Wason 
 HG20S1 
 P5 
 A25. 
 

 CORNELL 
 
 UNIVERSITY 
 
 LIBRARY 
 
3 1924 074 346 101 
 
 DATE DUE 
 
 
 
 
 
 
 L — 
 
 rr'^^i r 
 
 'i ~ ' 
 
 
 
 
 
 
 
 
 *— « 
 
 
 
 ~™-», 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 CAVLORO 
 
 
 
 PRINTEDINO.S A 
 
Cornell University 
 Library 
 
 The original of this book is in 
 the Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924074346101 
 
REPORT 
 
 OF THE 
 
 CHIEF OF THE DIVISION OF THE CURRENCY 
 
 TO THE 
 
 TREASURER OF THE PHILIPPINE ISLANDS 
 
 CONCERNING THE 
 
 ADVISABILITY OF ESTABLISHING A GOVERNMENT 
 
 AGRICULTURAL BANK IN THE 
 
 PHILIPPINES. 
 
 BUREAU OF INSULAR AFFAIRS, 
 
 WAR DEPARTMENT. 
 
 WASHINGTON: 
 GOVERNMENT PRINTING OFFICE. 
 
 i9oe. 
 
CONTENTS. 
 
 Text of report: I Paga 
 
 J?he need of an agricultural bank in the Philippines 5 
 
 Postulates of successful agricuhiiral credit 8 
 
 Various types of agricultural'TOnks 8 
 
 The extension of a^cultural credit in the Philippines by private initiative. 9 
 
 ^ArGovernment agricultural bank 9 
 
 ©dbperative agricultural credit associations 11 
 
 "The Egyptian plan 12 
 
 The plan proposed for the Philippines 13 
 
 Some objections briefly considered — 
 
 (1 ) The alleged misuse of money by borrowers 14 
 
 (2) Possible expense to the Government 14 
 
 (3) Confused condition of land titles 16 
 
 (4) The difficulty of obtaining the necessary investment of capital. . . 16 
 
 (5) The interference with the official duties of provincial and munici- 
 
 pal treasurers 16 
 
 (6) 'The rate of interest 17 
 
 Conclusion 17 
 
 Exhibit A. — Draft of a bill for the establishment of an agricultural bank in 
 
 the Philippine Islands 19 
 
 Exhibit B. — Agricultural credit in the Philippines 28 
 
 Schedule I. — Eates of interest prevailing in different provinces on loans 
 
 secured by realty 28 
 
 Schedule II. — Summary of opinions of provincial treasurers concerning 
 
 the advisability of establishing an agricultural bank 29 
 
 Schedule III. — Extracts from opinions of provincial treasurers concerning 
 
 the need of an agricultural bank 31 
 
 Schedule IV. — Statement showing (A) agricultural land registered in 
 each of the provinces under the Philippine land regis- 
 tration act; ( B ) agricultural land in each of the provinces, 
 applications for the registration of which are pending . . 43 
 (This last schedule is in course of preparation and will 
 be submitted later. ) 
 
 Exhibit C. — The Agricultural Bank of Egypt 44 
 
 Schedule I. — Extracts from Lord Cromer's reports 44 
 
 Schedule II. — Concession of Egyptian Government 52 
 
 Schedule III. — Statutes of bank 54 
 
 Schedule IV. — Bank's plan of operation 60 
 
 Schedule V. — Instructions to borrowers 62 
 
 Schedule VI. — Forms used by bank 63 
 
 Exhibit D. — Provisions of the code of commerce cenceming mortgage and 
 
 agricultural banks in the Philippines 70 
 
 Exhibit E. — Statutes of the East Prussian Landschaft 73 
 
 Exhibit F.— Statute of the New West Prussian Landschaft 78 
 
 Exhibit G. — French law relating to societies for the grant of land credit 82 
 
 Exhibit H.— Articles of the Credit Foneier of France 87 
 
 Exhibit I. — Laws and regulations relafing to the Hungarian Boden-Kredit 
 
 Institut ; - . 95 
 
 Exhibit J. — Extracts from the laws and regulations regarding real credit in 
 
 Italy 105 
 
 Exhibit K. — Law relating to the mortgage bank of Canton Beme (Switzer- 
 land) 116 
 
 3 
 
4 CONTENTS. 
 
 Page 
 Exhibit L. — Agricultural bank bill proposed for the Madras presidency 
 
 (India) 120 
 
 Exhibit M. — Abstracts of the agricultural banking laws of the various Aus- 
 tralian States and of New Zealand 
 
 Schedule I. — Abstract of the South Australian agricultural bank act 151 
 
 Schedule II. — Abstract of the Western Australian agricultural bank act. . 151 
 
 Schedule III. — Abstract of the New South Wales agricultural bank act. .. 152 
 
 Schedule IV. — Abstract of the Victorian agricultural bank act 152 
 
 Schedule V. — Abstract of the Queensland agricultural bank act 153 
 
 Schedule VI. — Abstract of the New Zealand agricultural bank act 153 
 
 Exhibit N.— Comments and recommendation of Mr. Charles A. Conant with 154 
 reference to the establishment of mortgage banks in the Phil- 
 ippines 155 
 
REPORT OF THE CHIEF OF THE DIVISION OF THE CURRENCY 
 TO THE TREASURER OF THE PHILIPPINE ISLANDS. 
 
 Tebasukt Bureau of the Philippine Islands, 
 
 Division of the CuRiiENcr, 
 Manila, P. Z, February 7, 1905. 
 Sik: Pursuant to instructions given the chief of the division of the 
 currency in June, 1904, by the treasurer of the Philippine Islands, 
 under authority of a resolution of the commission passed April 13, 
 1903, instructing the insular treasurer to present to the commission a 
 plan for the establishment and maintenance of an agricultural bank 
 in the Philippines with government funds, I have the honor to make 
 the following report: 
 
 THE NEED OF AN AGEICULTUEAL BANK IN THE PHILIPPINES. 
 
 The need of some institution in the Philippines which will make 
 advances to farmers upon the security of their lands or crops has 
 been a long felt one. The establishment of such an institution was 
 frequently urged in Spanish times, and it is said that several serious 
 efforts were made in that direction, efforts, however, which proved 
 futile principally on account of the confused condition of land titles 
 in the islands. The code of commerce" contains liberal provisions for 
 the establishment of agricultural banks on the debenture plan. The 
 charter of the Banco Espanol-Filipino authorizes that bank to make 
 loans on real estate, under c'ertain restrictions, to half the value of 
 the property mortgaged. The report of the Schurman Commission 
 declared that " the lack of proper capital and the high price asked for 
 loans constitute another obstacle, which stupefies industry, augments 
 the cost of production, and restrains, in consequence, its benefits." 
 The civil commission, in its second annual report, discussed the subject 
 at length, and recommended Congressional action to encourage the 
 creation of mortgage banks by private enterprise. The desirability of 
 some government action with this object in view has been frequently 
 urged by provincial governors, provincial treasurers, and others 
 having an intelligent interest in Philippine affairs. Inquiries made 
 sometime ago of the various provincial treasurers with reference 
 to the need of ah agricultural bank in their respective provinces* 
 elicited in nearly every case the reply that the need was a most 
 urgent one. Out of 28 replies received to the inquiries made, 24 
 were favorable to such a project. Although these letters were writ- 
 ten nearly two years ago, there is little reason to believe that the 
 conditions therein described have very materially changed in the 
 interim. 
 
 o See Exhibit D. ^ Exhibit B, Schedules II and III. 
 
6 AGEICULTUKAI. BANK IN THE PHILIPPINES. 
 
 The deplorable condition of agriculture in the Philippines is too well 
 known to require comment." The ravages of rinderpest and of locusts, 
 the failure of crops through droughts, me havoc wrought by the insur- 
 rection, the wretched facilities for the transportation of crops, as well 
 as the normally backward condition of Philippine agriculture at its 
 best are commonplace among people" familiar with Philippine con- 
 ditions. In this connection it is sufficient to repeat the statement so 
 frequently made that there are few countries so fertile and as richly 
 endowed with agricultural possibilities as the Philippines, and withal 
 few so primitive in methods of cultivation and so unproductive of 
 results. The Philippines are preeminently an agricultural country, 
 and their economic future will depend very largely upon the develop- 
 ment of their agricultural resources. 
 
 Thanks to the enlightening influence of American occupation, and 
 more especially to the work of the American teacher and the insular 
 bureau of agriculture, the Filipinos are beginning to wake up to the 
 deplorable condition of Philippine agriculture and to its wonderful 
 possibilities if properly utilized. 
 
 A knowledge on the part of the people of these bad agricultural con- 
 ditions and of possible means of remedying them is one thing, the 
 ability to adopt improved methods is quite another one. Waste land 
 can not be reclaimed, improved farm machinery can not be bought, 
 fields can not be drained or irrigated, and draft animals can not be 
 bought without capital, and the Filipino people are at present land 
 poor. 
 
 Without credit facilities the world's present day great commercial 
 and industrial enterprises would be utterly impossible. The stock-_ 
 broker buys upon a margin, deposits the stock purchased as security 
 for payment, and later settles his account from the proceeds of its ■ 
 sale. The manufacturer purchases his raw material and hires his labor 
 by means of funds borrowed from a bank on the security of the goods 
 purchased and of the product being manufactured therefrom. The 
 debt is paid from the proceeds of the sale of the finished product. 
 The exporter purchases his produce and hires his labor by means of 
 funds borrowed from a bank on the security of a pledge to transfer to 
 the bank, at certain rates fixed in advance, the exchange bills he will 
 draw upon the consignee of the goods when exported. The consignee 
 in turn accepts the bills when presented, obtains the goods, and in 
 three, four, or six months' time, as the case may be, pays his home 
 bank from the proceeds of the sale of the goods imported. From first 
 to last the great bulk of the world's commercial transactions are effected 
 through the mechanism of credit. 
 
 /^ Carefully worked out and highly specialized as is this credit system 
 jas regards industrial and commercial enterprises, it is still, relatively 
 speaking, in a crude and undeveloped stage as far as agriculture is 
 concerned. While there appears to be no reason in the nature of 
 things why it should not ultimately be as easy for a farmer to obtain 
 capital by the pledge of his land or crops, "as it is for the manu- 
 facturer to obtain it on the security of his plant, his raw materials, 
 or his finished produate and no reason why a farmer's crops should 
 not be insured agafflrlosses by drought, insects, or other destruc- 
 tive agents as readily as is the manufacturer's plant from fire, this 
 
 a Exhibit B, Schedule III. 
 
AGEICXJIiTTJKAIi BANK IN THE PHILIPPINES. 7 
 
 condition of affairs has not yet been realized. Land titles are fre- 
 quently uncertain; obstacles in the way of the facile alienation of landed 
 property are numerous; rapid advances in the way of improved and 
 extended transportation facilities and the resultant opening up of new 
 territory render agricultural lands extremely uncertain in value; man 
 has not yet attained sufficient knowledge and control of natural forces 
 to be able to assure himself to any high degree of regularity and uni- 
 formity of crops; the supply of our staple crops is extremely variable, 
 and so also is the price. For these and other reasons agricultural lands 
 and growing crops are not generally looked upon as the safest and most 
 desirable classes of securities for a banking institution, and, as a con- 
 sequence, it has been found desirable for the state in many cases to 
 assist in one way or another the development and extension of agricul- 
 tural credit. At the present time nearly all civilized countries, as 
 the laws appended in Exhibits C to M of this report will bear witness, 
 grant special privileges and concessions to institutions loaning money 
 for agricultural purposes. Among the numerous methods employed 
 by different states for the assistance of agricultural credit may^ be 
 mentioned the establishment of government agricultral banks, and the 
 granting of special concessions to private agricultural banks or asso- 
 ciations, such as subventions, guaranties of dividends on stock or of 
 interest on bonds, the use of government officials and clerks for admin- 
 istrative purposes, exemptions from taxation, the franking privilege, 
 and a great variety of extraordinary legal privileges to assure the 
 prompt and economical enforcement of the bank's claims. /' 
 
 If state assistance is necessary in the more advanced countries of 
 the world, how much more imperative is it in a backward country like 
 the Philippines, where the impediments to the successful development 
 of agricultural credit are infinitely greater. 
 
 In Exhibit B, Schedule I, of this report a summary statement is 
 given of the interest rates prevailing in the different provinces of the 
 islands on loans secured by agricultural property. The rates stated 
 are appalling and sufficient to strangle the most productive agriculture 
 anywhere. Bates of from 2 to 5 per cent a month appear to be com- 
 mon, while rates as high as 10 per cent a month, and even higher, are 
 not infrequent. The treasurer of Cagayan reports that interest in 
 that province varies from 25 to 50 per cent. In Ilocos Sur the rate is 
 said to vary from 10 to 100 per cent; in Ilocos Xorte, from 20 to 100 
 per cent. It is a common practice for the person loaning the money 
 to obtain the privilege of purchasing the borrower's crops at ridicu- 
 lously low prices fixed in advance, so that the nominal rate of interest 
 often falls far below the rate actually exacted. 
 
 /* The demand for agricultural credit is not being met by the banks of 
 the islands, nor does it offer any prospects of being so met for some 
 time to come. Of the four large banking establishments in the Philip- 
 pines, two — the Hongkong and Shanghai Banking Corporation and the 
 Chartered Bank of India, Australia, and China — are prevented by their 
 articles of association from making advances on real estate, although 
 both institutions have occasionally, on special permission from their 
 head offices, made small advances on real estate security as special 
 favors to patrons of the bank. According to the latest reports received 
 by this office the total outstanding loans secured by agricultural prop- 
 erty of the Banco Espaiiol-Filipino and the International Banking 
 Corporation, in the Philippines, will probably not exceed ^P750,000. 
 
8 AGEICULTTJBAL BANK IN THE PHILIPPINES. 
 
 The figiires can not be stated exactly because of the difficulty of draw- 
 ing a sharp line between advances made on urban and agricultural 
 property. 
 
 The larger European commei'cial houses frequently make advances 
 upon crops, but these advances are for the most part limited to the 
 owners of a few large estates, and even then the charges by way of 
 interest, commissions, and the reduced prices at which the crops are 
 purchased are said to often be excessive. Reports from Iloilo received 
 this year state that loans of this type in that section of the islands are 
 becoming less frequent. 
 
 POSTULATES OF SUCCESSFUL AGRICULTURAL CREDIT. 
 
 Mr. F. A. Nicholson, in his able and voluminous report to the gov- 
 ernor of Madras "Regarding the possibility of introducing land and 
 agricultural banks into the Madras presidency," sums up the postu- 
 lates of successful agricultural credit in the three words, (1) proximity, 
 (2) security, (3) facility and safety. "For the due provision of such 
 credit," he says, "there are demanded as postulates proximity of 
 lender and borrower, security to the lender that his loans are solidly 
 and safely based on unincumbered property actually owned by the 
 borrower; that they will be repaid with punctuality and strictness; 
 that dues and arrears shall be readily recoverable; facility and safety 
 to the borrower, so that on the one hand he may be able to borrow 
 freely, promptly, and cheaply and to repay conveniently, and that on 
 the other he may not only be free from the risk of unforeseen entan- 
 glements, accidental or deliberately promoted, but may be influenced 
 and even guided toward the safe and productive use of the credit 
 granted." 
 
 VARIOUS TYPES OF AGRICULTURAL BANKS. 
 
 As regards ownership and control four distinct types of agricultural 
 credit institutions present themselves: 
 
 (1) An agricultural bank conducted by private capital for the profit 
 of the promoters. Such an institution may be carried on independ- 
 ently, or in conjunction with other business enterprise. 
 
 (2) A purely governmental institution, financed with government 
 funds, and administered through government agencies. 
 
