62 AI^GERIA - CREDIT 



new colonists who increase their cHentele and therefore they favour them, in 

 fact finance them. Credit is very easity obtained in this colony. The ne- 

 cessary means are supplied b}' the original mechanism to which we have 

 alluded and which M. Avenol succinctly' and very accurately describes as 

 follows : 



" Three large banks operate in Algeria. Two of them there employ 

 capital obtained either locally or in France. These resources of their own 

 give them a precious autonomy, but the course of their business is slow. Do 

 they not perhaps limit their credit business too rigidly ? 



" It is the part of the Banque de I' A I gerie to give elasticit}' to the system. 

 An issuing bank having a small capital, it finds resources in its notes pay- 

 able to bearer : subject to no obligation as regards cover, it makes a cur- 

 rency of the credit it affords. It has a direct clientele with whom its oper- 

 ations are very important. But it also rediscounts the paper of banks. 

 Its fiduciary circulation constitutes the principal mone}- of Algeria, and — 

 varsing with the amount of business done — is always complementar}- to 

 the capital of the banks. Thus Algeria makes advances to itself. 



" Unfortunately this circulation has no international value, not be- 

 cause it is itself vicious but because Algeria is always in the position of a 

 debtor to the mother-covmtry. 



"Thanks however to a curious mechanism connecting French creditors 

 and Algerian debtors payments are made in francs at par, as though France 

 and Algeria were one country. By an administrative device the bank is the 

 onty debtor, the Treasury the only creditor. This disadvantageous posi- 

 tion is exactly that which gives the bank an interest in pla^'ing that moder- 

 ating role which is suited to an issuing bank. It is the course of its indebt- 

 edness to the Treasury which gives it the data whence to determine the 

 rate of discount, and the course of discount makes the suppW of capital 

 in Algeria proportionate to sound business ". 



This necessity of maintaining the current account with the Treasury 

 at a just level was made particularlj^ clear by the crisis of 1912-1913. This 

 crisis was an indirect result of the very abundant corn harvest and vintage 

 of 1910. The resources consequent^ available certainly gave a new im- 

 pulse to land purchase and the bringing of land under cultivation, but the}- 

 led more particularly to expenditure on luxuries — the value of imports 

 increasing by 150 million francs in three years — and to speculation. X.^n- 

 fortunately in 1912 Algerian business ceased to develop smoothly and lost 

 equilibrium. The paper of the Banqiie de I'Algerie was increased to excess 

 b}' rediscounting operations with other banks which found their resources 

 largely absorbed by the need for credit. At the same time the debit bal- 

 ance of the Banque de I'Algerie with the Treasury' rose inordinatel}' , be- 

 cause the product of discounted bills was largely sent to France while the 

 bills given by the bank returned to it by the medium of the post-office. 

 Bj' opportune!}' raising its decreed rate of discount the Banque de I'Algerie 

 put a stop to this flow of business, and the two great private banks decided 

 to increase their capital and were thus able to re-establish equilibrium. 



