BANK LOANS TO FARMERS. 25 
CONCLUSION. 
For short-time or personal credit, the farmers rely mainly on com- 
mercial banks, estimated loans from this source amounting at the 
close of 1920 to nearly $3,870,000,000. Data are not at hand for a 
satisfactory estimate of farmers' personal credit from general stores 9 
implement dealers, and kindred sources which are relied upon for a 
considerable amount of credit, particularly in certain sections of the 
country. Bank credit has been unusally costly to the farmer dur- 
ing the past year and a hah, but there is no doubt that merchant 
credit has been even more so. The interest charges of the merchant 
are almost invariably higher than those of the banks in the same 
locality and, in addition, a higher price is frequently placed on goods 
sold to a credit purchaser. 
It would be better for all concerned if all credit were sought and 
obtained from specialized credit agencies and purchases made for 
cash. The truly progressive and constructive rural banker makes 
every effort to acquaint himself with the legitimate credit need of 
the farmers in his community and to supply this need to the extent 
of his ability. Similarly the progressive and constructive merchant 
frankly points out the advantages of purchases with cash instead of 
on credit. The f arsighted and progressive farmer in his turn aims to 
establish definite banking connections, is thoroughly frank with the 
banker as well as with the merchant, and prompt and businesslike 
in his dealings with both. Small farmers and tenants particularly, 
who have hitherto been without banking connections and who have 
little security to offer, can materially improve their credit status by 
pooling their security and consolidating their credit demands by 
means of local credit associations or credit unions. 3 The organiz- 
ation of such associations should be facilitated by the enactment of 
suitable State laws where such laws do not not already exist. 
As indicated on preceding pages, the rate nominally charged by 
banks is not in all cases the actual rate. In some States, the practice 
of requiring a minimum balance from the proceeds of. a loan to be 
maintained at the bank, as well as that of collecting interest in ad- 
vance, materially increases the rate on the amount actually made 
available to the borrower. Such subterfuges are believed to be 
contrary to the public interest, and where they are the result of un- 
wise legal regulation of rates such regulations should be properly 
modified. 
The rate of interest, so far as the legitimate credit market is con- 
cerned, can be lowered only by establishing a new relationship be- 
tween the supply of capital and the demand for it. This can be 
accomplished only by thrift and saving. The wise farmer borrows not 
» See Department Circular 197, "The Credit Association as An Agency For Short-Time Rural Credit." 