 (3) Cooperative associations of the type so common throughout 
 Europe, wherein the farmers in one or more rural communities band 
 themselves together in a cooperative society, depositing their own 
 funds in the society and obtaining additional funds by the sale of 
 debentures, many of which they purchase themselves, loaning among 
 their number the funds so obtained, and managing in every way the 
 affairs of the institution. 
 
 (4) A private institution under careful government supervision and 
 control, and with liberal government guarantees and concessions, as, 
 for example, the Agricultural Bank of Egypt. 
 
 Each of the above types of institutions has its own peculiar merits 
 and defects, and in each class the merits and defects have been made 
 known through the test of experience. It is not the province of a 
 report like the present one to enter into a detailed discussion of these 
 or other possible types of agricultural banking institutions. A word 
 with reference to the applicability of these different plans to conditions 
 in the Philippines will be sufficient. 
 
AGRICULTUKAL BANK IN THE PHILIPPINES. V 
 
 THE EXTENSION OF AGRICULTUKAL CREDIT IN THE PHILIPPINES BT 
 PRIVATE INITIATIVE. 
 
 With reference to the policy of inaction on the part of the govern- 
 ment, and of leaving the problem of providing agricultural credit 
 facilities for the islands entirely to private initiative, it should be said 
 that has been the policy so far adopted in the Philippines, and that its 
 results, as seen in present conditions, give it scant justification. The 
 risks are at present too great for the enticement of private capital in 
 any considerable quantities into such enterprises, while the expenses 
 connected with the investigation of titles and values, and the collection 
 of annuities, in a country so extensive as the Philippines, and possess- 
 ing such poor means of communication, would be prohibitive. The 
 adoption, moreover, of any one of the other plans mentioned need not 
 prevent the extension of agricultural credit operations by existing 
 banking institutions. 
 
 A GOVERNMENT AGRICULTURAL BANK. 
 
 The second type of institution mentioned, i. e. , one financed and 
 administered entirel}^ by the government, is the opposite of the plan 
 just referred to. A plan of this type, recently suggested to the chief 
 of the division of the currency, contemplates the acquisition by the gov- 
 ernment of the necessary capital by the issuance of government bonds, 
 the establishment of a central office in the treasury bureau under the 
 supervision of the insular treasurer, with branches in each of the pro- 
 vincial treasuries under the management of the respective provincial 
 treasurers, who would receive and investigate applications for loans, 
 collect annuities when due, and in other ways look after the local inter- 
 ests of the bank. Advances would be made only on the security of 
 real estate registered under the land-registration act, and in each case 
 upon the approval of a central board located in Manila. 
 
 This scheme, which appears to be the one most generallj' contemplated 
 by persons who have been interested in the establishment of an agri- 
 cultural bank in the islands, and which undoubtedly possesses many 
 ■merits, does not appear to the chief of the division of the currency to 
 be practicable for the following reasons: 
 
 (1) It would encourage the already too prevalent proclivity of the 
 native population to depend upon the government for financial aid and 
 support. It would tend to encourage dependence and laziness, whereas 
 the first essentials of agricultural progress are self-reliance and industry. 
 Under such a plan the government would come to be looked upon as 
 a sort of paternal institution, possessing an unlimited amount of wealth 
 upon which it placed little value because it was easily obtainable and 
 wnich it was under obligation to loan to the people on easy terms of 
 pa3^ment. It would be expected to be liberal to the extent of laxity 
 in collecting its annuities and iti otherwise enforcing the terms of the 
 loan contract. If it should foreclose mortgages to an 3'- extent for non- 
 payment of loans it would be liable to arouse popular opposition and 
 to be vituperated for its greed in exacting unreasonable terms of a poor 
 and unfortunate people, and for depriving the people of their property 
 to increase its ali'eady extensive domains. 
 
 (2)r Government officials are not in position to assume the work 
 and responsibility such a plan would entail upon them. The work of 
 
10 AGBICULTUBAL BANK IN THE PHILIPPINES. 
 
 a provincial treasurer under such a scheme would be heavy, and it 
 would involve an amount of investigation into the private affairs of 
 the people of bis province foreign to the work of bis oflScial position 
 and inconsistent with its efficient performance. A considerable propor- 
 tion of the applications made for loans would have to be rejected, and 
 the government would find it difficult to avoid criticism and all sort 
 of charges of injustice and partiality in accepting some applications 
 and rejecting others. Such a procedure would put the government 
 in a very delicate position. The fact, moreover, that the provincial 
 treasurer was not himself financially responsible for loans made upon 
 his recommendation would probably result in many bad investments. 
 
 (3) The rigid enforcement of the terms of the loan contract would 
 be difficult for the government, and would probably result in dump- 
 ing upon the government a considerable amount of property as the 
 result of foreclosures. 
 
 The dangers just described are not fanciful; they have been in other 
 countries the rocks upon which more than one government agricul- 
 tural bank has foundered. 
 
 Mr. F. A. Nicholson, in his report on "The possibility of intro- 
 ducing land and agricultural banks into the Madras presidency," says: 
 "The establishment of state banks is out of the question; it is impos- 
 sible and would, if possible, be inadvisable. * * * It would enor- 
 mously develop bureaucratic interference in everyday affairs of 
 life, * * * and would absolutely confirm the already overwhelm- 
 ing tendency of this country to look to the state, not only in all emer- 
 gencies, but in the ordinary affairs of life, to consider it as answerable 
 for or bound to relieve its misfortunes and to accept the burden of all 
 its debts and poverty; it would develop in a high degree the habit of 
 attempting to overreach and defraud that entity vaguely known as 
 'government,' which is usually credited with unlimited means and 
 with the ability to overlook individual debts; * * * it would choke 
 all private enterprise and, still worse, the development of habits of 
 providence, thrift, self and mutual help, which are among the highest 
 qualities of a nation." Again, he says: " The history of rural banking 
 shows that no state bank nas ever yet succeeded except in very petty 
 states, where the administrative staff is out of all proportion — rela- 
 tively to large states — to the work to be done and the area to be 
 covered by it, or where the communes are linked to the central organ- 
 •ization by peculiar arrangements, or where the banks are not credit 
 banks at all, but mere offices of issue of loans either upon the results 
 of the inquiries of special commissions, as in the case of the German 
 rent charge banks, or upon the security of commercial organizations 
 which deal with all details, as in the case of the Russian peasants land 
 bank, founded to enable the exserfs to buj^ out the land settled upon by 
 them. There are no state land banks in great states dealing with the 
 continuous yet fluctuating credit required by a cultivating peasantry." 
 
 Lord Cromer, in his annual report for 1900, in speaking of the Agri- 
 cultural Bank of Egypt, said: "The objections to purely government 
 action in Egypt are twofold. In the first place, the government could 
 not, without much inconvenience, have provided the necessary capital. 
 In the second place, the officials of the government have not the time 
 to go amongst the villagers and seek out those who are in want of loans. 
 Even if they had the necessary time at their disposal, it is not altogether ' 
 desirable that they should be employed on work of this sort. Further, 
 
AGRICULTTJKAL BANK IN THE PHILIPPINES. 11 
 
 they have no personal pecuniarj^ interest in the matter. When it has 
 been publicly notified that an application to some government author- 
 ity at a certain time and place, small loans may be obtained on certain 
 conditions, the government officials naturally enough think Ihat they 
 have done all that is required of them." 
 
 COOPEKiTIVE AGEICULTDRAL CREDIT ASSOCIATIONS. 
 
 The third possible type of agricultural bank suggested is found in the 
 rural cooperative credit associations of Europe. These associations 
 represent without question the most successful type of agrieHltural 
 credit institution yet established. The names of Schultze-Dilitzsch 
 and Raiffeisen in Germanj% Austria, and Belgium, and of Euzzatti 
 and Wollemborg in Italy, are household words among the peasant 
 classes of those countries, and the agricultural credit associations 
 founded through their labors and influence have been one of the 
 strongest factors in the regeneration of European agriculture and in 
 the recent progress and present contentment of millions of the Euro- 
 pean peasantry. The sum of money annually made available by these 
 credit associations for productive purposes is estimated at £150,000,000. 
 The amount of the business doM^however, is not so significant as its 
 character. This vast sum is n^j^pip largely of small loans made for 
 agricultural purposes at low rates of interest and at an insignificant 
 cost of administration. Mr. Henry W. Wolfe, who has probably made 
 a more careful study of these institutions than any other English- 
 speaking person, and the results of whose studies are given in his 
 numerous writings upon the subject, the principal of which is his mas- 
 terful work on "People's Banks," says, "To my mind there has never 
 been a more prolific source of potential temporal good placed at the 
 disposal of those who are dependent upon labor." 
 
 The different cooperative systems above referred to, though varying 
 in detail, are all based upon the same general plan, i. e., the establish- 
 ment of cooperative associations by the small farmers and other inter- 
 ested persons in local communities, who are at once creditors and 
 debtors of the association, and who manage its affairs through regular 
 general meetings, either weekly or biweekly as a rule. Funds areN 
 obtained through the issue of debentures, the receipt of small deposits, ! 
 and often through an initial subscription to a capital fund, state sub- 
 ventions are sometimes granted. Advances are made to the members 
 of the association, usually on promissory notes bearing the signatures 
 of two members. Repayments are by annuities covering principal 
 and interest. Local associations are frequently linked together in a 
 sort of league for mutual cooperation, and with a central association 
 which issues its own debentures in return for those of the local associ- 
 ations and thereby materially assists in the profitable disposal of local 
 debentures. 
 
 Under the plan outlined each association is largely a local affair, 
 the borrowers are for the most part using the small savings of their 
 neighbors. They accordingly fully appreciate the value of the money, 
 and public opinion requires them to expend it wisely. The money is 
 loaned by the people who best understand the character and resources 
 of the borrower, who can best sympathize with his misfortunes, and, 
 in case of threatened loss through the negligence of the borrower or 
 the improper use of the funds borrowed, who are most capable of 
 
12 AGRICULTTJEAL BANK IN THE PHILIPPINES. 
 
 bringing effective pressure to bear to protect their own interests and 
 those of the borrower as well. The management of these associations 
 by the peasants of Europe has given them an education in business 
 methods, and has developed a spirit of mutual cooperation and sym- 
 pathy the value of which can scarcely be overestimated. The history 
 of the success of these cooperative associations is one of the most fas- 
 cinating chapters in modern finance. 
 
 Any attempt to introduce this type of institution in the Philippines 
 would, it is believed, for some time to come be premature. The qual- 
 ities of intelligence, foresight, honesty, self-control, as well as the 
 business ability, mutual confidence, and power to abide by the opinion 
 of the majority, which are absolutely essential to the success of a coop- 
 erative credit association, are as yet too deficient in that class of the 
 Filipino people who most need agricultural credit to give for the 
 present any promise of success to such an institution in the Philippines. 
 Cooperative agricultural credit may belong to the to-morrow of the 
 Philippines; it is scarcely a possibility of the present. 
 
 If the difficulties in the way of extending agricultural credit in the 
 Philippines by means of private enterprise or by means of an exclu- 
 sively governmental institution appear for the time being to be insur- 
 mountable, and if at the same time each class of institutions has peculiar 
 merits of its own, the question at once presents itself whether it would 
 not be possible to organize an institution which would, to a great 
 extent, utilize the good features of both plans and eliminate the objec- 
 tionable ones. This, in a word, was the idea underlying the recent 
 organization of the Agricultural Bank of Egypt, an institution which 
 has so far proven remarkably successful. 
 
 THE EGYPTIAN PLAN. 
 
 The principal difficulties in the way of the extension of agricultural 
 credit facilities by means of private enterprise were found to be the 
 risks involved and the expense of establishing and maintaining the 
 administrative machinery necessary for the making of loans, the proper 
 inspection of mortgaged properties, and especially for the collection 
 of annuities on a large number of widely scattered loans. The plan 
 adopted in Egypt, which will be found described in detail in the 
 annual reports of Lord Cromer, extracts from which are given in 
 Exhibit C, Schedule I, of this report, consisted in the simple expedi- 
 ent of the government's guaranteeing interest on capital invested in 
 an agricultural bank by private individuals and corporations, and of 
 its placing at the disposal of the bank for the collection of annuities 
 and for other minor duties the services of the government tax collectors, 
 who make collections for the bank at the same time at which they col- 
 lect the regular land tax. Those collectors are paid by the bank a 
 I small commission for their services. The Egyptian Government holds 
 a certain amount of the bank's stock, is represented on the board of 
 directors, and p6ssesses the right of careful supervision over the bank's 
 operations; othetwise the bank is in all respects a private enterprise. 
 
 The Agricultural Bank of Egypt found its rude beginnings about 
 1895, when the Egyptian government as an experiment advanced 
 £E10,000 in small loans to the fellaheen. In 1899 the newly created 
 National Bank of Egypt began to make advances of small sums up to 
 £E20, at 9 per cent interest repayable in lump sums, and of larger 
 
AGKICULTTJEAL BANK IN THE PHILIPPINES. 13 
 
 sums, at the same rate of interest, repayable in five annual install- 
 ments. Local tax collectors were utilized in making collections. The 
 rate of interest was subsequently raised to 10 per cent. " In 1899 
 operations were undertaken in only one district; * * * 2,450 
 advances, amounting in all to £E31,500, were made. In 1900 the 
 bank extended its operations to ten districts." Its sphere of opera- 
 tions now covers all lower Egypt. " In 1900, 9,500 advances, amount- 
 ing to £E137,781, were made. Of these, 6,213, amounting to 
 an aggregate of i;E36,216, were loans repayable within the year; 
 the remaining 3,287 advances, amounting in all to £E101,565, were 
 repayable in five years. * * * The amount that fell due in 
 1900' was i;E28,120, due from no less than 5,030 borrowers," with 
 reference to which Lord Cromer says in his report of 1900: "It is 
 with very special pleasure that I am able to record that the whole sum 
 was recovered." By 1901 the National Bank of Egypt had advanced 
 about £E400,000 in small loans, and not being able at the time to lock 
 up more capital in such loans the Egyptian government came to the 
 rescue by temporarily advancing ££250,000 to the bank. "It was 
 evident, however," says Lord Cromer in his report of 1902, " that the 
 class of operations involved in making these loans fell more properly 
 within the functions of a land bank than within those of an ordinary 
 bank. Moreover, after a prolonged trial it appeared that the somewhat 
 novel system adopted in Egypt some few years ago had passed out of 
 the experimental stage, and that the introduction of a scheme of a 
 more permanent character than that heretofore adopted was justifiable. 
 Negotiations having this object in view were set on foot with the result 
 that on the 1st of June, 1902, an agricultural bank was started under 
 the auspices of the National Bank of Egypt. All loans outstanding 
 with the National Bank were transferred to the new bank, whose sole 
 business it is to lend money to the fellaheen." 
 
 In his annual report for 1903 Lord Cromer says that on December 
 31, 1903, the outstanding loans of the bank amounted to ££2,186,746, 
 and that this sum represented advances to 78,911 persons. The aver- 
 age amount of the loans was ££27-14 s., the great bulk of the loans being 
 in amounts of from £E20 to £E50. "Additional capital to the amount 
 of ££2,500,000," Lord Cromer says, "is about to be raised to extend 
 the operations of the bank." 
 
 That the Egyptian Agricultural Bank has so far proven a remark- 
 able success, both from the standpoint of the stockholders and of the 
 Egyptian fellaheen, there can be no que^on. 
 
 THE PLAN PROPOSED FOR THE PHILIPPINES. 
 
 The plan proposed for the Philippines will be found in the draft bill 
 given as Exhibit A of this report. The bill largely explains itseTF 
 and requires little comment. The plan proposed is an attempt to 
 adjust the-Egyptian scheme to Philippine conditions. Many features 
 of the bill, however, are adapted from provisions in the laws govern- 
 ing the principal agricultural banks of Europe, copies of which are 
 given in the exhibits of this report. The bill contains comparatively 
 few original features, and, with few exceptions, the provisions of the 
 bill in their essentials have been for many years in successful opera- 
 tion in one or more European countries. 
 
