The Bank of France and Agricultural Credit
"There is no such thing as agricultural credit; there is only credit," said M. Dupin in 1845.[174] Matters have not changed since. It is certain, for instance, that Scotland, which for a long time was the classical land of pauperism, owes its prosperity to the banks, which, by developing credit in favor of agriculture, have entirely transformed the soil and the country. Indeed, more than any other, the Scotch farmer needed credit, and more than any other he has benefited by it. It may be said that personal credit is peculiar to agriculture. Thus it suffered as a result of the evolution already mentioned, which, by causing the disappearance of local banks or by giving them a new direction, struck a fatal blow to personal credit.
We know that "agricultural credit" includes loans from seed-time to harvest. The first labor done, the first loan made to the land can only be repaid much later. The average time necessary for agricultural loans is five or six months at least. Now, for other reasons the by-laws of the bank prohibit the discounting of paper having more than ninety days to run. By a special favor which would not be accorded in business, where each loan has a different object, the bank allows the renewals necessary for agricultural loans, which almost exclusively take the form of bills payable to order. The bill returned to the maker on the day of maturity is renewed the following day. The date of maturity alone is changed.
A very important agricultural industry, which we have already mentioned, is that of cattle-raising. The cattlemen are, for the most part, customers of the bank wherever it has a branch. This customer of a somewhat special kind appears, by the very nature of his trade, to be indicated as a suitable client for the bank and not for the financial institutions. The bank permits the cattlemen to indorse each other's paper, and thus can accommodate them without intermediaries. There results a very useful co-operation. Moreover, by using the bank the cattlemen effect great savings, the full value of which they alone can estimate.
After the law of July 18, 1898, and the legislation that followed, it might have been expected that the use of agricultural warehouse receipts would be greatly extended. This legislation makes a serious exception to the common law for the benefit of agriculture. It "constitutes the landowner, so to speak, a public warehouse. It is he who, without any other controlling appraisement, makes declaration as to quantity and commercial value to the clerk of the justice of the peace. In short, the agriculturist enjoys a confidence which so far has been denied to industry and commerce." Notwithstanding this favor, the agricultural warehouse receipts are little used,[175] and the bank, despite its willingness to take them freely, regrets to find them among its discounts in such very small number.
Our survey would not be complete should we fail to say a word concerning the agricultural credit associations, of which also much was expected and which have only in a very limited measure fulfilled the high hopes of their founders.[176]
For the support of agricultural credit the State draws from two sources the funds required to supply the organs of distribution, the local and regional associations. The first source is the loan of 40,000,000 francs made by the bank on November 17, 1897, when the charter was renewed. This amount, like the 140,000,000 francs already advanced in 1857 and 1878, bears no interest. The second source is the yearly payment made by the Bank of France on the profit-yielding circulation. This payment cannot be less than 2,000,000 francs yearly, and more often it is in the neighborhood of 5,000,000 francs.
All these sums, intended for agriculture, are distributed by the Government, and are used in endowing the associations of agricultural credit. The regional associations, which are the pivot of the present organisation, are self-governing societies, with a capital of their own. This capital, added to the advance made by the State, is invested in first-class securities, which are then deposited in the Bank of France, as discount guarantee to take the place of the third signature, if need be. The local offices send their paper to the regional office, which then takes it to the bank, as the needs of funds are felt.
Such is the part of the Bank of France in the distribution of agricultural credit. Effective intervention was obviously very difficult, yet the bank has contrived, even beyond its legal obligations, to give the benefit of its credit to agriculture, which so justly deserves the care it is receiving.