settlers, local authorities, or city working men, to be repaid by half yearly instalments of principal and interest, spread over periods of time up to 36½ years. It might also be wholly repaid at any time. The rate of interest charged is one per cent. more than the money costs; and usually averages about 4½ per cent. The extra one per cent. is used to pay flotation charges and working expenses; and any balance is carried to a reserve fund, which is reinvested on mortgage.

The State Advances to Settlers Department has lent to deserving settlers over £20,000,000 since 1894. The loans authorized during the ten years 1906 to 1915 numbered 43,520 and amounted to £10,096,930. Yet page 16 during 18 years there were only 35 foreclosures and practically no losses. The cost of administration and working expenses in 1915 were only 0.12 per cent. or 2S 4d per £100 of the capital employed; while the lowest working expenses of any of the European systems are said to be 0.34 per cent.

Although this is not a co-operative business (each borrower being responsible only for the amount of his own loan), it may be noted that all borrowers pay into a fund to provide against any individual loss. The net profits of the Advances to Settlers Department for the year ending 31 March 1915 were £57,434.

Advances to workers.—The State Advances Office also lends money up to £450 to enable any manual or clerical worker to buy or build a house, if he is not in receipt of an income of more than £200 per annum, owns no land other than the allotment on which it is proposed to build, and is prepared to reside permanently in the home when it is built. The interest on the advance (which is secured by a mortgage on the whole property) is payable half yearly, with an instalment of the principal which by this means is fully repaid in either 36½ years, 30 years, or 20 years, as the case may be, when the mortgage is released. Valuation fees, and the cost of preparing and registering the necessary deeds, are fixed by regulation on an exceedingly low scale and are payable by the borrower.

A Wisconsin (U. S. A.) board after carefully investigating the Advances to Settlers system in New Zealand reported : It has successfully maintained itself for over 20 years. It has directly benefited thousands of settlers by securing long time loans of capital for them at low rates of interest. It has promoted the development of the agriculture, manufactures and commerce of the dominion, by attracting settlers and enabling them to make their holdings productive. It has aided in the development of community advantages in isolated settlements by increasing the schools and other community facilities and it has indirectly benefited the entire Commonwealth. "

The government is now considering the advisability of going a step further and starting agricultural banks similar to those that have proved so successful in other parts of the world.