14 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 Among the principal objections that may be brought to the proposed 
 plan are: 
 
 (1) The danger that native borrowers will misuse the funds borrowed. 
 
 (2) The possible expense to the government. 
 
 (3) The confused condition of Philippine land titles. 
 
 (4) The difficulty of obtaining the necessary investment of capital. 
 
 (.5) The interference with the official duties of provincial and muni- 
 cipal treasurers, many of whom are already overburdened with the 
 work of their offices. 
 
 (6) The high rate of interest. 
 
 A few words of comment with reference to these objections may be 
 apropos. 
 
 ALLEGED MISUSE OP MONET BY BORROWERS. 
 
 First, with reference to the misuse of funds by native borrowers. 
 It is frequently said that an agricultural bank in the Philippines would 
 be impracticable because of the unreliability of the native population. 
 The claim is made that money would be borrowed ostensibly for agri- 
 cultural purposes, but in many cases as soon as received would be 
 diverted from its pretended object and squandered on fancy clothes 
 and jewelry, or, still worse, at the cockpit or the monte table. That 
 this would be a real danger in the Philippines, and one to be carefully 
 guarded against, can not be questioned. In reply, however, it should 
 be said that when account is taken of the class of natives to whom loans 
 would be made, the danger has probably been exaggerated. Further- 
 more, the bank would carefully investigate the character and responsi- 
 bility of each applicant for a loan as well as the security offered; its 
 officers would have the power to oversee the expenditure of the money 
 borrowed, and finally, under Section XIX of the proposed bill, the use 
 of the money for other purposes than those stipulated in the loan con- 
 tract, without the permission of the bank, would be a misdemeanor, 
 and as such render the offender liable to a fine and imprisonment, and 
 would immediately affect the maturity of the loan and authorize the 
 foreclosure of the mortgage, if necessary, for its collection. 
 
 The above objection was one strongly urged against the Egyptian 
 scheme. The fellaheen are in manj' ways proverbial for the same 
 shortcomings that are charged against the Filipinos. They are said 
 to be unreliable, improvident, and extravagant. After three years' 
 experience with agricultural loans Lord Cromer said : "So far * * * 
 as I have been able to judge^he alleged irremediable extravagance of 
 the fellaheen has, as I anticipated would be the case, been greatly exag- 
 gerated. Up to the present time the number of those who have used 
 their improved credit in order to incur fresh debt has, to the best of 
 my belief, been very small." 
 
 THE POSSIBLE EXPENSE TO THE GOVERNMENT. 
 
 In guaranteeing dividends of 4 per cent upon the capital stock of 
 such an institution, the government undoubtedly assumes a certain 
 risk. The fact that capitalists can not be induced to undertake such 
 an enterprise upon their own initiative without a government guar- 
 anty is evidence that, to the minds of shrewd business men, the 
 investment is not one perfectly certain of producing reasonable 
 returns. 
 
AGKICirLTUEAL BANK IN THE PHILIPPINES. 15 
 
 It-" 
 
 Granting this, however, it is believed that under the safeguards 
 provided in the proposed law the risk assumed by the government 
 would not be great. The bill provides a government guaranty of 4 
 per cent dividends a year for twenty-five years upon the bank's cash- 
 paid-up capital stock, the total stock authorized being 1P10,000,000. 
 The principal is not guaranteed, although the government waives its 
 claim for the repayment at the time of the bank's liquidation, of funds 
 due it by the bank on account of dividends advanced, in case the bank's 
 assets should not at that time be found sufiicient to more than meet 
 the legitimate debts of the bank and to paj' to the stockholders the par 
 value of their cash-paid-up capital stock. Upon the worst possible 
 assumption, i. e., that the government should be compelled to pay 
 the maximum amount for twenty-five years, and should receive no 
 repayment at the time of the bank's liquidation, the expense to the 
 government would be only ^10,000,000, or ¥=400,000 a year for 
 twenty-five years. All loans except the petty ones must be secured 
 by first mortgages on productive land possessing perfect titles and of 
 a value equal to at least twice the amount of the loan. In the case of 
 loans secured by those classes of lands which are peculiarly liable to 
 fluctuations in value, such as urban property and forest lands, the 
 maximum advances made can not exceed one-third the value of the 
 property mortgaged, while no loans are permitted upon such uncer- 
 tain securities as mines and quarries. 
 
 The bank furthermore receives part payment for its loans each year, 
 receives an interest rate of 10 per cent per annum, which should pro- 
 vide a good margin above reasonable dividends to cover expenses of 
 operation and losses, is compelled from the beginning to set aside a 
 large share of its profits to the credit of its surplus fund, a consider- 
 able part of which must be vested in securities not directly connected 
 with the vicissitudes of agricultural enterprise. The requirements 
 with reference to the accumulation of a reserve are rigid, and no claim 
 can be made against the government for dividends until the entire 
 reserve is exhausted. The government, for advances made on account 
 of dividends, has a first lien upon all profits subsequently realised, over 
 and above sufficient to pay 4 per cent dividends, until its advances 
 are repaid in full with compound interest. Furthermore, in consider- 
 ation of the risk incurred by the government, and the concessions made, 
 Section XXVI provides that the government shall share in the bank's 
 Extraordinary profits. The government's guaranty is not effective 
 unless the terms of the law and articles of association are complied 
 with. Directors are liable personally for noncompliance therewith, 
 and all responsible employees of the bank are required to be adequately 
 bonded. Unreasonable expenditures are guarded against by the neces- 
 sity of government approval of all large expenditures, while the gov- 
 ernment, hj representation on the board of directors and b}^ its com- 
 plete powers to inspect the books and records of the bank and to 
 examine its officers, should be in position to exercise an eifective and 
 salutarj' supervision. The bank, moreover, as well as the public, is 
 saved from large legal expenses by the fact that the courts of first 
 instance in the respective provinces are given final jurisdiction in all 
 suits arising over questions concerning the making of loans amount- 
 ing to ten thousand pesos or less by the bank, and their collection. 
 
 The government's position under the proposed bill is much better 
 secured than is that of the Egyptian government under the Egyptian 
 
16 AGKIGULTUEAL BANK IN THE PHILIPPINES. 
 
 agricultural banking law. Egypt has never been called upon to pay a 
 cent on account of its dividend guaranty, and Lord Cromer said in his 
 annual report for 1903: "It is in the highest degree improbable that 
 any occasion will arise for calling on the government to make good a 
 deficit." 
 
 CONFUSED CONDITION OF LAND TITLES. 
 
 One of the principal objections which has heretofore been urged 
 against the establishment of an agricultural bank in the Philippines 
 has been the confused condition of land titles. The proposed bill 
 eliminates the objection by forbidding the bank to make any loans in 
 sums above two hundred pesos except on the security of first mort- 
 gages on land registered under the land registration act. In this way 
 the bank's interests will be protected, while a much needed stimulus 
 will be given to the registration of titles. 
 
 Additional funds to meet the expenses incident to the registration 
 of titles will be rendered available by the bank's loans of the third 
 class, and by the fact that capital will be set free through the pay- 
 ment of private loans by the proceeds of advances obtained from the 
 agricultural bank for that purpose. 
 
 THE DIFFICULTY OF OBTAINING THE NECESSARY INVESTMENT OF 
 
 CAPITAL. 
 
 It is not probable that the Government will experience difiiculty in 
 inducing capitalists to invest money under the conditions of the pro- 
 posed law. The investment offers a guaranteed dividend of 4 per cent 
 per annum for twenty-five years, a rate which would repay the prin- 
 cipal, even if ever^^ cent invested were lost in the interim. The prob- 
 abilities of large profits are manifold, with the high interest rates 
 authorized, and the privilege the bank enjoys of utilizing govern- 
 mental administrative machinery for the collection of its loans. The 
 remarkable success of the Agricultural Bank of Egypt should give 
 capitalists added confidence in the scheme. With Philippine govern- 
 nient 4 per cent bonds eagerly sought for at a substantial premium, it 
 is not probable that a proposition like the one proposed would "go a 
 begging." 
 
 THE INTERFERENCE WITH THE OFFICIAL DUTIES OF PROVINCIAL AND 
 MUNICIPAL TREASURERS. 
 
 There is no reason why the services performed by government ofS- 
 cials for the bank need materially interfere with their official duties; 
 in fact, such services are authorized only in so far as they shall not 
 interfere with the efficient performance of their official duties. In the 
 richest provinces, to which the bank will probably largely confine its 
 operations at first, it will have its own permanently located represent- 
 atives, and the same will be true of the other provinces as rapidly as 
 the bank's business in them grows to any considerable proportions. It 
 is only in those provinces where the business of the bank is too small to 
 justify the establishment of a permanent office that the provincial treas- 
 urer will be likely to be called upon to perform many services for the 
 bank, aside from the overseeing of the collection of annuities by the 
 municipal treasurers. These collections will be performed in connec- 
 
AGBICULTUKAL BANK IN" THE PHILIPPINES. 17 
 
 tion with the regular tax collections of the municipal treasurers, and 
 should not require much extra time. The bank, moreover, will doubt- 
 less employ, as does the Agricultural Bank of Egypt, one or more 
 traveling representatives. 
 
 THE RATE OF INTEREST. 
 
 At first thought an interest rate of 10 per cent appeai-s unreasonably 
 high. It should be remembered, however, that the words "high" and 
 "low" when used with reference to interest rates are relative terms. 
 Ten per cent in countries like France, Germany, and England, or in 
 the New England and Middle States of the Union, where the prevail- 
 ing market rates on real estate security are 5 and 6 per cent, would be 
 high; 10 per cent, however, in a country like the Philippines, where 
 the prevailing rates on loans thus secured are from 1 to 10 per cent a 
 month, is a low rate of interest. There is nothing in the law to pre- 
 vent persons who are able to borrow money elsewhere at lower rates 
 from doing so. As long as the risk connected with such loans on the 
 part of the bank is considered great and the expenses of administration 
 are large the interest rate (using the term in the absolute rather than 
 the relative sense) must be high. Section XII of the proposed law 
 provides a method by which the rate of interest upon all outstanding 
 loans of the bank will be automatically reduced as soon as the bank's 
 independent financial position is assured and the success of the under- 
 taking established by the accumulation of a surplus. The first essen- 
 tial of such an institution is financial stability, and the people who 
 profit by loans at the beginning of the bank's operations and at the 
 time when agricultural conditions are unsettled, should be expected to 
 meet the extra expenses thereby required. 
 
 CONCLUSION. 
 
 The questions of the constitutionality of such a law, and of the 
 necessary authority from (Congress, are matters oatside of the province 
 of this paper. It may be worthy of mention, however, in passing 
 that not only have such banks been organized in foreign countries, 
 but that State-aided mortgage banks were frequent in the early days 
 of the United States, that the courts have upheld the grants of public 
 moneys to agricultural associations, that in the proposed law the 
 Philippine government receives a quid pro quo, in its participation in 
 the bank's extraordinary profits, and that the banking business, as 
 shown by the careful governmental supervision to which it is sub- 
 jected, and its close relation to public and private welfare, possesses 
 many of the features of a quasi-public enterprise. Such a concession, 
 moreover, on the part of Congress would not affect harmfully anj^ 
 particular industry or section in the United States, and as a conse- 
 quence would not be liable to arouse the strong local opposition and 
 local prejudices in the home country that recent attempts at tariff 
 reduction on Philippine products have aroused. 
 
 To the end that the plans in operation in foreign countries may be 
 readily available to those interested in agricultural credit in the Phil- 
 ippines, the more essential features of existing laws in other countries 
 are appended as exhibits of this report. 
 
 30795—06 2 
 
18 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 A detailed statement of the agricultural land registered in the dif- 
 ferent provinces of the islands under the Philippine land registration 
 act, and also of the land, applications for the registration of which are 
 pending, is in course of preparation and will later be submitted as 
 Schedule IV, Exhibit B, of this report. 
 
 The chief of the division of the currency is, not sufficiently familiar 
 with agricultural conditions in the islands to feel justified in recom- 
 mending the passage of the bill in its present form, assuming that the 
 necessary authority from Congress would be forthcoming if requested. 
 The inclosed bill is submitted merely as a rough draft to work from, 
 with the hope that it may ultimately serve as a basis for some definite 
 action forthe improvement of agriculture in the Philippines. 
 
 All of which is respectfully submitted. 
 
 E. W. Kemmeree, 
 Chief of the Division of the Currency. 
 
 The Treasurer oe the Philippine Islands, 
 
 Manila., P. I. 
 
EXHIBIT A. 
 
 DRAFT OF A BILL FOB, THE ESTABLISHMENT OF AN AGRICtTL- 
 TUBAL BANK IN THE PHILIPPINE ISLANDS. 
 
 [Prepared by E. W. Kemmerer, February 10, 1905.] 
 
 AN ACT To encourage agriculture in tlie Philippine Islands by granting certain concessions and guar- 
 anties to a corporation to be known as the Philippine agricultural bank, the business of which 
 shall be the making of loans to agriculturists in the Philippine Islands upon real estate, growing 
 crops, or other security duly authorized by this act, for the purpose of enabling them to pay off' 
 existing debts, to make improvements upon their lands, to purchase agricultural implements, farm 
 animals, fertilizers, and seed, and to make other similar expenditures desirable and proper for the 
 advancement and improvement of agriculture in the Philippine Islands. 
 
 By authority of tlu' United St(ttet(, he it enactedhy the Philippine Com- 
 mission that: 
 
 Section I. The short title of this act shall be "The Philippine agri- 
 cultural bank act." 
 
 Sec. II. The words " the bank," when used in this act shall refer to 
 the Philippine agricultural bank, unless the context clearly shows that 
 some other bank is referred to. 
 
 Sec. III. The persons hereinafter named being desirous of organiz- 
 ing a corporation for the purpose of loaning money to agriculturists 
 in the Philippine Islands, and having petitioned the Philippine 
 Commission for certain privileges and concessions to facilitate the 
 establishment and the safe and economical management of the afore- 
 mentioned enterprise, are hereby granted authority to organize a cor- 
 poration under the laws of the Philippine Islands, with headquarters 
 in Manila and branches in various parts of the islands to be known as 
 "The Philippine agricultural bank," which, by complying with the pro- 
 visions of this act, shall be entitled to the rights, privileges, and 
 guarantees herein granted, for a period of twentj^-tive years from the 
 date of the final approval of the articles of association by the Philip- 
 pine Commission as hereinafter provided. 
 
 Sec. IV. The Philippine agricultural bank shall have an authorized 
 cash capital of ten million pesos, which may be increased upon due 
 authorization from the Philippine Commission. The bank shall not 
 commence operations in the Philippine Islands until four million pesos 
 of said capital shall have been subscribed, and at least two million 
 pesos thereof paid in. 
 
 Sec. V. The articles of association of the Philippine agricultural 
 bank, which shall be approved by the Philippine Commission before 
 they shall become operative, and before the guaranties and privileges 
 provided in this act shall become effective, shall make provisions in 
 detail covering the following points: 
 
 (a) Capital stock — amount, character, par value, methods of sub- 
 scription, payment, transfer, and rights, privileges, and obligations 
 appertaining thereto. 
 
 19 
 
20 AGEICULTTJRAX, BANK IN THE PHILIPPINES. 
 
 (h) General meetings — ordinary and extraordinary — wlien, where, 
 and iiow to be convened, of whom composed, how organized, and the 
 powers and duties thereof. 
 
 (c) Directors — their number, method of election, term of office, 
 qualifications, remuneration, powers, duties, liability, and accounta- 
 bility. At least two directors shall be appointed by the Grovernor- 
 General. 
 
 (d) Other responsible officials of the bank — their method of appoint- 
 ment, duties, salaries, and bonded security required. 
 
