THE PROBLEM OF AGRICULTURAL CREDIT IN

CANADA.

EW questions in relation to economic agriculture have attracted so much attention as has the problem of supplying loans and advances to farmers at low rates of interest, and no question apart from the tariff-which is ever with usis so agitating the minds of the Western Canadian farmer at the present moment.

Ever since, and doubtless even before Louis XIV. in one of those pleasing bons mots which so distinguished that otherwise amiable monarch, remarked that credit supports agriculture as the cord does the hanged, it has been recognized that credit facilities are of the utmost importance to farmers, even more so perhaps than to other business men. That this is so may very readily be seen on reflecting that a farmer, especially if he be a grain farmer, receives far the greater amount of his money in one lump sum when he sells his product. His greatest outgoings have been immediately before he markets his crop; help has had to be hired and paid in cash; machinery has had to be repaired or replaced; the threshing gang has had to be paid either in cash or by a lien note on the crop, and in many other ways the greatest expense has been incurred immediately before his returns come in. In addition to that, nature makes haste slowly and agriculture is not susceptible to a whirlwind campaign; although the returns from good farming land may be reasonably sure, they are also undoubtedly slow. A farmer is not in the position of a merchant with a large and quick turnover, with money coming in every day over the counter, who can discount a bill of lading and obtain advances from the bank if his credit be good, readily and at reasonable rates. What is more, the Banks are prohibited by law from advancing money on mortgage, and can only make loans on personal security, thereby cutting off the farmer's chief asset.

We find the farmer, therefore, in peculiar need of credit facilities, and also peculiarly handicapped in his ability to obtain them.

The question has indeed come before us with redoubled vigour of late owing to the rising tide of feeling, principally in the States and the Western Provinces of the Dominion, that some form of co-operation might be introduced to benefit the farming community in the matter of obtaining loans at a cheap rate. For some years now there has been a growing feeling in the West that the Banks have treated the farmer harshly and unconscionably. Among other charges that have been laid at the door of the Banks, to quote the Saskatchewan Commission's Report, it is said that they have tried to dominate business policy; have sought to pay dividends first and serve their clients second; that they are controlled outside the Province and at times of stress leave the Province to its fate; that their charges for transferring funds are unreasonably high, and the rate of interest they charge unnecessarily large; that the interest allowed on deposits is too low, and that, finally, their sympathies lie rather with the commercial than with the agricultural class.

This is indeed a formidable indictment and if proved would show a lamentable absence of public spirit on the part of the Banks. So great has been the agitation in the States that in May, 1913, a large Commission consisting of two members from every State in the Union sailed for Europe, charged with the duty of inquiring into the facilities offered in different countries of Europe to the farmers to obtain loans at low rates of interest. Along with them went several representatives from the Western Provinces the Province of Saskatchewan sending two delegates. In that Province the agitation against the Banks and Loan and Mortgage Companies has been particularly insistent, thanks largely to the enthusiasm of the Grain Growers' Associations, and the Provincial Government took this opportunity to make an inquiry into the whole

1In this connection the evidence of Sir Edmund Walker before the Committee on Banking and Commerce which investigated the revision of the Bank Act, 1913, should be given due weight. He stated that it was the policy of the Bank of Commerce to go into any new place with the railway, practically along with the first store-keeper. On the average a new branch does not pay its expenses till the third year, and it takes six or seven years at least before it has made enough money to cover the losses of the first three years. Sir Edmund Walker's evidence throughout is a striking defence of the Canadian Chartered Banks.

subject. With this report and recommendations we will deal later.

THE SASKATCHEWAN ROYAL AGRICULTURAL CREDIT.

COMMISSION.

On the return of the delegates of the Province of Saskatchewan from their European tour with the United States Commission, the Government of the Province appointed a Commission to tour the Province and inquire into the actual state of affairs in agricultural districts. Their procedure was to select some county town (they visited fifteen centres in all) and invite any farmers, bankers, loan company agents, or anyone interested in the question to meet them in a more or less informal discussion of the needs of the farmers of the district for better credit facilities; the general state of agriculture in the vicinity; the ease or difficulty with which money could be raised on good security, and the willingness of the farmers to try a co-operative system of raising money on mortgage. The Commission possessed the right to subpoena but does not appear to have exercised it. The sittings held were exceedingly interesting and much valuable and significant evidence was collected. Great interest was evinced and farmers would drive in from all the adjacent districts to attend the sessions of the Commission.

