134 



[August, 1910. 



AGRICULTURAL FINANCE AND CO-OPERATION. 



THE AGRICULTURAL BANK OF 

 EGYPT. 



(From the Indian Agriculturist, Vol. 



XXXV., No. 6, June, 1910.) 

 The advantages of the system ol co- 

 operative credit established in India 

 over the plan of forming a powerful agri- 

 cultural bank with a large capital to 

 lend money direct to the cultivator were 

 forcibly urged when the creation of 

 banks in this country was under discus- 

 sion several years back. The arguments 

 then advanced find practical support in 

 the situation with which the Agricul- 

 tural Bank of Egypt is confronted. In 

 his annual report Sir Eldon Gorst shows 

 that some of the agriculturists who 

 borrowed money fiom the Bank are 

 finding difficulty in meeting their instal- 

 ments, and that the amount of arrears 

 was very much larger at the end of 1909 

 than it had ever been before. The Bank 

 was established in 1902, aud it was hoped 

 that the capital furnished through its 

 agency to the fellaheen would enable 

 them to escape from the grip of the 

 usurer, and also to improve their 

 methods of cultivation and to extend 

 their holdings. At the time of the 

 Bank's formation and for several years 

 afterwards Egypt enjoyed exceptional 

 prosperity. The cotton harvests were 

 good and brought high prices, and owing 

 to the demand for land a phenomenal 

 advance took place in the value of real 

 property. Towards the close of 1907, 

 however, a financial crisis arose as the 

 result of over-speculation in land and 

 shares, and this was followed by low 

 price for cotton in 1908 and by a bad 

 cotton crop in 1909. During the per iod 

 of prosperity the cultivators borrowed 

 heavily from the Agricultural Bank. 

 Although accurate information as to the 

 purposes for which the loans was raised 

 is not available, a large portion was 

 undoubtedly devoted to the purchase of 

 land, while the balance must have been 

 employed " in settling old debts and in 

 expenditure of a more or less unproduc- 

 tive nature." Land is usually sold in 

 Egypt on the instalment system, and 

 the greater parts of the loans were made 

 at a time when the enhancement of land 

 values was proceeding at a rapid rate. 

 The period of inflation has been follow- 

 ed by the inevitable reaction, and the 

 Bank is not receiving its instalments 

 with the regularity that could be de- 

 sired. The loans outstanding amount to 

 £8,136,000 distributed over 238,000 deb- 

 tors, and the proportion of arrears to the 



amount of annuity which fell due to be 

 collected during the year rose from 3-1 

 per cent, in 1906 to 17 7 per cent, in 1909. 

 It is suggested by Sir Eldon Gorst that 

 the accumulation of arrears may in part 

 be attributed to the difficulties in the 

 way of instituting proceedings against 

 recalcitrant debtors, and to the expense 

 and delay involved in having recourse 

 to law. But it would appear that the 

 fundamental cause of the trouble is 

 that a portion of the advances has been 

 expended unwisely, or used for unpro- 

 ductive purposes. The difficulty of dis- 

 criminating between applications for 

 loans is said to be considerable, and 

 measures have been taken to ensure 

 that in future more careful investigation 

 shall be made into the position of pros- 

 pective borrowers and into the purposes 

 to which it is proposed to devote the 

 money, "It is also hoped," says Sir 

 Eldon Gorst, " that it may be feasible 

 to introduce a system of collective 

 guarantors, and to form co-operative 

 village organisations with which the 

 Bank could deal directly. The collective 

 guarantee would on the one hand ensure 

 the punctual payment of the loa ns, and 

 on the other secure that no advances 

 were made except for remunerative ob- 

 jects." This significant statement shows 

 how valid were the objections urged 

 against the proposal to establish similar- 

 banks in India. In the Note dealing 

 with the subject which he drew up in 

 1908, Mr. W. R. Gourlay pointed out 

 that the conditions which obtain in Ben- 

 gal differ entirely from those prevailing 

 in Egypt, where the fellah pays his land 

 tax, or rent, direct to the State. The 

 Government of Egypt through their 

 officials supply information respecting 

 the position of the applicant for an 

 advance, and their agents collect the 

 Bank's dues with the land tax. But 

 apart from questions of machinery, the 

 establishment of such a bank in Bengal 

 was opposed by Mr. Goirrlay on the 

 broad ground that the only safe method 

 of rescuing the ryot from the burden 

 of usurious indebtedness and of placing 

 him on a sounder economic basis was by 

 teaching him thrift and the value of 

 self-help, and that this could best be 

 secured by co-operative credit associ- 

 ations controlled by the people them- 

 selves. What has been done in India is 

 to begin with the village society and 

 to work upwards to the .unions of 

 societies and subsequently to the Cen- 

 tral Bank. In Egypt the reverse process 

 was adopted, and a commencement was 

 made with a powerful Bank, financed 