 (e) The annual statement — its character in detail. 
 
 If) Auditors — their number, method of appointment, term of office, 
 compensation, qualifications, powers, duties, and accountability. 
 
 (g) Dividends — rules for their declaration and payment, and for their 
 disposition when unclaimed. 
 
 (A) Rules for the valuation of mortgages and other securities 
 tendered. 
 
 (i) The conditions which shall lead to dissolution, and the methods 
 and condition of liquidation. 
 
 (j) Rules for the periodic communication to borrowers of statements 
 of their accounts. 
 
 (k) Rules for the inspection of books and accounts by shareholders. 
 
 (l) Tables for the calculation of annuities. 
 
 (m) Rules and conditions for the renewal of loans and the extension 
 of the dates of repayment. 
 
 (n) Rules regarding the notification required by the bank borrowers,, 
 with reference to any changes, either actual or prospective, in the prop- 
 erty mortgaged, or in the bank's lien thereon, such as may be liable to 
 impair the value of the mortgage as security to the bank. 
 
 {o) A list of the salaries of all officials of the bank. 
 
 (p) Rules for such other matters as may be considered necessary or 
 desirable. 
 
 The articles of association, after once having been approved by the 
 Philippine Commission, shall not be amended, nor in any way altered 
 by the corporation during the period of the government's guaranty 
 of dividends, nor thereafter until all advances made by the government 
 shall have been repaid, without the express authorization of the PhiHp- 
 pine Commission. 
 
 Sec. VI. The bank shall make no expenditures for the erection, 
 improvement, or equipment of bank premises, which shall involve the 
 payment of five thousand pesos or over, during the period of the gov- 
 ernment's dividend guaranty without first obtaining the approval of 
 the secretary of finance and justice. 
 
 Sec. VII. Directors are responsible for operations undertaken by 
 the bank other than those contemplated by this act and the articles of 
 association pursuant thereto. Every director shall be individually 
 liable for all damages caused to the bank by failure to comply with 
 this rule, unless he shall prove that he was ignorant of the operation, or 
 that the operation was protested against by him and that he communi- 
 cated the fact immediately to the treasurer of the Philippine Islands 
 and to the general meeting held, if any, next after said operation. 
 
 Every director shall, except those appointed by the government, 
 own shares in the bank represeiiting a par value of at least twenty 
 thousand pesos. During the period of his directorate these shares 
 shall be kept in the custody of the treasurer of the Philippine Islands. 
 
AGEICTJLTUEAIj bank in the PHILIPPINES. 21 
 
 They may not be alienated, pledged, nor in any way charged during 
 his directorate. He shall ipso facto vacate office in case of breach of 
 this rule. 
 
 Sec. VIII. Advances made by the bank shall be of three classes, to 
 be known as loans of the first, second, and third classes. 
 
 Loans of the first class shall comprise all loans the principals of 
 which shall be more than five thousand pesos and not more than thirty 
 thousand pesos. * 
 
 Loans of the second class shall comprise all loans the principals of 
 which shall be more than two hundred pesos and not more than five 
 thousand pesos. 
 
 Loans of the third class shall comprise all loans the principals of 
 which shall be not more than two hundred pesos: Provided, That no 
 loan shall be made the principal of which shall be less than twenty 
 pesos, nor more than thirty thousand pesos, and that not more than 
 one-fourth of the bank's total loans outstanding at any one time shall 
 be comprised of loans belonging to the first class at the time: And 
 provided further. That the bank shall treat with especial attention and 
 favor applications of small farmers for loans of the second and third 
 classes, the proceeds of which are to be used by them in improving 
 agricultural properties, in planting or harvesting the crops, in pur- 
 chasing farm implements, or in paying off prior debts. 
 
 Sec. IX. Loans made by the bank shall be subject to the following 
 restrictions: 
 
 (a) No loan of the first or second class shall be made except on the 
 security of a first mortgage on real estate situated in the Philippine 
 Islands and duly registered under the Philippine land registration act: 
 Provided, That advances made wholly or in part for the purpose of 
 providing funds to enable a borrower to remove completely a prior 
 lien on said real estate, and actually so used, with the effect of promptly 
 giving the bank a first mortgage on the property, shall be considered 
 as first mortgage loans for the purposes of this act. 
 
 (5) No loan of the third class shall be made unless it is properly 
 secured either by collateral of a market value equivalent to twice the 
 amount of the loan or guaranteed by two or more responsible persons 
 of good standing. 
 
 (c) No loan of the first or second class shall be made of an amount 
 exceeding one-half the market value of the property mortgaged or 
 one-half of the assessed valuation of the property at the time of the 
 last assessment, whichever valuation shall be the smaller. 
 
 {d) The bank shall not grant loans except for the purpose of assist- 
 ing agriculture in the Philippine Islands. 
 
 (e) Advances for agricultural purposes against mortgages on urban 
 property or forest lands shall not exceed one-third of the valuation of 
 the property^mortgaged. Not more than one-third of the bank's cap- 
 ital shall at any time be loaned on the security of urban property and 
 forest lands together. 
 
 (/■) The bank shall not grant loans on any of the following classes 
 of property: 
 
 (1) Theaters; (2) mines; (3) quarries; (4) property in joint owner- 
 ship, unless the mortgage extends to the whole of such property and 
 has the consent of all the cosharers; (5) properties which are idle or 
 do not yield a certain and durable income; (6) the bank's own stock. 
 
 {g) In no case shall the annuity, to the payment of which the bor- 
 
22 AGEICULTUEAL BANK IN THE PHILIPPINES. 
 
 rower obligates himself, exceed the total normal annual income of the 
 property mortgaged. 
 
 (A) No loan of the first class shall be made except upon the written 
 authorization of the secretary of finance and justice. 
 
 Sec. X. The bank shall not be permitted to hold real estate beyond 
 that required for business premises: Provided^ That the temporary 
 acquisition of land as the result of foreclosure, or otherwise on account 
 of a debt, shall be pwmitted on condition that land so acquired shall 
 be sold within five years of the date of acquisition. 
 
 Sec. XI. Loans of the first and second classes shall be repayable by 
 annuities covering principal and interest, and shall not run for a 
 period longer than twenty years. When a loan is made to enable the 
 borrower to make permanent improvements upon his land, the returns 
 from which will not to any considerable extent be realized for some 
 time, the bank may, in its discretion, provide that the repayment of 
 the loan by annuities shall begin at any date not later than three years 
 after the granting of the loan. The bank may authorize the payment 
 of annuities in two or more installments. Loans of the third cla8s 
 shall not run for a period longer than two years, and shall be repay- 
 able at maturity in a lump sum covering principal and interest. 
 
 Sec. XII. The bank shall collect interest at the rate of tenper cent 
 per annum on the amounts of the respective loans outstanding. The 
 rate of interest shall be reduced in the following manner: 
 
 As soon as the bank shall have accumulated a surplus in the manner 
 hereinafter provided equal to twenty -five per cent of its cash-paid-up 
 capital, the rate of the interest upon the balances of all loans outstanding 
 and upon new loans shall be reduced to nine per cent per annum; when 
 the surplus shall equal fifty per cent of its cash paid-up capital, the 
 reduction shall be to eight per cent per annum; when the surplus shall 
 equal seventy-five per cent of its cash-paid-up capital, the reduction 
 shall be to seven per cent per annum, and when the surplus shall equal 
 the cash-paid-up capital the reduction shall be to six per cent per 
 annum. 
 
 Sec. XIII. Every borrower of the first and second classes shall have 
 the privilege of repaying his loan in a lump sum prior to the date of 
 its final maturity, or of paying in any year an amount, in addition to 
 the regular annuity maturing in said year, equal to ten per cent or 
 more of the principal still outstanding after said annual annuity shall 
 have been paid. 
 
 Whenever payments shall be made in advance of the dates due, the 
 bank shall, at the option of the borrower, either reduce the amounts of 
 the respective annuities still unpaid, leaving the number of annuities 
 unchanged, or reduce the number of annuities, leaving the respective 
 amounts, as far as practicable, unchanged. 
 
 The bank shall be permitted to charge the borrower, thus paying in 
 advance, a commission not to exceed one-half of one per cent per annum 
 on the amounts of said advance payments for the period intervening 
 between the date or dates of such advance payments and the due dates, 
 respectively, of money so paid. Each payment in advance of maturity 
 shall be considered as being paid on the annuity or annuities first 
 becoming due. 
 
 Sec. XIV. The borrower, after the extinction of every thousand 
 pesos of the principal of his debt, shall be entitled, upon request, to a 
 corresponding diminution of the mortgage entered on the land register. 
 
AGKICTJLTUEAL BANK IN THE PHILIPPINES. 23 
 
 The above reduction shall be made upon presentation to the proper 
 register of deeds of a declaration signed by the president or cashier 
 of the bank and duly certified by a notary. 
 
 Sec. XV. The bank shall have the right of requiring the payment 
 of the balance of its loan on three months' notice to the borrower, and 
 in lieu of such payment to attach the property and foreclose the mort- 
 gage on any of the following conditions: 
 
 (a) When the borrower fails to make punctually his bounden pay- 
 ments to the bank; this right ceases when the arrears and all costs 
 shall have been paid. 
 
 (b) When a mortgaged property, either by reason of bad manage- 
 ment or other causes, deteriorates in value to such an extent as to 
 endanger the security of the bank, and the borrower, upon reasonable 
 notice, shall fail to either pay back a corresponding portion of the loan 
 or to make such improvements as shall be necessary for the protection 
 of the bank. 
 
 (e) When the borrower fails to insure his buildings, stock, and stores 
 against fire. 
 
 (d) When the mortgaged property has been alienated inter vivos 
 without the bank's consent, or, in the case of transference by succes- 
 sion, when the person inheriting the same fails to accept the conditions 
 of the bank's loan contract within a reasonable period fixed by the 
 bank. 
 
 (e) When the borrower is unable to prove that he has regularly paid 
 the public dues upon his estate. 
 
 if) When the estate comes under attachment or public sale. 
 
 (g) When the borrower fails in any way to meet the obligations of 
 his loan contract. 
 
 Sec. XVI. No director, officer, or servant of the bank shall be per- 
 mitted to bid for any real estate or other property sold on account of 
 debt due the bank. 
 
 Sec. XVII. Annuities not paid when due, and loans of the third 
 class not paid at maturity, may in the discretion of the bank be charged, 
 in addition to the regular rate of interest payable on the loan, a penal 
 interest of one-half of one per cent a month until paid. 
 
 Sec. XVIII. Reasonable expenses incurred by the bank in collect- 
 ing loans not paid when due, in enforcing any of the terms of the loan 
 contract, or in investigating applications for loans, whether the same 
 shall ultimatelj'^ be granted or not, shall be chargeable to the respec- 
 tive borrowers or applicants for loans on whose account or for whose 
 benefit the expenses were incurred. 
 
 Sec. XIX. When a loan has been granted by the bank, the proceeds 
 of which the borrower agrees to use for certain specified uses, the pro- 
 ceeds of such a loan shall not, without the consent of the bank, be 
 diverted to other uses, or be subject to any claim upon a guaranty, 
 or to any distraint or to any injunction, on behalf of a third person. 
 
 Loans granted by the bank according to the terms of which the bor- 
 rower agrees to use the proceeds for certain specified uses, shall become 
 immediately due, and the bank is authorized to adopt whatever legal 
 means may be necessary for their prompt collection, if the borrower, 
 without the permission of the bank, shall apply the proceeds thereof, 
 either whollj^ or in part, to other uses than those specified in the agree- 
 ment, and the diverting of the proceeds to such other uses without the 
 consent of the bank, shall be a misdemeanor and as such render the 
 
24 AGEICULTURAL BANK IN THE PHILIPPINES. 
 
 borrower liable to a fine not exceeding -, or to imprisonment not 
 
 exceeding — , or both, in the discretion of the court. 
 
 Sec. XX. Property liable to damage by fire must be insured at the 
 cost of the borrower, unless the bank at the same time holds in security 
 of the debt, in addition to the property in question, other property 
 not liable to damage by fire and equal in value to double the amount 
 of the debt. 
 
 The loan contract shall contain a condition transferring to the bank, 
 in case of damage, the amount of the insurance. 
 
 The bank may require that the policy shall be made out in its own 
 name, and that the premium shall be paid by itself. In this case the 
 amount of the annuity payable by the borrower shall be correspond- 
 ingly increased. 
 
 In case of damage, the amount of the insurance shall be promptly 
 paid over to the bank regardless of whether the policj'^ shall have been 
 made out in the name of the borrower or that of the bank. 
 
 During a period of one year from the date of the payment of the 
 insurance, the borrower shall have the right of restoring the property 
 to its original condition, or a condition equally good from the stand- 
 point of the security of the bank's loan, and in doing so shall be per- 
 mitted to draw on the bank, to the extent of the insurance fund held, 
 to meet the reasonable costs of said restoration as rapidly as it shall be 
 accomplished. 
 
 If at the end of the aforesaid year the debtor has not used his right 
 of restoring the property, or if before that time he has notified the 
 bank that he does not intend to restore it, or if the restoration shall 
 have been accomplished and an undrawn balance shall still remain to 
 the credit of the assurance fund, the bank shall credit the borrower's 
 account with the assurance fund or the balance of said fund still 
 remaining, setting it off against the debt as a payment in advance. 
 
 Sec. XXI. In all suits at law between the bank as one party and 
 one or more persons to whom the bank has made loans as the other 
 party, when the amount at issue shall not exceed ten thousand pesos, 
 and when the suits shall relate to the principal or interest of a loan, 
 the date or dates of its maturity, the amounts of the respective annui- 
 ties, the maintenance of the property mortgaged, the bank's title 
 therein, the alienation or attachment of the property, the foreclosure 
 of the mortgage, or to any other matters relating to the granting of 
 the loan, its security, repayment, or the terms of the loan contract, 
 the jurisdiction of the court of first instance shall be final. 
 
 Sec. XXI1._ The bank, through its dulj' authorized representatives, 
 shall be permitted to inspect all properties under mortgage to itself 
 with reference to their value, maintenance, and management, and any 
 other circumstances which may have to do with the security of the 
 bank's loans. 
 
 Sec. XXIII. The bank shall be entitled to inspect the registration 
 books and land records relating to properties within its area of opera- 
 tions, and to take extracts therefor free of charge. 
 
 Sec. XXIV. On or before the fifteenth day of January of each year 
 the bank shall submit to the treasurer of the Philippine Islands on 
 forms prepared by him a statement, sworn to before a notary, by the 
 president or cashier of the bank, giving: (1) An itemized statement of 
 its resources and liabilities at the close of the calendar year; (2) its 
 operations during the year, including a detailed statement of {a) the 
 
AGBICULTUBAIi BANK IN THE PHILIPPINES. 25 
 
 loans made, (h) the sums collected, (c) the past due loans outstanding, 
 (d) loans renewed, (e) expenses of operation, (_/) mortgages foreclosed, 
 (o) attachments made, and {/i) any other information with reference to 
 tne bank's resources, liabilities, and operations which the treasurer 
 of the Philippine Islands may request: Provided, That nothing con- 
 tained in this act shall be interpreted so as to render acts number 52 
 and 556, United States Philippine Commission, and such amendments 
 thereto as may hereafter be made, inapplicable to the Philippine agri- 
 cultural bank. 
 
 Sec. XXV. At the end of each calendar year the bank shall com- 
 pute its net earnings for the year in the following manner: 
 
 To its gross earnings for the year it shall add all sums received 
 during the year in payment of obligations to the bank which became 
 due during previous years and were not paid. From the total sum 
 ^ obtained the bank shall deduct (1) all expenses of operation for the 
 year; (2) all sums maturing during the year and not paid on or before 
 the thirty-first day of December. The difference shall be considered 
 for the purposes of this act to be the bank's net profits (or net loss, as 
 the case may be) for the calendar year in question. 
 
