Mr. Speaker, as members prepare to give Bill C-75, an act to amend the Farm Improvement and Marketing Co-Operatives Loans Act, or as we refer to it in the abbreviated form of FIMCLA, consideration for third reading, I would like to review some of the reasons we are anxious to have the bill passed into law as soon as possible.
FIMCLA is designed to increase the availability of credit on reasonable terms to farmers and farmer owned co-operatives. Farmers can borrow up to $250,000 to invest in new technology and equipment or for a wide range of farm improvement projects. Farmer owned co-operatives can get loans up to $3 million to invest in facilities to add value to their farm products, for example the washing or packing plants for vegetables, fruit juice plants or many other applications.
These loans to co-ops must be approved by the Minister of Agriculture and Agri-Food. This is the only national loan guarantee program that can be accessed by farmers across Canada. Like other business sectors, the farm economy goes through cycles and changing credit conditions. Loan guarantees are an important tool that governments can use to ensure that credit is readily available to viable farm enterprises throughout the business cycle.
Bill C-75 will change only one clause in the act. That is the raising of the total amount of loans which can be guaranteed under FIMCLA over a five-year period of time from $1.5 billion to $3 billion. If this amendment is not passed we will soon reach the loan cap and we will have to suspend the program possibly for as long as two years. We have almost reached the point of having to suspend the program already it is so successful.
The Department of Agriculture and Agri-Food should give lenders 60 days notice if it will not be able to guarantee loans under the program. Since we expect to reach the present guarantee limit of $1.5 billion by the end of July, it is imperative that the legislation be passed as quickly as possible. Clearly, we do not want to reach the point of having to suspend the program.
The Farm Improvement and Co-Operatives Loans Act program is very popular. It is becoming more so every year. Over the last five years the number of loans registered under the program has more than tripled, from about 4,890 loans in the year 1990-91 to over 18,000 loans in the year 1994-95. The value of those loans has climbed from just under $82 million in the year 1990-91 to $515 million of loans that have been guaranteed in the year 1994-95.
We expect the activity for this year to reach $550 million. That will bring the five-year aggregate to the $1.5 billion level. With the current level of approvals, it should stay there for the next few years. At that level, a $3 billion cap will allow us to continue offering the program.
We attribute the increased loan activity to a number of factors: sustained lower interest rates and an improved farm debt situation, not as improved as we would like to see it but it certainly has improved from where it was in the past; greater participation by independent rural lenders; improved marketing of the program; and increased competition between lending institutions.
I would like to expand for a moment on the point about increased participation of rural lenders. In the early 1990s the
department began to encourage credit unions and caisses populaires to make the program more available to their customers. This has resulted in the addition of about 600 new designated lenders across the country. Besides adding more outlets for getting FIMCLA loans, this marketing change has also generated more competition between institutions for loans, all to the benefit of the borrowers, being the co-ops and the farmers themselves.
I said that the program had become more popular recently. Quebec and Alberta are the sources of most of the new growth. In Quebec we can thank the caisses populaires Desjardins. That movement has become a major participant. We can credit it for the rapid growth of loans in Quebec under FIMCLA. Quebec has now the third highest number of loans.
Just ahead of Quebec is Alberta which has the second highest number of loans. In that province the government owned Alberta Treasury Branches has become a significant lender under FIMCLA Saskatchewan. However, it is still the biggest user of the program. In 1994-95 that province accounted for roughly half of all the registered loans.
FIMCLA has proven to be a very inexpensive way for the government to support the agri-food sector. Over 30 years, costs have averaged over just $1 million a year, roughly 1 per cent of annual loans. Over the past three years the program has returned $6.3 million to the consolidated revenue fund.
In order to reduce the program costs even further, we will be increasing the registration fee by a small amount, one quarter of 1 per cent. This will raise the average registration fee by $67. It will now become $202 on average. Still, we must agree it is a very reasonable cost to provide such a guarantee and program to the co-operative movement and to the primary producers, the Canadian farmers. Had this fee level been in place over the past 30 years, net costs would have averaged $434,000 a year instead of $1 million.
To allay the concerns that the government's 95 per cent guarantee is actually a subsidy to lenders, I should point out that the net losses under FIMCLA have historically been lower than the losses lenders have incurred on loans guaranteed outside the program. We are certainly proud in the agri-food industry that those losses are at less than 1 per cent. That is a tremendous record and one which the agri-food industry should be and is proud of.
The program and the amendments have the support of the major farm groups and the commercial lenders across Canada. I urge members on both sides of the House to support quick passage of Bill C-75 so that there is no disruption in the program for the agri-food industry in Canada.