Agricultural Credit

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Agricultural Credit

 

a type of credit designed for agricultural development.

The essence and significance of agricultural credit are determined by the character of the production relations. Under capitalism, agricultural credit is a form of investment of loan capital in agriculture. Only large capitalist farms can easily afford the high interest rates charged for credit or come up with the mortgage collateral required for loans, so that land tenure becomes increasingly concentrated, with ruination being the fate of the poorest peasants and farmers. In the United States, interest reaches 8–12 percent per annum on short-term loans and 5 percent on long-term loans. Agricultural credit is closely inter-twined with mortgage credit.

In the socialist nations, agricultural credit is an important economic tie between the city and the countryside. With the aid of agricultural credit, the state influences the development of production and the mobilization and effective use of the monetary resources of agricultural enterprises. The socialist state uses agricultural credit to develop agriculture and raise the standard of living of the rural population. In the USSR, agricultural credit is an expression of the relations of public ownership of land and the means of production and is used for expanding and strengthening the material and production base of kolkhozes, sovkhozes, other agricultural production enterprises, and agricultural research institutions. Agricultural crediting in the USSR began with the founding of the Gosbank (State Bank) of the RSFSR in 1921. From 1932 through 1959, long-term agricultural crediting was provided by the Sel’khozbank (Agriculture Bank) of the USSR and short-term crediting by the Gosbank of the USSR. Since 1959 both types of crediting have been concentrated in the Gosbank of the USSR. Until the end of the 1950’s, the kolkhozes received most of the long-term agricultural credit, but in the 1960’s and 1970’s, the interkolkhoz associations, sovkhozes, and other agricultural enterprises that had been converted to full economic accountability also became recipients of agricultural credit.

Long-term agricultural credit is aimed at increasing the fixed assets of the kolkhozes, interkolkhoz organizations, and sovkhozes. The decree On Measures to Raise the Economy of the Lagging Kolkhozes (1964), a decree of the Central Committee of the CPSU and the Council of Ministers of the USSR, established maximum periods for agricultural credit of 20 years for construction and eight years for the purchase of tractors and combines. As a rule, the loans are granted for the full amount of expenditures for individual facilities. Around 83 percent of the credit is used for construction of production facilities and for the acquisition of equipment. Long-term agricultural credit is of a planned character. It is to be granted for stipulated purposes and is determined by the plan quotas for agricultural development.

Short-term agricultural credit is bank credit for covering a seasonal shortage of money. This form of credit is used to pay for commodities and the labor of kolkhoz members within the limits set by the production and financial plan, as well as to cover taxes and other fees. The periods of the loans are set up to 12 months, depending on when the income is received. The Gosbank of the USSR charges 0.75 percent per annum for long-term loans and 1 percent for short-term loans.

In the other socialist countries the development of agricultural production cooperatives has been accompanied by increased state investments in agricultural crediting. In these countries, longer periods are characteristic for agricultural credit. In Poland, loans for forming fixed capital are granted for a period of up to 30 years and more. In Bulgaria, the periods are timed so that the loans are paid at about the time the fixed capital is completely worn out. Agricultural credit is characterized by low interest rates in the other socialist nations, as it is in the USSR. In Czechoslovakia, 1.5 percent per annum is the charge for using credit for construction and for the purchase of machinery; in Hungary the rate is 1 percent. The banks of the socialist nations also provide preferential agricultural credit to individual peasant farms (in Poland, for example, farms can receive agricultural credit for 20 to 40 years at a rate of 1–3 percent per annum). In most of the foreign socialist nations, agricultural crediting is carried out by the state banks of issue; in Poland and the German Democratic Republic it is done by special banks.

REFERENCES

Finansy i kreditovanie sel’skokhoziaistvennykh predpriiatii. Moscow, 1968. Pages 159–216, 308–15.
Kolychev, L. I. Kredit i effektivnost’ kolkhoznogo proizvodstva. Moscow, 1972.

L. V. BRAGINSKII

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