 Sec. XXVI. From the bank's annual tiet profits so computed the 
 bank shall set aside a sum equal to four per cent of its cash-paid-up 
 capital for the purpose of dividends, shall pay the Philippine govern- 
 ment any sums due it on account of advances under the guaranty con- 
 tained in Section XXVIII of this act, and of the remainder at least 
 forty per cent shall be credited to the bank's surplus fund, until said 
 fund shall be equal to twentj^-five per cent of the bank's cash-paid-up 
 capital, ten per cent shall be paid to the Philippine government, and 
 the balance shall accrue to the corporation for dividends, or such 
 other uses consistent with law as it may determine upon. 
 
 After a surplus fund equivalent to twentj'-five per cent of the bank's 
 cash-paid-up capital stock has been accumulated, at least twent3^-five 
 per cent of the bank's annual net profits over and above a sum suffi- 
 cient to pay the aforementioned four per cent dividends and any in- 
 debtedness due the government on account of its guaranty, shall be 
 placed to the credit of the surplus fund: Provided, That if the sur- 
 plus fund should at any time fall below twenty-five per cent of the 
 bank's cash-paid-up capital stock, forty per cent of the net annual 
 profits over and above an amount sufficient to pay the aforementioned 
 four per cent dividends and to meet the bank's obligations to the Phil- 
 ippine government, shall again be placed to the credit of the surplus 
 fund each year, until said fund is restored to the equivalent of twenty- 
 five per cent of the bank's cash-paid-up capital stock. 
 
 Sec. XXVII. The surplus fund, except such a part thereof as shall 
 at any time be in excess of twenty-five per cent of the bank's cash- 
 paid-up capital, shall be invested in one or more of the following 
 classes of investments, and that part of the surplus so invested shall 
 be known as the primary surplus: 
 
 (1) Bonds or other certificates of indebtedness of the insular gov- 
 ernment of the Philippine Islands. 
 
 (2) Bonds or other certificates of indebtedness of the municipal gov- 
 ernment of the city of Manila. 
 
 (3) Interest-bearing deposits in any bank or banks doing business in 
 the Philippine Islands, which shall have an unimpaired capital and 
 
26 AGEICULTtJKAL BANK IN THE PHILIPPINES. 
 
 surplus equivalent to two million pesos or over. At least one-fifth of 
 the primary surplus shall at all times be so kept on deposit. 
 
 (4) Other investments in bonds or stocks or concerns doing business 
 in the Philippine Islands or elsewhere, which shall be approved in 
 advance by the secretary of finance and justice. 
 
 If at any time the primary surplus shall exceed at the current mar- 
 ket prices of the securities held, twenty -five per cent of the bank's cash- 
 paid-up capital stock, the excess or any part thereof may be loaned by 
 the bank in the same manner and for the same purposes as is the bank's 
 capital. That part of the surplus so invested shall be known as the 
 secondary surplus. 
 
 If by reason of the payment of dividends from the primary surplus, 
 the depreciation of the securities in which it is invested, or of other 
 causes, said primary surplus shall at any time fall below an amount 
 equal to twenty -five per cent of the bank's cash-paid-up capital, tire 
 twenty-five per cent invested in the manner aforementioned shall be 
 restored as rapidl}'^ as possible, and for that purpose the secondary sur- 
 plus shall be correspondingly reduced. 
 
 Sec. XXVIII. If in any year during the period of this concession 
 there shall be a net loss, or if the net profits, as above computed, shall 
 not be sufficient to pay the aforementioned dividends of four per cent 
 upon the bank's cash-paid-up capital, there shall be deducted from the 
 surplus fund a sum sufficient, together with the net profits of said 
 year, to enable the bank to pay the aforementioned dividend of four 
 per cent; and if the entire surplus fund and the net earnings of the 
 year taken together shall not be sufficient to enable the bant to pay 
 said dividend of four per cent on the bank's cash-paid-up capital stock, 
 then, and not otherwise, there shall be paid to the bank by the treas- 
 urer of the Philippine Islands, acting under specific instructions from 
 the secretary of finance and justice, a sum out of the funds of the 
 insular treasury not otherwise appropriated, sufficient, together with ' 
 the surplus and the net profits for said year, to enable the bank to pay 
 the aforementioned dividend of four per cent: Provided^ That said 
 guaranty shall at no time render the Philippine government liable to 
 the bank for an annual payment greater than four per cent of the par 
 value of the bank's duly authorized cash-paid-up capital stock. 
 
 Sec. XXIX. Money paid by the Philippine government pursuant 
 to the aforementioned guarant}', together with interest thereon com- 
 pounded annually at four per cent per annum, shall be a contingent 
 liability of the bank to the Philippine government, and, as such, shall 
 constitute a lien upon the annual net profits of the bank, subject only 
 to the right of the stockholders to receive therefrom four per cent 
 dividends per annum upon the bank's cash-paid-up capital stock. No 
 dividends above four per cent shall be paid, and no profits credited 
 to the surplus fund, either during the period of the governments' 
 guaranty or subsequent thereto, until the Philippine government shall 
 have been repaid in full, principal and interest, all sums advanced to 
 the bank under said guaranty. 
 
 Obligations of the bank to the Philippine government arising from 
 advances made pursuant to the aforementioned guaranty, and existing 
 at the time when the bank shall go into liquidation, shall constitute a 
 lien on the bank's assets, subject only to the payment of the bank's 
 legitimate debts, and the repayment to the stockholders of the par 
 
AGKICULTUEAL BANK IN THE PHILIPPINES. 27 
 
 value of the bank's duly authorized cash-paid-up capital stock: Pro- 
 mded, That nothing in this section shall be interpreted as a guaranty 
 on the part of the Philippine government to the stockholders of the 
 bank of the par value of the bank's cash-paid-up capital stock, when 
 the bank shall go into liquidation. 
 
 Sec. XXX. The Philippine Agricultural Bank shall be permitted, 
 on the approval in each instance of the treasurer of the Philippine 
 Islands, to utilize the services of any of the provincial treasurers of 
 the Philippine Islands, and any of the municipal treasurers in their 
 capacity as deputies of the provincial treasurers of their respective 
 provinces, in so far as such services shall not conflict with the efficient 
 performance of the official duties of said provincial and municipal 
 treasurers. Collections made by provincial and municipal treasurers 
 pursuant to this section shall be made as far as practicable at the times 
 when the regular taxes of said provinces or municipalities are collected, 
 and in connection therewith. In making collections for the Phil- 
 ippine Agricultural Bank, municipal treasurers shall be responsible 
 to the provincial treasurers under whose instructions they shall act, as 
 in the collection of provincial taxes. 
 
 Compensation for services rendered shall be made by the bank to 
 provincial and municipal treasurers in the form of definite percentage 
 of the sums collected. The total commission paid shall not exceed one 
 and one-half per cent of the sums collected. 
 
 The bank shall give additional compensation for special services 
 rendered. 
 
 Provincial treasurers, in making collections as above provided, shall 
 be responsible directly to the bank, and monthly accounts of such col- 
 lections shall be rendered by them to the bank on or before the fifth 
 day of each month, copies of which shall at the same time be for- 
 warded to the treasurer gf the Philippine Islands and to the insular 
 auditor. 
 
 Funds collected for the bank may be temporarily kept on deposit in 
 the X^arious provincial and municipal treasuries without charge to the 
 bank: Provided, That in case the keeping of said funds shall necessitate 
 extra vault room or additional clerical assistance, the expenses thereof 
 shall be met by the bank: And provided further. That the responsi- 
 bility for funds so deposited shall rest upon the provincial treasurer, 
 in his capacity as the agent of the bank and not as the representative 
 of the government of the Philippine Islands or any of its branches: 
 And provided further. That all accounts and records of transactions, 
 either directly or indirectl}' pertaining to the affairs of the Philippine 
 agricultural bank, shall be kept entirely separate and distinct from 
 the official accounts and records of the various provincial and munici- 
 pal treasurers, and all funds belonging to said bank shall be kept 
 entirely separate from the municipal, provincial, and insular funds 
 held by said treasurers, and shall be labeled as such. 
 
 Sec. XXXI. The public good, etc. 
 
 Sec. XXXII. This act shall take effect upon its passage. 
 
 Manila, P. I., February 10, 1906. 
 
EXHIBIT B. 
 
 AGRICTJIiTUIlAIi CREDIT IN THE PHILIPPINES. 
 
 SCHEDULES. 
 
 II. Rates of interest prevailing in different provinces on loans secured by realty. 
 II. Summary of opinions of provincial treasurers concerning the advisability of 
 establishing an agricultural bank. 
 
 III. Extracts from opinions of provincial treasurers concerning the need of an agri- 
 
 cultural bank. 
 
 IV. Statement showing (a) agricultural land registered in each of the provinces 
 
 imder the Philippine land registration act; (b) agricultural land in each of the 
 provinces, applications for the registration of which are pending. 
 (This last schedule is in course of preparation and will be submitted later. ) 
 
 Schedule I. 
 
 Rates of interest prevailing in different provinces on loans secured by realty. 
 [Extracts Jrom letters of provincial treasurers, May, 1903.] 
 
 Province. 
 
 Rates of interest. 
 
 Hemarks. 
 
 Abra .. 
 Albay . 
 
 26 
 
 10 to 120 . 
 
 Ambos Camarines. 
 
 24 and upwards. 
 
 Antique . 
 
 75 to 100 . 
 
 Bataan . 
 
 10 to 15 . 
 
 Batangas . 
 
 10 to 25 . 
 
 Bobol 
 
 10 to 50 . 
 
 Bulacan 
 Cagayan 
 
 Capiz... 
 
 28 
 
 15 to 25 
 
 25 to 50 
 
 Prohibitive 
 
 Money loaned usually on tobacco crops at 25 per cent per 
 annum. 
 
 Money advanced by commercial houses to small buyers. 
 The rate of interest charged by the commercial houses 
 will average about 10 per cent on short-time loans; 
 very frequently 10 per cent per month is charged for 
 these loans. This money is sublet to people in moun- 
 tains at much hig.her rates. 
 
 " Practically no loans are now being made on lands and 
 crops: occasional loans are made on this class of secur- 
 ity, but so few that there is no quotable rate. I think 
 it is safe to say that no such loans are made at 15ss than 
 2 per cent a month, and generally at a much higher 
 rate." 
 
 " Loans are being made upon crops at from 75 to 100 per 
 cent interest for from four to six months, and upon 
 lands at about the same rates of interest, but for from 
 one year to eighteen months." 
 
 "There are some loans now made on land here, private 
 means gene[ally, and but few, I believe. The rate of 
 interest is from 10 to 15 per cent, averaging about 12 
 per cent. It is, I believe, rather more usual to get 
 short-time advances on crops at about same rate." 
 
 "Very few loans are being made in the province upon 
 the land for the purpose of improving the same. Loans 
 are being made in small sums for various enterprises, 
 and the rate per cent varies from 10 to 25 per cent, 
 according to the circumstances and needs of the bor- 
 rower." 
 
 " At the present time nearly all the farmers borrow 
 money, to be repaid with interest at from 10 to 30 per 
 cent or in shares of the crop, one-third to one-half of 
 the crop being the property of the loaner. The sums 
 borrowed at present are small, as a rule, generally less 
 than Pis. 100." 
 
 " Interest paid is usually from 15 to 25 per cent, in many 
 instances greater." 
 
 From 30 to 35 per cent of the farmers borrow money on 
 their crops at present. Rates of interest vary from 26 
 to 50 per cent. 
 
 There are few, if any, loans now being made upon lands 
 and-Crops in this section, and it is impossible to state 
 the prevailing rate of interest. The rate during the 
 Spanish regime was 26 to 36 per cent per annum. Loans 
 could not be secured here now, with farm lands as se- 
 curity, even at those rates. As a matter of fact, the 
 people who have money are afraid to let it out at any 
 price. 
 
AGKICULTUEAL BANK IN THE PHILIPPINKS. 29 
 
 Rates of interest prevailing in different provinces on loans secured by realty — Continued. 
 
 Province. 
 
 Rates of interest. 
 
 Remarks. 
 
 Cavite . 
 
 Per cent. 
 Not known . . 
 
 Cebu . 
 
 10 to 25 . 
 
 Ilocos Norte. 
 
 Ilocos Sur . 
 Isabela 
 
 20 to 100 . 
 10 to 100 . 
 
 Laguna. 
 
 10 and upward . . 
 
 Mindoro. 
 Misamis . 
 
 10 to 30 . 
 8 to 12 . . 
 
 Romblon 
 
 Oriental Negros . 
 
 Pampanga 
 
 Pangasinan . 
 
 Rizai , 
 
 Samar , 
 
 Surigao 
 
 Tarlac , 
 
 Tayabas . . 
 Zambales. 
 
 10 to 25 . 
 25 to 40 . 
 
 Up to 30 and 35 . 
 'i2'to"5b"]!]]!]!! 
 24 to 36 
 
 "There is scarcely any money loaned on real estate in 
 this province. I know of but one man who does any 
 business of this sort, and do not know what interest he 
 charges, but know it is so high that he is hated by the 
 people, and he is said to take their land eventually." 
 
 Rates from 10 to 25 per cent per annum, with condition 
 that in case of bad cultivation indemnification will be 
 half of the grain or fruits collected from the mortgaged 
 property. 
 
 " When the actual currency is exchanged the rates of in- 
 terest are very high, ranging from 20 to 100 per cent per 
 annum." 
 
 The rate of interest on loans made on crops range from 
 id to 100 per cent. 
 
 " So far as I can learn no loans are being made to agri- 
 culturists of Isabela, except by corporations and a very 
 few native land owners of importance to tenants on 
 their haciendas, and these are only made in the form 
 of supplies furnished during the year, for which the 
 tobacco crop is security. No specific rate of interest is 
 charged for this kind of loan, but the privilege is re- 
 served of buying all the tobacco of the tenant at such 
 prices as the land owner thinks it worth." 
 
 "There prevails in this section a system of mortgage by 
 which the owner of lands or cocoanut trees borrows 
 money very near to actual value of property and turns 
 over property to mortgagee, who in turn reaps all bene- 
 fits accruing from products of land or trees. The al- 
 most universal custom is that after four years should 
 the mortgagor desire to redeem property he can do so 
 by repayment of sum originally borrowed. When 
 money is loaned at interest there seems to be no fixed 
 rate; 10 per cent seems the lowest rate." 
 
 "Loans are being made in this province with interest 
 ranging from 10 to 30 per cent, with a custombre com- 
 pound. " 
 
 "At times money can be borrowed here in small amounts 
 on real estate by paying from 8 to 12 per cent interest 
 annually." 
 
 " No loans of any sort can be learned of." 
 
 "The interest paid ranges from 10 to 25 per cent. The 
 money is generally obtained in Iloilo and Cebu." 
 
 Share system. Money, when loaned on "gilt-edge se- 
 curity," brings from 25 to 40 per cent per annum. 
 
 No rates given. 
 
 Rates varying up to 30 and 35 per cent. 
 
 No rates given. 
 Do. 
 
 Rates on best land titles from 12 per cent upward. When 
 loaned on the crop the general rate is a cavan of palay 
 for every dollar loaned, or almost 50 per cent 
 
 The minimum rate of interest is 24 per cent, usually com- 
 puted at 2 per cent monthly. Many are paying as high 
 as 36 per cent. 
 
 No rates given. 
 
 Schedule II. 
 
 SUMMARY OF OPINIONS OF PROVINCIAL TREASURERS CONCERNINCJ THE 
 ADVISABILITY OF ESTABLISHING AN AGRICULTURAL BANK IN THE 
 PHILIPPINES. (mat, 1903.) 
 
 Opinions of provincial treasurers concerning the advisahility of establishing an agricultural 
 
 hank in the Philippines. 
 
