AGRICULTURAL CREDIT 



Loans and their Repayment 



The development of the movement for the formation of small 

 holdings in Denmark has from time to time received considerable 

 assistance from Government. As early as 1786 the Government 

 started a fnnd from which loans were given to peasants to enable 

 them to buy small farms. The rate of interest charged was very 

 low, only 2 per cent., and the period of repayment of capital was 

 a very extended one. 



In the depression which accompanied and succeeded the 

 Napoleonic wars in the beginning of the nineteenth century, the 

 movement for the formation of small holdings was checked. About 

 the middle of the century, however, it received a fresh impetus, 

 and there then sprang up a strong desire among the agricultural 

 population towards acquiring ownership of land. It became a 

 question whether the money necessary should be provided through 

 the State or by private enterprise. The solution was found in the 

 establishment of a number of lending companies caUing themselves 

 " Agricultural Credit Societies," and carrying on business on prin- 

 ciples similar to companies known in France as the "Credit 

 Foncier." These companies have rules which are approved by 

 Government, and their administration is to some extent controlled 

 by Government. It is through them that at the present time most 

 of the money is lent upon land. They advance to the extent of 

 50 per cent, to 60 per cent, of the value of the land and the stock 

 upon it, and they receive in security not the land alone, but also 

 the stock upon the holding. The rate of interest varies, but it is 

 usually 4 per cent., with ^ per cent, added for repayment of capital, 

 which repayment is usually extended over a period of about sixty 

 years. Prior to the loan the holding and the stock are reported 

 upon, and the Company has it in its power, from time to time, to 

 inspect the farm, with the object of seeing that it is properly 

 farmed, and that the stocking on it is maintained. In the event 

 of the borrower failing in his obligations, the Company have power 

 to take possession of the holding or to sell. The companies charge 

 a commission of 2 per cent, for carrying through the transaction. 

 It is a peculiarity of the system that the borrower does not receive 

 cash for the amount of his loan, but he obtains cash securities of 

 the Company of the face value of the amount of the loan, and 

 these cash securities the borrower sells in the open market. The 

 securities may at the time be either over or under par, and the 

 borrower loses or profits accordingly. 



The borrower is bound, as already stated, to repay the capital 



