Mr. Speaker, miracles never seem to happen to me in this House. I listened to the Reform Party go on and on, its members first stating they support the bill. They then spent almost all of their time saying why it was not such a good idea. I am a little confused by that approach. It seems they are saying government should not assist farmers.
Almost one in five workers in the Durham area are farmers with 3,500 families who either directly or indirectly owe their living to agriculture. The people of Durham very much appreciate the federal government's commitment to assist them in the capitalization of their farming operations.
Sometimes there is a lot of confusion in the House about what farmers do and the types of operations they run. Many members have talked about how other forms of capital are available to farmers, that lending institutions could take up the slack. That is not true. The Farm Credit Corporation and this program came into existence because the government recognized that problems within our capital markets prevent access to capital by not only small businesses but farmers in particular.
Farming is a capital intensive business. I could probably equate it with a utilities company. Everything done in farming involves substantial capital: equipment, the farm property, barns. Utilities are probably the closest example of similar operations that require capital over long periods of time.
Our lending institutions are often only interested in short term loans, which creates a disequilibrium in the capital markets. That is why this is an area government should be involved in. I know many of my farm constituents are very happy the federal government is part of this process.
I would like to speak about some of the specific aspects of Bill C-75. Some members have expressed concern over questions of overlap and duplication with the provinces. Only two provinces have similar programs, Quebec and Alberta. These are the two provinces where activity under FIMCLA has shown its greatest growth. The arguments about duplication being bad come from the very provinces that have utilized this system the most.
I heard some of my colleagues in the Bloc talking about how it was a failure. Interestingly enough, loan applications in Quebec went from 142 in 1990-91 to 1,700 in 1994-95. This is a success, hardly a failure. That growth has been largely a result of caisse populaire Desjardins' movement to become a lender under the program. In Alberta, the provincial government's treasury branches now offer FIMCLA loans and concentrate its resources in other areas. The concept of duplication is not real in this case.
Within the federal government we have to consider the different roles FIMCLA, Farm Credit Corporation and the Small Businesses Loans Act play. Of these FIMCLA is the only national loan program that can be accessed by farmers and farmer-owner marketing co-ops because FIMCLA loans are available from the six major banks. There are banks in almost all of our communities but there is not an FCC office in all communities. Similarly, the Small Businesses Loans Act is really oriented toward small business operations as opposed to farmers although farmers can also access this program.
Every rural centre has a bank or credit union but not all have FCC offices. In addition, the Farm Credit Corporation does not guarantee loans made by competing commercial lenders. Those lenders would not likely welcome audits by the FCC as is required under FIMCLA. So there is really no way FIMCLA could be offered by the FCC.
It has also been suggested that FIMCLA should be amalgamated with the Small Businesses Loans Act. The problem with this idea is that the FIMCLA loss ratio is significantly less than the SBLA program. Most FIMCLA loans are made to establish farm operations because assets taken as security for FIMCLA loans generally have a higher disposable value.
This gets back to what I was originally saying. Farms are highly capitalized, therefore they also have capital to put up for credit purposes more so than to some smaller type businesses. As a consequence there are fewer loan loss provisions. It would be unfair to charge farmers higher interest rates and registration fees to subsidize small business loan losses.
In addition, most commercial lenders have segregated their commercial lending and agricultural lending divisions. Government loan guarantee programs currently mirror this structure.
FIMCLA gives farmers a better interest rate than they could normally get and allows them borrowing credit with only 20 per cent equity. In other words, they have the ability to get up to 80 per cent financing on their assets.
Finally, there has been some confusion about the meaning of the loan cap. The legislation provides that the total amount of the loans registered over a rolling five-year period will not exceed $1.5 billion. This legislation is really quite simple in that it doubles the cap, increasing the total cap to $3 billion within the program.
The parliamentary secretary was saying earlier that we were quickly approaching that cap. If we do not pass this legislation shortly we will have to curtail the program. I can assure members that as the spring work continues on the farms that some farmers would be unduly penalized if for some reason this legislation did not continue.
I repeat, this is the total amount of loans registered over the five-year period. It is not the total amount of loans outstanding because at any one time repayments have already been made on the loans registered in the first four years of the period.
In other words, it is a total loan application. Loans come and go. The total exposure of the government is substantially less than even $1.5 billion today or $3 billion in the future as we increase the cap.
The government's liability on the program is for defaults. Historically these have been very low, around 1 to 1.5 per cent. I can assure members that this is a very significant loan loss provision. It tells members a lot about our farm communities. It tells you that these people pay their bills. In spite of the fact that they are highly capitalized, and they do have a high debt structure, once again it is because of their type of operations.
I know this quite well because I actually farmed at one time. I can tell members that every time there was an extra dollar on the farm, it seemed to go back into some form of equipment. This is why farmers are highly exposed when borrowing.
I understand that all the parties I have heard of today are still in support of this legislation. I encourage members to pass it forthwith.