 Province. 
 
 Favorable or un- 
 favorable. 
 
 Remarks. 
 
 Abra 
 
 Favorable 
 
 Favorable 
 
 Unfavorable 
 
 Favorable 
 
 Favorable 
 
 
 Albay 
 
 "Would be of inestimable value to the people of ttiis 
 
 Ambos Camarines 
 
 province." 
 "Ido not think such an institution as an agricultural 
 bank is either necessary or advisable." 
 
 Bataan 
 
 be of great benefit, both local and general." 
 
30 
 
 AGEICULTUKAL BANK IN THE PHILIPPINES. 
 
 Opinims of provincial treasurers concerning the advimbillty of establishing an agricultural 
 bank in the Philippines — Continued. 
 
 Province. 
 
 Batangas . 
 
 Bohol. 
 
 Bulacan. 
 Cagayan. 
 Caplz 
 
 Cavlte. 
 
 Cebu . 
 
 Ilocos Norte . 
 Ilocos Sur . . . 
 
 Isabela . 
 
 Laguna.. 
 Mindoro . 
 
 Misamis 
 
 KomWon 
 
 Oriental Negros . 
 
 Pampanga .. 
 Pangasinan . 
 Klzal 
 
 Samar . . 
 Surigao. 
 
 Tarlac . . . 
 Tayabas . 
 
 Zambales. 
 
 Favorable or un- 
 favorable. 
 
 Favorable . 
 
 Favorable . 
 
 Favorable - 
 
 Favorable . 
 
 Favorable . 
 
 Favorable - 
 
 Favorable . 
 
 Favorable . 
 Favorable . 
 
 Unfavorable. 
 
 Favorable . . . 
 Favorable . . . 
 
 Favorable — 
 Unfavorable. 
 Favorable . . . 
 
 Favorable . 
 Favorable . 
 Favorable . 
 
 Favorable . . . 
 Unfavorable. 
 
 Remarks. 
 
 Favorable . 
 Favorable . 
 
 Favorable . 
 
 ' I heartilv indorse the project of establishing such a 
 bank, and earnestly recommend its immediate estab- 
 lishment, and in doing so I voice the unanimous senti- 
 ment of the people of Batangas." 
 
 ' Although the success of such an institution is not at all 
 assured, the great amount of good that it would do, if 
 successful, would make it worth while trying theexperi- 
 ment." 
 
 ' There is no doubt but that the establishment of a gov- 
 ernment agricultural bank in these islands would be 
 of vast benefit and importance to the people of this 
 province." 
 
 'I earnestly recommend to you the establishment of a 
 government agricultural bank, to assist in the agricul- 
 tural development of this country. * * * This can 
 not be too positively recommended to the government." 
 
 ' I strongly recommend the adoption of the plan, and 
 trust it will be carried into effect with the least practi- 
 cable delay. I feel sure that the greatest good would 
 result from the establisment of the bank to all classes 
 of people." 
 
 'There is no part of the i.slands that needs money worse 
 than this province. * * * I thinkit(thebank)greatly 
 needed." 
 
 ' Agriculture will take on new life in this district, and it 
 will be very advantageous for everybody." 
 
 ' Would be in everyrespect of great benefit to the people, 
 and if properly brought to their notice would , I am sure, 
 be taken advantage of." 
 
 "I do not believe that there is at present any demand 
 for or necessity on the part of the inhabitants of Isabela 
 for such an institution. * * * Under present condi- 
 tions, loans would injure instead of help the natives." 
 
 " Such an institution would be acceptable to the people 
 of this province, provided the rate of interest was not 
 too great." 
 
 " I believe that the bank mooted is necessary, and will 
 work a lasting good, provided it can be so established 
 as to help the ' small farmers' or the men having only 
 a small piece of land." 
 
 "The establishment of such a bank as you mention 
 would certainly be received as a Godsend by the peo- 
 ple of Misamis Province." 
 
 " Except to loan money for roads to the municipalities, 
 an agricultural or any other sort of a bank would be 
 premature so far as it would help Romblon." 
 
 "I have personal knowledge of the great desire of the 
 people for some form of legitimate banking, by which 
 money could be obtained at a reasonable rate of in- 
 terest." 
 
 " In this province * * * such a bank properly con- 
 ducted would be of incalculable benefit to the poor 
 farmers." 
 
 " There is-no question but that such an institution, estab- 
 lished in this province, would be of the utmost benefit 
 to the farmer, if small loans be made." 
 
 " The establishment of such an institution * * * will 
 be of immense value, not only to the individual land 
 owner, but also to the province and the public in gen- 
 eral." 
 
 "Such an institution would be welcomed, and would 
 prove to be of incalculable benefit to the province." 
 
 " I do not favor the establishment of an agricultural bank, 
 as far as this province is concerned. * * * The tend- 
 ency would be to fritter away such loans for other pur- 
 poses, leaving them in worse condition than before." 
 
 " The general opinion is that such an institution would 
 be the salvation of the farmers." 
 
 "There is no question in my mind but what your idea is 
 a grand one and would work en incalculable amount 
 of good throughout the Archipelago." 
 
 " Taking everything into consideration, I am of theopin- 
 ion that it would ultimately be a success for the people, 
 for this province, and for the bank itself." 
 
AGEICULTUEAL BANK IN THE PHILIPPINES. 31 
 
 EXTKACT8 FKOM OPINIONS OF PROVINCIAL TREASURERS CONCERNING 
 THE ADVISABILITY OP ESTABLISHING AN AGRICULTURAL BANK IN THE 
 PHILIPPINES. 
 
 [Letters written May, 1903.] 
 
 With regard to this will say that there is probably no province in the Philippines 
 where the necessity of a bank is more apparent daily than in the province of Albay. 
 By referring to the governor's reports for 1901 and 1902 you will find this is strongly 
 recommended. Enormous sums of money are required here for moving the hemp 
 crop. At present this money is invariably advanced by the commercial houses to 
 the small buyers in the mountains, who there advance it to the owners of the lates. 
 The rate of interest charged by the commercial houses will average about 10 per 
 cent on short-time loans; very frequently 10 per cent per month is charged for these 
 loans. The rate at which this is sublet to the people in the mountains I am unable 
 to say, but undoubtedly it is at a much higher rate. 
 
 Enormous sums of money are handled in this province with absolutely no clear- 
 ing house whatsoever except those in Manila. There is fully a million dollars that 
 changes hands in the town of Legaspi alone every thirty days, the real clearance of 
 this money being in Manila on which two-thirds of 1 per cent is charged for trans- 
 porting the money by the steamships. 
 
 Fully 70 per cent of the adult male population of this province are property owners; 
 the hemp lates vary in size from half a hectare to 10,000 hectares. 
 
 A banking institution stationed in Legaspi for the handling of funds for the pur- 
 pose as stated in your letter will be of inestimable value to the people of this province. 
 
 Permit me to suggest that if an institution of this sort is opened there be in con- 
 nection with it a savings depository, somewhere after the system of savings banks 
 at home. The ordinary workingman of this province makes from 2 to 10 pesos 
 per day; the hemp worker will average 8 pesos per day. He has absolutely no con- 
 ception of saving money, and if he did save it he would have no place to deposit it; 
 therefore he invariably gets rid of it as rapidly as possible, and, no doubt, this has 
 much to do with the great sums that are handled in the cockpits. Drawing his 
 wages on Saturday, and having no place in which to deposit it, he proceeds to get rid 
 of it as speedily as possible in the way that he may be able to get the most amuse- 
 ment and excitement out of it. In that case he generally resorts to the cockpit. 
 
 A savings institution, I thoroughly believe, is quite as important here as a com- 
 mercial bank; both would be of inestimable value to the Philippine Islands, and 
 would be of very great convenience to the Americans and Europeans who are 
 endeavoring to engage in business out here. 
 
 AMBOS CABMAEINBS 
 
 The advantages of such a concern would be largely accepted by the landowners of 
 this province. I should say that at least a majority of the owners of agricultural 
 land would borrow money on their holdings. 
 
 Practically no loans are now being made on lands and crops. Occasionally loans 
 are made on this class of security, but so few that there is no quotable rate. 1 think 
 it is safe to say that no such loans are made at less than 2 per cent a month, and 
 generally at a much higher rate. 
 
 There is a demand for and need of money for improvement of land and the devel- 
 opment of the agricultural resources of the province. 
 
 Having made direct answer to the inquiries propounded in your letter I will ask 
 you to pardon me for giving you my views on the question of the desirability of the 
 Government establishing an agricultural bank in these islands, viewing the subject 
 from the standpoint of its probable effect on the government and the people. 
 
 I will begin by stating that for many years I was in the employ of a large loan 
 company engaged in loaning money on farms, and my conclusions are the result of 
 actual experience. * * * From this experience I think that about half the farm- 
 ers who borrow money on their farms are injured rather than bettered by the trans- 
 action. Frequently a farmer who has become involved in debt and owes many small 
 debts on which he is paying a high rate of interest is bettered by funding this indebt- 
 edness at a low rate and securing the debt by a mortgage on his farm, thus giving 
 him a series of years to work out of his misfortune. But the farmer who borrows 
 money for the purpose of enlarging and extending his operations almost invariably 
 " goes to the wall. * * * 
 
32 AGBICULTUKAL BANK IN THE PHILIPPINES. 
 
 Now, let US try and look into the future and see what would result if the govern- 
 ment of these islands goes into the farm-mortgage-loan business. In making a farm 
 loan in the States the first thing considered is the value of the security and what 
 would the mortgagee do with it in case he comes in possession of it, and second the 
 character, standing, and business ability of the borrower. Here I think this order 
 should be reversed and the borrower should first be considered. These people are 
 notoriously lax in the fulfillment of financial obligations. They are the most hos- 
 pitable, generous, and obliging people I have ever known, but the obligation of a 
 debt sits lightly on them and if they want a thing they buy it. Almost without 
 exception they are gamblers, and I fear that the proceeds of the loan from the agri- 
 cultural bank would go to the cockpit and the monte table, and should any of it 
 escape those dangers it would go to the diamond dealer and piano merchant. Should 
 the government come in possession of this land in any quantity I do not see what 
 could be done with it. Certainly the government could not go into the business of 
 farming, and the only thing that could be done would be to dispose of the property 
 for a fraction of its true value to the speculator. 
 
 My field of view is not large, being confined to this province, but from my stand- 
 point I do not think such an institution as an agricultural bank is either neces- 
 sary or advisable. This province can not be called prosperous, but there is certainly 
 no suffering from lack of the necessaries of life on the part of those who are willing 
 to work. * * * 
 
 My conclusions are that the establishment of the proposed bank would prove a 
 detriment to both the government and the people. Should it be established it would 
 result in the taking over of a large quantity of agricultural land by the government 
 and the eviction of the former owners. This would result in a bitter and hostile 
 feeling on the part of the evicted and their relatives and friends against the govern- 
 ment that might become so widespread as to seriously affect the peace of the islands. 
 In fact, I believe the proposition is positively dangerous. In this connection I will 
 say that I have given considerable thought to the questions of loans on agricultural 
 land in these islands with a view of possibly soliciting the investment of American 
 capital in such an enterprise; but I have not been able to bring myself to the point 
 of advising any of my friends to make such an investment. 
 
 ANTIQUE, 
 
 I have the honor to [inform you that upon inquiry I find that the advantages 
 that would be offered by such an institution would be accepted by about 75 per cent 
 of the agricultural people of this section. 
 
 Loans are being made upon crops at from 75 per cent to 100 per cent interest for 
 from four to six months, and upon lands at about the same rates of interest, hut for 
 from one year to eighteen months. 
 
 There is a great need of money for the purchase of modem farm implements. This 
 province is capable of exporting 150,000 cavans of rice and 100,000 piculs of sugar 
 yearly. She has done it and can do it again if the farmers can borrow money at rea- 
 sonable rates of interest on their lands to enable them to get a fair start again after 
 having been idle for two or three years on account of the war. It is very hard on 
 them at present. Besides, the landowners, so far, have seemed to pay little or no 
 attention to the land-registration act. Now, if such a concern as above mentioned 
 should be established people will have to see that their titles to lands are registered 
 or they will not be able to borrow any money on them. I think the establishment 
 of such an institution will be of great benefit, both local and general. It would put a 
 stop to such high rates of interest now being paid by the poorer classes, who are 
 losing their lands on account of a small obligation they can not meet, because in a 
 few months the interest amounts to as much as the original debt. * * * 
 
 It is beyond question that Bataan's full quota of applications for such loans would 
 be made, generally, in small amounts. The people here seem to think such a bank 
 the thing principa,lly needed and attribute a very large part of existing depression to 
 the absence of facilities for borrowing upon land and crops. I am saying what they 
 think. 
 
 There are some loans now made on land here — private means, generally — and but 
 few I believe. The rate of interest is from 10 per cent to 15 per cent, averaging about 
 12 per cent. It is, I believe, rather more usual to get short-time advances on crops 
 at about same rate. 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 33 
 
 Certainly in this province a large sum could be placed, to the great benefit of con- 
 ditions if wisely expended. It could be managed so that the visible security would 
 be large enough, the only real trouble being the personal equation of the borrower. 
 
 In my opinion the assessed valuations would be an unsafe basis of measurement. 
 Lands have been listed rather high. 
 
 If I may be allowed to say it, I fancy it is not so much the lack of funds as the 
 expensive and out-of-date method used that are principally responsible for conditions, 
 and I would fear that, in many instances, loans made to continue along such lines 
 would result in many losses. 
 
 BATANGAS. 
 
 The province of Batangas is solely an agricultural province, and the prostration of 
 agriculture has impoverished the province. 
 
 Unless some such measure is taken to give the landowners of the province the 
 necessary capital to purchase animals, modern machinery and seed, the outlook is Very 
 discouraging. There is pressing need of such a bank and the people of Batangas 
 will gladly avail themselves of the opportunity thus afforded. 
 
 Thousands of hectares of rich, tillable land are lying idle for want of sufiEicieut 
 capital to enable the owner to cultivate the same. 
 
 The people of Batangas Province could conservatively use capital amounting to at 
 least $500,000 local currency, provided the interest was low enough to warrant its 
 use. Very few loans are being made in the province upon the land for the purpose 
 of improving the same. Loans are being inade in small sums for various enterprises, 
 and rate per cent varies from 10 per cent to 25 percent, according to the circumstances 
 and needs of the borrower. If money could be had for 5 per cent upon land security 
 of double value, it would be the salvation of the province. 
 
 I heartily indorse the project of establishing such a bank and earnestly recommend 
 its immediate establishment, and in doing so I voice the unanimous sentiment of the 
 people of Batangas. * * * 
 
 The province of Batangas, possibly more than any other province, is in need of 
 such assistance. Batangas is almost entirely an agricultural province; coffee, corn, 
 rice, sugar, cotton, chocolate, fruits, cattle, horses, hogs, and poultry being the prin- 
 cipal sources of revenue in the past. The coffee industry has been destroyed by an 
 insect, but there is a very bright prospect that the new coffee now. being planted will 
 be a success. Sugar cultivation is entirely at a standstill at present for want of work 
 animals. Most of the cattle died of rinderpest, and the jpresent condition of the 
 province is deplorable. 
 
 Loans made by an agricultural bank would be used by the people of the province 
 in planting coffee, abaca, cocoanuts, purchasing carabao, and bulls for agricultural 
 work and in the improvement of their methods of cultivation. * * * 
 
 There is no doubt that such an institution would be a benefit to the agricultural 
 industry; in fact, it is very badly needed, but it should be conducted in such a man- 
 ner that it would benefit the real agricultural population and not the wealthier 
 speculators, who would be the first to take advantage of it. 
 
 To be of real use to the people such an institution should have an agency or repre- 
 sentative in each province, who should have a knowledge of the people with whom 
 he would deal. 
 
