Mr. Speaker, it is a pleasure to open the debate at second reading on behalf of the Minister of Agriculture and Agri-Food and the government.
Bill C-75 is an act to amend the Farm Improvement and Marketing Co-operatives Loans Act. The acronym I will be referring to is FIMCLA. This amendment would only change one clause in the act. However, without the amendment we would have to suspend the program. Bill C-75 would increase the total amount of loans guaranteed under the act over a five-year period from $1.5 billion to $3 billion. Before I get into the question of why we want to make this change, I will tell the House a little about the FIMCLA program.
This program has been around for 50 years. It started with the Farm Improvement Loans Act passed in 1943 and came into effect in 1945. It was the first guaranteed loan program in Canada and was followed by student and small business loans. It is probably the most successful of all those programs.
At first the farm improvement loan program was intended to help tenant farmers get access to funding to improve their farms or farm living conditions. The guarantees were needed. They could not offer the land as security since they were tenants. Therefore they were unable to get bank loans. Over the years it has been a very popular program especially in western Canada, becoming increasingly popular throughout the nation.
Now farmers use the program to get loans of up to a maximum $250,000 for a wide range of farm improvement programs and projects such as acquisition of additional breeding stock, more land, improvements to buildings, fencing projects, irrigation, improved waste disposal facilities, et cetera. It could also be used and is being used to try alternative farming methods, whether organic farming or any other type of alternative method that farmers are now so aggressively pursuing in the diversification of their operations.
In addition, the program facilitates access to credit for farmer owned marketing co-operatives for activities that add value to the agricultural production. For example, a co-op could borrow up to $3 million under FIMCLA to build a juice plant, or something with vegetables or any other type of co-operative dealing with further value adding and processing of agriculture products.
Loans to co-operatives must be approved by the Minister of Agriculture and Agri-Food. Under this program borrowers benefit from interest rate savings of about 0.5 per cent and a lower equity requirement usually around a minimum 20 per cent.
The program is very popular and is becoming even more popular every year. Five years ago the department began to encourage credit unions and caisse populaires to make the program available to their customers as well. This has added about 600 new designated lenders throughout the country.
In towns which may only have one bank or one credit union or no bank or no credit union, farmers often had to drive to another town to get financing. With this change they suddenly had a lot more lenders to work with. In addition, we have seen sustained lower interest rates, higher farm equipment sales and an improved farm debt situation in the last few years.
Not surprisingly, the number of loans registered under the program has more than tripled from about 4,800 in 1990-91 to nearly 18,500 in 1994-95. The value of those loans has climbed from just under $82 million per year to $515 million per year. This year we expect the loans to reach $550 million, bringing a five-year aggregate to $1.4 billion. We expect that to remain constant for the years ahead. At a level of a $3 billion cap we will now be allowed to continue to offer the program. Most of the new growth has taken place in Quebec and Alberta.
Not long ago there was only a single lender using the program in Quebec. Now the giant Caisse Populaire Desjardins movement has become a major participant and Quebec has the third highest number of loans of any province. Similarly in Alberta, which has the second highest number of loans, the Alberta treasury branches have become a significant lender under FIM-
CLA. However, Saskatchewan is still the biggest user of the program.
This new growth has caused the government to propose this amendment to increase the cap. If we do not, as I said before, the program could reach its $1.5 billion cap in June of this year and then we would have to suspend the program for about two years.
In preparation for this amendment we have consulted with the people who are most closely involved in the FIMCLA program, including major farm organizations like the Canadian Federation of Agriculture as well as commercial lenders.
I would also like to address the inevitable question of why we are increasing the cap on this program by $1.5 billion at a time of government restraint. I want to make clear this amendment does not in any way represent $1.5 billion in new spending. Over the last 30 years the program costs have averaged slightly over $1 million a year. It is a loan guarantee, not a loan of the actual money.
The 25-year net loss rate under FIMCLA has been about 1 per cent. If we look at other government programs it shows the dedication to repaying loans and the low loss in those loans in the agricultural community over the years, a record it can be proud of. This loss was a bit higher in the 1980s for obvious reasons but we expect it now to stay at less than 1 per cent in the foreseeable future.
The government has made a commitment to provide farmers with the tools they need. FIMCLA is one such tool, an inexpensive tool that offers a considerable amount of assistance to the agri-food sector. It supports adaptation, diversification and encourages regional development and job creation.
The government has recently increased the cap on small business loans to a total of $12 billion for the same reason. Here again we are asking for the assistance to increase the cap on the Farm Improvement and Marketing Co-operatives Loans Act.
At this time I urge all members in the House to support the amendment which will double the cap on loans under the Farm Improvement and Marketing Co-operatives Loans Act and enable this low cost support to farmers to continue. I look forward to the support of all members in the House.