I think it is worth about $7,000 or $8,000. I could make some money on it if I sold it but it is a very proud possession of mine.
The program is designed to increase the availability of credit to farmers and farmer owned co-operatives at a reasonable interest rate to improve farm assets and strengthen production and financial stability.
This act was amended in 1987 by increasing the maximum amount of outstanding loans for borrowers from $100,000 to $250,000. It introduced fixed rate loans and loan consolidation and refinancing. It expanded the scope of the act to allow for loan guarantees up to $3 million to farmer owned marketing co-operatives and for value added marketing, processing or distribution projects. It introduced a registration fee of one-half of 1 per cent of the loan amount.
Since February 1988 when the above noted amendments came into effect more than 65,000 loans representing more than $1.5 billion have been made under the act. Since 1990 over 55,000 loans have been made to utilize the act. There are currently 10 active value added co-operative loans totalling $14.2 million. Personally, I believe that value added marketing is the wave of the future. We will see this area grow significantly in the years ahead.
Last year, this act was used to facilitate more than 18,000 loans totalling more than $475 million. The average loan size for 1994-95 was $27,000 and the five year average is $22,000.
Over the last 25 years, net losses under the act have approximated 1 per cent of the total loan guarantees. There are currently two one time fees paid by the borrower. The first is the loan registration fee which is forwarded to Agriculture and Agri-Food Canada of one-half of 1 per cent of the loan amount. The second is an administration fee which is paid to the lender, the lesser of one-half of 1 per cent or $250 on loans less than $250,000, or one-tenth of 1 per cent on loans of $250,000 or more.
The maximum rates of interest which can be charged by lenders are prime plus 1 per cent on a floating rate basis and prime plus 1 per cent plus one-quarter of 1 per cent for each year of a term loan. For example, that would be prime plus two and one-quarter per cent for a five year term loan. For a loan of $27,000 the cost would be approximately an extra $67. Approximately 683 rural lenders, such as credit unions, have been newly designated as lenders under the act since 1991.
Under the existing act, once the five year $1.5 billion loan guarantee limit is reached, the federal government would no longer be in a position to guarantee loans made by the lenders.
This would make any further new loans under the act impossible. Therefore, it is essential to have an amendment to the act which will increase the five year loan limit to $3 billion.
Having shared with members how I view the importance of this program, I do not believe the major banks have shared my opinion. I do not believe the banks have made sufficient progress in improving access to capital for the agriculture community. In fact, it has been suggested that the banks discourage the use of this loan act in favour of loans which would bring the banks larger profits.
More must be done to address the credit needs of agriculture. It is imperative. Just as the banks have been slow to finance small business, the same holds true for agricultural co-operatives. The banks have acknowledged though that they can do a better job of lending to agriculture and have taken a number of steps to improve this situation. However, we continue to receive the message from the agriculture community that more needs to be done.
As a member of the federal Ontario Liberal task force on access to capital to small business, I heard a litany of anecdotal evidence indicating the banks' indifference to small business. As a farmer, I was quite aware that many of the concerns of small business were the same for agriculture.
While it is difficult to document the validity of each individual claim, the volume of complaints certainly depicts an uneasy relationship with the banking institutions. I hope that situation will be improved now that we have the banks' attention with the levying of the temporary capital tax on large deposit-taking institutions in the finance minister's 1995 budget.
The government will be working with the banks to develop appropriate benchmarks for small business. I would define small business as including agriculture. We promised in the red book that we would take steps to increase capital availability in rural areas. We are keeping that promise with the passage of Bill C-75.
I encourage all members of the House to indicate their support of the agriculture community by supporting this bill.