 A Filipino could not perform the managing or accounting of such an agency, and 
 therefore this representative or manager should be an American, who should have a 
 well-paid native assistant, one who could be depended on for conducting investiga- 
 tions and valuations of property, etc. 
 
 At the present time nearly all the farmers borrow money to be repaid, with interest 
 at from 10 to 30 per cent or in shares of the crop, one-third to one-half of the crop 
 being the property of the loaner. 
 
 The sums borrowed at present are small as a rule, generally less than $100 Mexican, 
 and the Chinos and wealthier Filipinos have a monopoly of the business and are 
 becoming the possessors of a great deal of the land. 
 
 Another thing to take into consideration is the fact that most of the borrowers do 
 not possess legal title to their land, although their titles are good, probably; and this 
 being the case, if the regulations for borrowing money were too strict, the bank 
 would be of no benefit to the people and could not be taken advantage of unless 
 crops, machinery, cattle, etc., were accepted as security. 
 
 There must also be taken into consideration the cattle-raising industry. Cattle 
 raisers do not usually own the land upon which their cattle graze, and if they did it 
 
 30795—06 3 
 
34 AGBICULTUEAL BANK IN THE PHILIPPINES. 
 
 would not be sufficient security for loans on cattle; therefore liberal provisions should 
 be made for this class of loans, this branch of the agricultural industry bemgin more 
 need of assistance than almost any other. 
 
 It is a significant fact that the l)anks in the Philippines do not make loans of the 
 above-mentioned classes, however their conservatism is well known. 
 
 The running expenses of an agency in each province would probably amount to 
 §3,000 United States currencv per annum. To be self-supporting and provide against 
 possible losses, each agency "should do at least about $100,000 worth ef-business at 6 
 per cent per annum. Increase of business would not necessarily mean increase of 
 expenses. 
 
 The main points to be taken into consideration in forming such an institution 
 would be: Sufficient capital to make bank self-supporting (including possible losses) 
 on loans at low rate of interest; facility and promptness in making loans; method of 
 benefiting the real agricultural class, and provisions for excluding speculators from 
 the 'benefits thereof. 
 
 Summary: An agricultural bank should not be founded without, first, careful study 
 of conditions in other colonies comparable to the Philippines; second, careful study 
 of conditions in each separate locality or province. The conditions above mentioned 
 apply to Bohol. They do not apply to other parts of the Philippines, such as Negros 
 and Luzon, where the large land owner is the rule and not the exception. 
 
 Although the success of such an institution is not at all assured, the great amount 
 of good that it would do, if successful, would make it worth while trying the experi- 
 ment. 
 
 BULACAN'. 
 
 There is no doubt but that the establishment of a Government agricultural bank in 
 these islands would be of vast benefit and importance to the people of this province. 
 
 Money is very much in demand here. The interest paid is usually from 15 to 25 per 
 cent, in many instances greater. The method employed in making loans is as follows: 
 
 A person who has a clear title to a piece of property, say valued at 5,000 pesos, 
 takes such deed, together with a document (promise to pay) for 1,500 pesos to be 
 paid one year after date. This man probably borrows 1,000 or 1,200 pesos, and at 
 the expiration of the note pays 1,500 pesos, when the deed is returned to him. 
 
 CAGAYAX. 
 
 The inhabitants of this province are principally Cagayanes or Ibangs, with some 
 Ilocanos. The towns of Claveria and Sanches Mira are entirely Ilocano, and most 
 of the other towns have a considerable number of this race. 
 
 The Ilocano is a thrifty, hard-working man, careful of his property, and making 
 provision on the sale of his yearly crops for all possible expenses during the year. 
 He lays aside money for food not produced by himself, even for salt, also for taxes, 
 clothes, and burial expenses. 
 
 The Cagayan is shiftless, lazy, and indolent. He will raise enough for his actual 
 wants and no more. When taxes come due, or other expenses occur out of the 
 tobacco-selling season, he borrows the money, if possible, to meet such expenses. 
 
 They are a quiet people, and, if not influenced from outside sources, will go on 
 living as their fathers have, planting the same crops, tilling the land with the same 
 implements, and celebrating the same fiestas forever. The councilmen, principales, 
 and presidentes wield a wonderful power over the people, and can influence them for 
 good or evil, much as they see fit. 
 
 The land of this province, as shown bv the land-tax registers of last year, is owned 
 by 22,046 persons, declaring some 68,000 to 70,000 different parcels of land. The 
 revenue from land taxes, charging three-fourths of 1 per cent in all towns except 
 Apparri, where rate was thirteen-twentieths of 1 per cent, was over $26,000 United 
 States currency, showing the value of land and improvements of the province at 
 approximately $3,500,000 United States currency. Additional registrations of this 
 year will increase the numbers of holders by 2,000, and with the tax revision the value 
 of the land by $500,000 United States currency. 
 
 The value of land, as estimated from last year's register, is $158.67 United States 
 currency for each owner. The estimated population of this province is from 100,000 
 to 120,000, which would show one in every five persons owning property in fee 
 simple. * * * 
 
 If an owner has his land worked by others, he, the owner, furnishing the carabao, 
 the crop is equally divided between him and the laborer. If the laborer furnishes 
 the carabao the crop is divided two-thirds to the laborer and one-third to owner. 
 
AGEIOTJLTUEAIj bank in the PHILIPPINES. 35 
 
 From data collected by the board of tax revision the owner's revenue per hectare 
 for first-class land is from 40 to 50 pesos per annum from tobacco and 10 to 15 pesos 
 per annum from the corn crop, when the owner gets but one-third. This will show 
 at the lowest estimate a revenue of $150 local currency, per hectare per annum, while 
 for the highest, $195 local currency, when cost of labor and carabao is not deducted 
 as is the ca?e with small owner having his own carabao. This is the revenue for an 
 average year. * * * 
 
 There is considerable money loaned to farmers in this province. The money is not 
 spent for the improvement of the land or in the purchase of implements, but to 
 meet current expenses of farmers for the year. The rate charged is 50 per cent per 
 annum, or from the time loaned to the harvesting of the crop. 
 
 The Chino merchant gives the farmer credit, and for each peso the farmer guaran- 
 tees to deliver at harvest time one fardo of tobacco of the fourth current class, worth 
 f 1.50 local currency. Some tobacco buyers advance money with the understanding 
 that for every peso the farmer will deliver one fardo of fourth current class tobacco. 
 The larger companies loan money with the understanding that the farmer will sell his 
 tobacco to them, but they charge no interest. However, it is generally reported by 
 the natives that the classification of the tobacco is so arranged b_v placing part of the 
 tobacco in one class lower than where it rightfully belongs, that it results in a charge 
 of from 25 to 50 per cent. People loaning money claim that the risk of collection is 
 so great that this rate is considerably decreased to the creditor. From 30 to 35 per 
 cent of the farmers borrow money on their crops at present. * * * 
 
 It is estimated that 40 per cent of the land owners have not sufficient carabaos to 
 work their land. * * * 
 
 It is possible that with sufficient carabaos here to reduce them in cost to a reason- 
 able amount, the cultivated area would be increased from 25 to 50 per cent. * * * 
 That the people would gladly borrow money at a low rate for the purchase of cara- 
 baos there is not the least doubt. It carabaos could be brought in and sold at a rea- 
 sonable rate the benefits to the farmer would be very great. They can not restock 
 their farms at present except by natural increase of cattle, on account of the high 
 rate of interest and equally high price of cattle. 
 
 As to the purchase of improved implements, the general opinion is that the native 
 willnotchangehispresentprimativemethodsof agriculture for modern ones. * * * 
 
 Fertilizers are not purchased by these people. They burn the grass off the fields, 
 together with any rubbish before plowing them. A large part, and I may say all, 
 of the best lands now being cultivated are in the low river bottoms, and the yearly 
 inundations of the Cagayan, with its many tributaries, cover the ground with a deposit 
 of sediment, which is the best of fertilizers. The flat land above the high water, 
 and not overflowed, receives no fertilization other than the burning of the grass, 
 brush, etc. 
 
 If cheap fertilizers can be delivered in the tobacco district to fertilize land not 
 overflowed at high water, the crops can be fully doubled on such land. Whether 
 the native farmer, after he has been made to see that, by proper expenditures for 
 fertilization, his crops will be very materially increased, will then make an effort in 
 this line, can only be told by experiment. The concensus of opinion of the principal 
 educated Filipinos is that this can not be done. The ignorance of the better class 
 of people here on this subject is surprising. It can only be attributed to the fact 
 that fertilization has never been attempted. They know nothing of the possibilities 
 of such methods, and believe if the land is not overflowed it is inadvLsable to use 
 artificial fertilization. They have had new lands to draw on without keeping up 
 the old, and can not see far enough into the future to realize the necessity of fertilizing. 
 
 Nature has endowed the Oagayan Valley with her richest gifts: Low, fertile lands 
 extensive in area, bountiful rainfalls for eight months in the year, natural fertiliza- 
 tion of soil by alluvial deposits, and cheap water transportation to the principal 
 markets. The inhabitants have depended on these gifts, and have cultivated in the 
 most primitive manner what land they needed to meet their few wants. 
 
 To develop these natural gifts and increase their wealth and importance has been 
 the aim and ambition of a very few. They are much like the man born with a gold 
 spoon in his mouth. They have lost their natural energy from the fact that every- 
 thing they wish can easily be procured, and they have grown into the habit of pro- 
 ducing this little with the least possible fatigue to mind and body. The develop- 
 ment of this valley is all in the future. The possibilities are not exceeded in any 
 part of these islands and are equaled in a very few sections. With proper develop- 
 ment it can be made one of the greatest wealth-producing provinces in the archi- 
 pelago. It can in time be made to support a population of twenty times what it does 
 to-day, and even with this population the wealth per capita will exceed what it does 
 to-day. 
 
36 AGBICX7LTXJRAI, BANK IN THE PHILIPPINES. 
 
 The greatest need at present is money, at low rate of interest, to buy sufficient 
 carabaos to farm the fields lying idle from the scarcity of such animals. This can 
 not be too forcibly recommended to the government. If something is not done in 
 this line, and also some attempt made to preserve what cattle have lived through the 
 rinderpest scourge of the last ten years, iu a very short time these people will be in 
 want. In my opinion it actually exists in some sections at present. 
 
 I earnestly recommend to you the establishment of a government agricultural 
 bank, to assist in the agricultural development of this country. 
 
 The difficulties of getting satisfactory security will be great, as the lands are not 
 registered, and many farms are claimed by several different owners. But with all 
 the difficulties offered, the advantages and possibilities far overweigh them. 
 
 I have the honor to state that in my opinion the beneficial effects of such an insti- 
 tution would be far reaching. However, it should be so operated as to be within 
 easy reach of the people of all sections. 
 
 Commercial prosperity in this province is entirely dependent upon agricultural 
 success. To promote the interests of agriculture we must have government assist- 
 ance or the same distressing conditions will continue to exist for many years. Many 
 owners of valuable haciendas are not able to pay their taxes, and when the lands are 
 offered for sale they are invariably forfeited to the municipality, as there are no buy- 
 ers even" at the price of the amounts due for taxes. The situation here is becoming 
 worse as each year passes. The failure of the rice crop for several years in succession 
 has brought about a condition of distress which is hard to describe. It is true much 
 more could have been done with the means at hand than has been accomplished, 
 and, taking this view of the matter, I have been somewhat deceived as to the extent 
 of the suffering among the laboring classes, but long observation and a close study of 
 the conditions have shown as conclusively that the distress is genuine, no matter 
 what may have been the cause. These are a peculiar people. They have not the 
 moral courage to face disaster and to make the best of poor conditions, and, as is well 
 known, they take little thought for the future. When I say that much more could 
 have been accomplished, the statement refers to the production of food supplies to 
 meet present necessities and not to commercial prosperity, which can only be 
 brought about by the government taking the lead in assisting and encouraging the 
 people to improve and develop their farm lands; to teach them new methods of 
 farming, and to introduce modern machinery, with practical demonstrations show- 
 ing the advantages to be gained over the present system. 
 
 Looking over the situation as it is to-day, I do not find much to encourage the hope 
 for any material change for the better within a number of years unless the greatest 
 effort is made to replace the carabaos that have died of rinderpest and other causes, 
 and to offer such financial assistance to the farming class as would enable them to 
 begin at once the cultivation of their lauds. The necessity is urgent, and nothing 
 less than prompt action in the direction indicated can, in my opinion, avert the most 
 serious consequences. 
 
 The establishment of an agricultural bank has been discussed here for some time 
 and the people have been looking forward to it with the expectation of many bene- 
 fits. There are few, if any, loans now being made upon lands and crops in this sec- 
 tion and it is impossible to state the prevailing rate of interest. I am informed that 
 during the Spanish regime the rate charged was from 25 per cent to 35 per cent per 
 annum. I am sure that loans could not be secured here now, with farm lands as 
 security, even at those figures. As a matter of fact, the people who have money are 
 afraid to let it out at any price. There seems to be a general lack of confidence in 
 the ability of those who would borrow money to repay the same when due, and this 
 doubt is apparently well founded. The only difficulty likely to be encountered in 
 carrying out the plan, which, it is presumed, has already been fully considered, lies 
 in the fact that very few persons have registered titles for the land which they claim. 
 This question could probably be arranged in many cases and would in the end be 
 the means of the property owner having secured good titles to his real estate, whereas, 
 he would probably neglect to do so without such incentive. 
 
 I strongly recommend the adoption of the plan and trust that it will be carried 
 into effect with the least practicable delay. I feel sure that the greatest good would 
 result from the establishment of the bank to all classes of people. 
 
 There is scarcely any money loaned on real estate in this province; I know of but 
 one man who does any business of this sort, and do not know what interest he charges, 
 
AGEICULTTJEAL BANK IN THE PHILIPPINES. 37 
 
 but know it is so high that he is hated by the people, and he is said to take their 
 land, eventually. There are not many lar^e estates here, excepting the Friar lands, 
 which I suppose- the people will get, but in very small tracts. The few owners of 
 large haciendas who need money go to Manila for it, generally to the banks. I feel 
 sure that every man of them would be glad to place a loan with the government 
 bank in order to restock his place with animals and buy machinery and implements. 
 
 There is uo part of the islands that needs money worse than this province. It is 
 really distressmg to see the great tracts of land untilled for want of animals and 
 implements. Irrigation ditches are built now wherever they are practicable, but 
 they are not kept up for want of money. I think at least 500 men would be glad 
 to get loans on long time on their haciendas at any reasonable interest. 
 
 Besides the general good to be derived from the proposed bank there must be 
 taken into consideration the fact that a measure of prosperity would tend to reduce 
 the number of ladrones in the province, as the people would have work for all that 
 wanted work. This is a matter of the gravest importance to us, and there is no let 
 up in the evil. 
 
 ILOCOS NORTE. 
 
 I have the honor to report that the practice of loaning money on land has long 
 been established in this province. The actual currency was probably very seldom 
 exchanged, and the method commonly followed in the majority of such transac- 
 tions was to loan rice or some other product, taking as security the land and a share 
 of the crop for the year. If for any reason the debt was jiot paid at the end of the 
 year the amount of the indebtedness was doubled, and so on for each year, thus by 
 compounding the debt the amount soon became so great that it would be impossible 
 for the borrower to liquidate it, and the land was taken from him, and he must con- 
 tinue to work for the creditor. In this way a condition of practical slavery was 
 established. I learn, however, that the poorer classes are gradually becoming better 
 informed and are breaking away from this form of bondage. 
 
 "When the actual currency is exchanged the rates of interest are very high, rang- 
 ing from 20 per cent to 100 per cent per annum. 
 
