The main purpose of this Bill is to increase the capital resources of the Agricultural Credit Corporation to enable it to keep pace with the growing demand for agricultural credit. The Bill proposes to increase the limit on the amount which may be borrowed by the corporation and similarly to increase the amount of such borrowing which may be guaranteed by the Minister for Finance. The Bill will also empower the corporation to raise moneys in foreign currencies and enable the Minister for Finance to guarantee repayment of such moneys and indemnify the corporation against any foreign exchange risks involved.
The Agricultural Credit Corporation was established in 1927 under the Agricultural Credit Act of that year, its object being to provide credit for agriculture and associated processing industries. The major expansion in the business of the corporation took place during the past decade. Total ACC loans issued in 1960-61 amounted to £1.1 million; by 1970-71 their annual lending had increased to £8.6 million.
A further dramatic increase took place in the current year and it is likely that loans and hire purchase advances issued in 1971-72 will total £13.5 million. Total ACC loans outstanding increased from £3.4 million in 1960-61 to an estimated £34.0 million at the end of 1971-72. Lendings during 1972-73 are expected to rise to £18 million.
It seems inevitable that the expanding demand for credit will accelerate during the next few years, particularly with the prospect of entry to the European Economic Community. Farmers will be seeking additional credit to increase their livestock numbers, acquire better buildings and machinery and generally to adapt their enterprises to EEC conditions. Such investment will enable them to benefit from the higher prices and improved marketing conditions available in the EEC. Additional credit will also be required by the agricultural processing industries, especially the industries engaged in milk and pigmeat processing.
These are the principal reasons which give rise to the present Bill. The Agricultural Credit Act, 1969, fixed the limit on borrowing by the ACC at £25 million. That limit has already been reached. It is felt that, on the basis of the existing and the prospective demand for credit over the next few years, the limit on ACC borrowing should be increased to £70 million. Section 5 of the present Bill puts the borrowing limit at £70 million and section 6 provides for guarantees by the Minister for Finance up to the same amount.
I now turn to the question of foreign borrowing. The existing borrowing powers of the ACC have been interpreted as empowering the corporation to borrow in Irish currency only. Suitable opportunities for foreign borrowing may arise from time to time and the corporation should be in a position to avail of them. For example, the corporation should be able to extend their deposits scheme to cater for investors abroad. Foreign borrowing would also arise in the case of loans negotiated through the World Bank.
Section 2 of the Bill enables the corporation to raise deposits in foreign currencies and section 3 extends their borrowing powers generally to include foreign borrowing. Under section 4 the Minister for Finance is authorised to guarantee such borrowing. Each of these sections contains a formula for calculating the equivalent in Irish currency of any foreign borrowing involved.
Section 7 deals with losses or gains arising on foreign borrowing as a result of changes in exchange rates: the Minister for Finance would meet any losses and receive the benefit of any gains.
Having given you a summary of the objects and provisions of the Bill, I should like to give a little more detail about the work of the corporation. They provide a wide range of credit tailored to meet the various needs of Irish agriculture. They give loans for the purchase of livestock, machinery and fertilisers, for land drainage and other land improvements, and for the erection of farm buildings and dwellinghouses. Periods of repayment vary, ranging up to five years for livestock, 15 years for land drainage, 20 years for farm buildings and 35 years for dwellinghouses.
The corporation also operate a budgeted loans scheme to help farmers to meet their seasonal financial needs in accordance with a budget submitted to the corporation. A written promise to repay is accepted as adequate security for loans up to £5,000 under this scheme. Loans to agricultural processing industries are becoming an important feature of the corporation's work and it is probable that they will have an important part to play in the future in financing programmes for the rationalisation of creameries and bacon factories.
The corporation maintain close contact with the farming community. As part of this policy, they have 19 area officers to ensure that applications for loans get individual attention and that the time taken to process applications is kept to a minimum.
The corporation's main rate of interest is 8½ per cent but, as a concession to small farmers, a reduced rate of 6½ per cent is payable by those whose total indebtedness to the corporation is not more than £400.
I referred earlier to the rapid expansion in the corporation's business in recent years. It is of interest to note that the bulk of this expansion took place without recourse to the Exchequer. During the past two years the corporation financed their lendings mainly from repayments on existing loans and investments by the public in their farm credit bonds and deposit accounts.
The farm credit bonds were introduced in 1962 and continued until 1969. Bonds could be purchased in multiples of £10. The rate of interest on the latest issue was 6¾ per cent and a tax-free capital bonus of 2 per cent is payable on bonds held for five years.
The amount invested in bonds at the end of December, 1971, was £1 million. Under the deposits scheme which started in 1965 the minimum deposit is £100: the rate of interest ranges from 5 per cent on seven days notice of withdrawal up to 7½ per cent on 12 months notice. The deposits scheme has been highly successful. The amount on deposit with the corporation at the end of December, 1971, was £20 million as compared with £11 million at the end of December, 1970. The deposits scheme offers a good return to the investing public and enables them to share in the development of the Irish agricultural economy.
This is a brief review of the corporation's activities. They are pursuing a progressive and flexible lending policy to meet the diverse and expanding needs of Irish agriculture. Their total issues of loans and hire-purchase advances in the current year are estimated at £13.5 million and the amounts are likely to expand considerably in the next few years.
The main purpose of this Bill is to enable the corporation to increase their resources and to maintain a rapidly expanding volume of credit. I recommend the Bill for the approval of the House.
This Bill has gone through all its Stages in the Dáil, and the Minister is anxious that it should go through all Stages in the Seanad this afternoon, if possible.