In analysing the evidence given, the first salient fact to be noted is that over eighty per cent. of all the farm lands in the Province are mortgaged. It may be noted that those districts in which the farmers did not give a very hopeful account of farming conditions were exactly the districts (as indeed might be expected) where the percentage of mortgaged farms is highest. For instance at Fillmore, a district which seemingly suffers from lack of good water, it was reported that ninety-nine per cent. of the farms were mortgaged; in the Scott district one farmer reported that every farm in the district was mortgaged. A notable exception is to be noticed at Prince Albert where only twenty per cent. were reported as mortgaged, this latter district appearing to be exceptionally prosperous.

*Cf. daily reports of the Regina Leader, Aug. 7-24, 1913, for a verbatim report of each meeting; also Report of the Royal Commission.

As to the question whether it was difficult to raise money from banks or mortgage companies, the evidence is practically unanimous that it has always been difficult but that this year it has been practically impossible or at the best extremely difficult.

With regard to the prevailing rate of interest in only one single instance, at Wolseley, did evidence show that as low a rate as 7 per cent. was charged by a mortgage company for loans. Rates at 9, 10, 12 and 14 were common, and even fifteen per cent. was spoken of. There was also some interesting evidence given as to the "preliminary fees" charged before a farmer can obtain a loan from a mortgage company. Here again evidence was unanimous in showing them to be very high, in some cases excessive and extortionate. For instance, one farmer at Yorkton spoke of preliminary fees of $38 being paid on a loan of $650, another at Moose Jaw of $25, having to be paid to obtain a loan of $400.

Perhaps the most interesting evidence of all was given on the question whether farmers would be willing to try some form of co-operative credit, possibly the Landschaft system, among themselves. Out of fifteen districts in which the question was asked, two replied in the negative, five answered in the affirmative without imposing any conditions, four were ready for the experiment if the Government backed it, and three most emphatically qualified their assent to such a scheme by stipulating that no Government aid should be given whatever, the fear of party politics entering into the granting of loans being freely expressed. In neither of the two communities where unwillingness was found to try a co-operative scheme, do the farmers speak optimistically of the outlook in agriculture, nor do the districts appear to be very prosperous. It would, therefore, not be an unjust inference to suppose that the desire for co-operation finds its keenest supporters in the very districts where its assistance to struggling farmers would be least needed and the greatest apathy towards it in those localities where presumably its benefits would be most valuable. Comment on this fact is surely needless.

Besides the evidence given by the farmers, the Commission has produced some remarkable figures with regard to the indebtedness of the agricultural community of the Pro

vince. They estimate that the average indebtedness of the farmers is close on $1,500, the average farm being one of 295 acres, that is an average indebtedness of $5 per acre. Even more grave than this is the statement that during the fifteen months ended August 15, 1913, there were no fewer than 1,723 sale and mortgage proceedings in the Province of Saskatchewan."

This is most undoubtedly a very serious state of affairs, and, whatever may be the cause from which it has arisen, it must be admitted that the western farmer is bearing a heavy burden of debt. To what means of alleviation shall he then turn? On the continent of Europe systems have been founded for helping farmers by co-operation or state assistance, and now, owing largely to the agitation carried on by the Grain Growers' Associations in the Western Provinces of the Dominion and by a group of Democrats from the South led by Senator Duncan U. Fletcher in the United States, great interest has been aroused in the West, more particularly in the Province of Saskatchewan, while both political parties in Manitoba have adroitly incorporated the cause of co-operation into their respective platforms. A great many forms of co-operative enterprise and systems of obtaining cheap credit for farmers have been instituted in different countries of the world. All differ as the exigencies of temperament, locality and financial conditions demand, yet a careful study will reveal the fact that all systems, however they may vary in form and detail, may be classed under three principal groups or types:

First, the system of raising loans on mortgages procured for the borrower by a society of landowners, who issue their own bonds secured by the land of the borrowers: under this heading we will consider the German Landschaften.

Statistics of mortgage indebtedness of farms in U. S. A. show that in the States immediately to the south the percentage of mortgaged farms range from 38 in S. Dakota to 51 in Iowa. The average for seven west north centre States is 45.4 per cent. Thirteenth Census of U.S.A.

This is a startling figure when compared with the evidence from the State of Victoria where, under State Government loans, only 28 farms were sold up in fifteen years.