Miscellaneous. 



328 



[Oct. 1906. 



ments included in the fixed annuity. The annuity remains fixed, and as the 

 portion due to interest gradually decreases, the one allotted to sinking fund 

 increases. Here lies the great advantage to a borrower of borrowing from 

 a land bank, instead of borrowing from private lenders. A private lender cannot 

 and will not receive his loan back in small payments spread over many years. 

 When the term of the mortgage is over the whole loan must be repaid. This 

 can only be done by further borrowing which will lead to more debt. It is a well- 

 known fact that capital sunk in the purchase or improvement of land can only 

 be replaced by setting apart annually a portion of the income. The founders of 

 the Credit Foncier de France seem to have clearly apprehended this fact. The 

 reports show that one-half of all the loans granted by the Bank bear annuities 

 in which the payment for the sinking fund is so small as to be hardly distinguish- 

 able. For instance, if a man borrows a sum of ten thousand rupees from the Bank 

 for fifty years, he pays an annuity of Rs. 5'72 percent, to the Bank of which 

 Rs. 5*30 goes for interest and only 42 cents for the sinking fund. He will pay 

 annually Rs. 572, and at the end of fifty years Rs. 28,600, and the annual payment 

 of Rs. 572 on which compound interest is calculated for fifty years wipes off both 

 principal and interest. If he borrowed the sum from a private lender at the same 

 rate of interest for fifty years, he would pay during the fifty years Rs. 26,500 as 

 interest alone, and still owe him the capital of ten thousand rupees. This is due 

 to the fact that as the sinking fund accumulates at compound interest, the principal 

 debt gradually decreases, while the annuity remains constant. The result is that 

 the portion of the annuity due to interest decreases and the portion credited to 

 the sinking fund increases, so that at the end of the payment the sinking fund 

 becomes 5 - 15 per cent, and at the end of forty years 3"28 per cent. It may be added 

 that on the continent of Europe in almost every country all loans on the security 

 of land are repayable only by annuity. 



The foregoing summary of facts collected from various sources will be 

 sufficient, it is believed, to give one an idea of how land banks have been found 

 necessary for the advancement of agriculture in different countries of Europe at 

 certain periods of their economic progress, and how the problem has been solved 

 by them. It has been suggested in some quarters that voluntary societies and 

 popular banks like the Schulze Delitzsch in Germany and Raiffeisen in 

 Wurtemburg will answer our purpose in Ceylon. But the condition of our society 

 is not advanced enough for the formation and working of such voluntary societies. 

 Even on the European continent where they have been founded, they are institu. 

 tions of but recent growth, whereas the land banks have been in existence for 

 more than 150 years. State aided land banks must precede, and their utility and 

 success serve as an object lesson to the natives, before any popular banks either 

 urban or rural can be started with any advantage to the public. The foundation 

 of such institutions which cannot but be ephemeral in the present state of our 

 economic progress, will, instead of helping the people, prove to be a national 

 disaster by utterly ruining the organisation of credit. Co-operative credit 

 societies have been in existence in India for nearly ten years, and what is the 

 result? Mushroom societies have come into existence by hundreds, and have 

 perished with equal rapidity, and there are others which are eking out a miserable 

 existence and are on the verge of extinction. And yet India is far more advanced 

 than Ceylon in the organisation of credit, for there are classes and castes of 

 bankers like the Gomutte Chetties, Bamas and Natucotta Chetties, who for gener- 

 ations have been engaged in banking, while in Ceylon we have no such organisation. 

 The co-operative credit societies which seem to be fairly successful are very small 

 ones with a capital of Rs. 300 or Rs. 400 established in villages where people are known 

 to each other. It is hardly necessary to add that it will be impossible to develop 

 the agricultural resources of Ceylon with the aid of such miniature societies alone. 