 There is also another method of borrowing money that results in personal slavery. 
 The parent getting the loan gives as security the person of a child of his, who is 
 bonded to the maker of the loan, and must labor for its subsistence. A charge is 
 made for clothing and for loss or breakage of any property of the creditor, for which 
 it can be held responsible. At the end of the year the amount of the loan is 
 increased by the addition of these charges, and if it is not paid the whole amount is 
 doubled, and so on for each succeeding year, so that the debt has soon increased 
 beyond the possibility of payment and the person bonded virtually becomes the 
 property of the creditor. 
 
 It can hardly be possible that a people would fail to see the advantage of being 
 able to borrow money at a fair rate of interest, secured by land over such a system 
 as this. 
 
 ILOCOS SUE. 
 
 I have the honor to state that the demand for such an institution is very great, 
 but the present business methods of the people being so very crude, it will take a 
 long time and lots of hard work to educate them into up-to-date business methods. 
 
 At the present time a great many loans are being made on lands and crops, most 
 of them on crops, as it is the custom when money is borrowed on land to deliver 
 possession of the land until the loan is paid, and as the land owner loses the revenue 
 from it during the time it is mortgaged, they think a long time before mortgaging it. 
 
 The rate of interest on loans made on crops ranges from 10 to 100 per cent, and 
 are generally made on the following terms: A farmer desiring a little money goes 
 to some one of the richer men of his municipality and sells a part of his crop, at a 
 very low price, to be delivered when harvested. The prices paid in these cases are 
 generally about 50 or 75 per cent of what the prices usually are at harvest time. The 
 loans above described are generally for small amounts, ranging from $10 to |500. 
 
 The larger landowners borrow money from the banks and commercial companies 
 in Manila at a fixed rate of interest, ranging from 10 to 25 per cent per annum, 
 which they subloan to the smaller farmers on the terms above described. 
 
 There is a great demand for money in this province to be used in purchasing 
 improved agricultural implements, machinery, etc., and for irrigation; but the sad 
 part of it is the people are not aware of it. 
 
 One of the principal products of this province is "maguey" (a class of hemp). It 
 is a plant that will grow on almost any kind of land, is of perpetual growth, and 
 
38 AGEICULTUBAl, BANK IN THE PHILIPPINES. 
 
 requires very little cultivation. The cultivation of the plant has been made impor- 
 tant by the great demand for fiber, and as the " maguey" is bringing a good pnce, 
 the fact of its importance has been brought to the notice of the people. 
 
 There is a great deal of land in this province specially adapted to "maguey" 
 owned by poor people, who do not cultivate it for lack of stock, implements, and 
 seed. 
 
 The loans of a bank in this province would, owing to the fact that the land is cut 
 up into small tracts, be for small amounts. That you may more thoroughly under- 
 stand the necessity for small loans will furnish you the following information: 
 This province has an area of 491 square miles, including Government lands. Assum- 
 ing that the Government lands are one-third, or 163 square miles, this will leave 328 
 square miles owned by the people. This is divided into 80,000 pieces, according to 
 the land-tax lists, which will make an average of 2.62 acres to each piece, and as land 
 in this province will average in value about $50 local currency per acre, each piece 
 of land will average 1131 local currency. In many cases one man will own from 10 
 . to 25 pieces, and there are other cases where you will find pieces of land containing 
 from 100 to 300 acres. These figures are only estimates taken from the records of 
 this province. 
 
 Finally, will state that the proposed bank would, in every respect, be of great 
 benefit to the people, and, if properly brought to their notice, would, I am sure, be 
 taken advantage of. 
 
 I do not believe that there is at present any demand for or necessity on the part 
 of the inhabitants of Isabela for such an institution. The existence of the large 
 corporations doing business here proves that they do not need assistance. The 
 small landholders are as a rule indolent and unambitious, preferring primitive meth- 
 ods by means of which they obtain a bare subsistence to anything in the way of 
 improvements. If the people could be educated to appreciate modern ideas such an 
 institution would benefit them greatly, but I see no hope for this for years to come. 
 
 So far as I can learn no loans are being made to agriculturists of Isabela (except by 
 corporations and a very few native landowners) of importance to tenants on their 
 haciendas, and these are only made in the form of supplies furnished during the 
 year, for which the tobacco crop is a security. No specific rate of interest is charged 
 for this kind of loan, but the privilege is reserved of buying all the tobacco of the 
 tenant at such price as the landowner thinks it worth. 
 
 The possibilities of the Cagayan and its tributary valleys are great. Lands are 
 abundant and fertile and yield a subsistence with little effort, but my opinion, 
 formed from a year's observation of the natives, is that no attempt at material 
 progress will be successful here until closer communication is established with 
 Manila and the southern provinces of Luzon, from which an impetus for such would 
 necessarily come in the shape of immigration and a demand for products which 
 could not now be disposed of. Under present conditions loans would injure instead 
 of help the natives. 
 
 Such an institution would be acceptable to the people of this province, provided 
 the rate of interest was not too great. I am positive that a rate of 6 or 8 per cent 
 could be paid and the owners of land be greatly benefited. 
 
 There prevails in this section a system of mortgage by which the owner of lands 
 or cocoanut trees borrows money very near to actual value of property and turns 
 over property to mortgagee, who in turn reaps all benefits accruing from products of 
 land or trees. The almost universal custom is that after four years should the 
 mortgagor desire to redeem property, he can do so by repayment of sum originally 
 borrowed. 
 
 When money is loaned at interest there seems to be no fixed rate; 10 per cent 
 seems the lowest rate. 
 
 A large sum could be used for improvements of land, purchase of implements, 
 stock, etc. I consider a mortgage upon farm lands in this province first-class collat- 
 eral. With proper implements and stock I know of no country which will yield 
 greater returns. All products of this province are staple and find ready sale. Much 
 hemp is being planted in some sections, as also many cocoanuts, and considerable 
 building and repairs of homes. 
 
 It would aid greatly in the registration of property, which is greatly to be desired. 
 
AGEICULTXJBAL BANK IN THE PHILIPPINES. 39 
 
 It is almost universal in these islands that the poor farmer or "tao" each year has 
 to turn over to some "diamond-ring hombre" about one-half or more of his crop, 
 this in payment of obligations past or present. In nine cases out of ten said obliga- 
 tions are the loan of a few pesos. 
 
 Indirectly cases have come under my observation where the obligation was where 
 the rich man has paid the land tax for the poor man, and because the poor chap did 
 not have a few pesos of ready money he had to pay eventually in some form or 
 other many times the original amount of the tax. 
 
 If the bank can be so established as to help the poor, it will solve to a great extent 
 the school question, because at the j)resent time hundreds of children of the poor 
 are servants in the houses of the rich by virtue of obligations incurred by their 
 parents. It is my beUef, based on a wide knowledge of the tao class and a long 
 experience with unscrupulous higher class, that a bank in Manila will never accom- 
 plish the purpose, but I believe if a plan can be devised which will give each 
 province a bank or suboffice, it would reach the poor as well as the rich. 
 
 I have long held that some form of banking institution is needed in each province, 
 and the necessity ia constantly growing. 
 
 I am many times each month requested to accept small deposits and to change 
 money, etc., which of course 1 can not do. Therefore I hope it will not be taken 
 amiss if I respectfully suggest that the bank should have some of the features of a 
 savings bank. 
 
 Loans are being made in this province with interest ranging from 10 to 30 per cent, 
 with a custombre compound. There is a demand for money in this province for 
 agricultural purposes, especially the purchase of animals, machinery, and for the 
 building of dikes; but it is the poor people that need this money, and if it could be 
 loaned to them directly, I firmly believe the result would be entirely satisfactory to 
 the bank and beneficial to the people in the province. 
 
 At times money can be borrowed here in small amounts on real estate by paying 
 from 8 to 12 per cent interest annually. Recently I visited the several towns of the 
 province with the board of tax revision and had an excellent opportunity of learning 
 the agricultural conditions. With the exception of hemp lands, these conditions are 
 as bad as can be imagined. Practically all of the rice, corn, and sugar lands in the 
 province that were formerly cultivated, more than three-fourths of the total taxable 
 lands, are now lying idle. The board of tax revision inquired closely as to the cause 
 of this, and the answer from all parts was to the effect that nearly all of the carabao 
 were dead and that it was impossible to cultivate their land. The landowners are 
 "land poor," and the condition of the poorer people outside of the hemp districts is 
 fast becoming pitiable. For some time past they have been sustaining life on camotes 
 (sweet potatoes), bananas, the pith of palm trees, and roots of certain plants. I heard 
 of people dying from starvation, and from personal observation I believe the stories 
 to be true. In the town of Jimenez, which has a population of about 8,000 souls, 
 the death register shows a list of deaths for 1902 of over 1,000, and this was before 
 cholera made its appearance there. This is an extreme case. Under normal condi- 
 tions this town should be one of the most prosperous in the province. Unless the 
 people receive help in the way of carabao and seed, I believe they will go from bad 
 to worse. I believe that nearly all the owners of rice and corn land would be glad of 
 an opportunity to buy carabao. This would give the poorer people work and condi- 
 tions would soon be normal. As to irrigation and the purchase of modern farming 
 implements, I believe the people generally would be timid about investing in them 
 until some one had estabhshed their practicability. The establishment of such a 
 bank as you mention would certainly be received as a godsend by the people of 
 Misamis Province. 
 
 ROMBLON, 
 
 The lower classes, whom such an institution should most benefit, have no desire, 
 and are morally unprepared, for responsibility or obligation. No loans of any sort 
 can be learned of; the indications are, and it is believed, there are none. 
 
 There is no demand for or need of money to develop land or buy implements, and 
 there will be no need of it until years of example, training, and experience in the 
 use and value of tools, implements, and machinery inspire larger operations than 
 now exist. 
 
40 AGBICXTLTUEAL BANK IN THE PHILIPPINES. 
 
 The people in this province have ample capital and cattle and improvised imple- 
 ments to work and develop their land now under cultivation. Except to loan money 
 for roads to the municipalities, an agricultural or any other sort of a bank would be 
 premature so far aa it would help Romblon. 
 
 The majority of those who might borrow would scarcely prove good stewards. An 
 unfortunate characteristic of the Filipino is to move rather than pay rent; he con- 
 scientiously leaves debt behind him. A fair mortgage would be construed as a profit- 
 able sale in many instances. While his trusting creditors speculated upon his crop 
 prospects and ability to repay, how he could most enjoy their easy money would be 
 his chief concern. In higher races than the Filipino prosperous small and large farm 
 owners have been reduced to day laborers or renters because either of disinclination 
 or misappropriation, which were conduced by their ability to borrow. Of intense 
 susceptibility, the Filipino gets money not for money's sake or future needs, but to 
 procure at once what pleases his eye. He might honestly borrow money to buy 
 plows, yet yield to slight temptation to spend it otherwise, possibly for guns and 
 ammunition to use against his creditors. It is believed an ability to borrow would 
 now affect the Filipino perniciously. 
 
 It would lessen the chance and inducement to misappropriate, and more nearly 
 conserve the beneficent intentions of the government to loan, not money, but the 
 actual tools, implements, or material which money might be loaned to buy. Thus 
 the object in view would be reached sooner and with less complication and temptation. 
 
 The impetus to progress and enlargement which is afforded by credit will be oppor- 
 tune to the Filipino, not now, in his state of demoralization and ignorance, but many 
 years hence, when he has become able, confident, thrifty, and conservative. 
 
 ORIENTAL NEGROS. 
 
 I have the honor to state that many of the farmers have already placed loans upon 
 their farms and the crops for the coming year, in order to obtain money for the 
 planting in May and June. The interest paid ranges from 10 to 25 per cent. The 
 money is generally obtained in Iloilo and Cebu. 
 
 I have personal knowledge of the great desire of the people for some form of legiti- 
 mate banking by which money could be obtained at a reasonable rate of interest. 
 
 Ours is purely an agricultural people. 
 
 There is a demand for $1,000,000 local currency on the part of the farmers, and 
 this will increase, along the lines of the purchase of improved farm implements and 
 erection of large sugar mills, whose owners will be manufacturers and where the 
 farmers can sell their crops, whether large or small, and be relieved from the neces- 
 sity of manufacturing the crop into sugar. In addition to this there will be a large 
 increase in the acreage brought into cultivation. 
 
 The pacific condition in this province and the loyalty of the people to American 
 supremacy insure protection for the investment of capital. I have spent the last 
 two months in visiting 21 out of the 24 municipalities, and spent much time in the 
 discussion of the obtaining of money by the farmers, and base my opinion on the 
 result of personal observation and the opinion of the best men of the province. 
 
 PAMPANGA. 
 
 I have the honor to state that in this province it is my opinion that such a bank 
 properly conducted would be of incalcuable benefit to the poor farmers, who, through 
 theravagesof war, rinderpest, locusts, and drought in 1902 have become impoverished. 
 
 On the part of the government it seems to me that the greatest thing it will have 
 to contend with will be the question of securing satisfactory security. 
 
 I take it for granted that it will desire in every case a mortgage or lien on the land 
 of the borrower. 
 
 To insure the government against loss this will necessitate the borrower proving 
 his title, which, if we take the United States as a standard, can not be done in 95 
 per cent of the cases without recourse to the land court. The people who will desire 
 to avail themselves of this privilege al-e not in a condition, financially, to pay even 
 the slight fee necessary to have their titles perfected in that court. 
 
 From the standpoint of the people I can see nothing but what could be of the 
 greatest advantage to them. 
 
 Probably the greater part of the agricultural interests of the islands are not directly 
 in the hands of the real owners of the lands. What is known as the "share system" 
 in the States is in vogue here almost universally. 
 
 The tenant in some cases takes a piece of land and agrees to pay for each balita, if 
 it is rice land, a specified number of cavanes of palay, or, if it is sugar land, so many 
 pilons of sugar, regardless of the crop that may be raised. In some few other cases 
 
AGKICULTUKAL BANK IN THE PHILIPPINES. 41 
 
 a certain proportion of the crop is paid, which, of course, when crops fluctuate, is a 
 more equitab'e arrangement. 
 
 The specific amount paid or the proportion depends altogether on the assistance 
 rendered the tenant in addition to the use of the land. 
 
 In some cases the tenant furnishes all the labor and the owner everything else, 
 including seed rice, caribao, implements, etc. In other cases the owner furnishes 
 the land and the tenant everything else. Between these two gradations are infinite 
 others. I might say, however, parenthetically, that in no case does the tenant have 
 a fair show. Then, there is another system which consists in loaning money outright 
 on gilt-edged security at from 25 to 40 per cent per annum. 
 
 This is the system where the tenant, being possessed of nothing but a small tract 
 of land, must seek help from some of the wealthier people to cultivate it. He is 
 advanced sufficient seed rice for planting and furnished money or its equivalent for 
 such other expenses as are necessary. In every case of this kind the rent or toll is 
 not contingent but specific. 
 
 If the season is bad the crop raised may be only sufficient to pay the debt due the 
 owner and, consequently, the tenant is practically in bondage, as he must borrow 
 enough rice to tide him over to the next season. If it should happen that the crop 
 was a failure, then he is in debt to the leaner, who has a mortgage or lien on his 
 land for money advanced which he can foreclose at any time. 
 
 Frequently the loaner does not foreclose, but holds a sort of a club over the heads 
 of the tenants, who are practically in slavery. 
 
 In general, I should say that the average small tenant, either cultivating his own 
 land with assistance or cultivating another's land on shares, gets in addition to his 
 board and lodging (which consists of rice and a nipa hut) about 10 per cent of the 
 crop for his labor. 
 
 One man with the antiquated methods now in use can probably cultivate 3 balitas 
 of rice land, averaging 25 cavanes to the balita and worth approximately 1 peso a 
 cavan. It will thus be seen that his wages exclusive of food and lodging are 
 ridiculous. 
 
 The tendency of the present system is toward larger holdings, the wealthy becom- 
 ing wealthier and the poor poorer. The debts of the poor increase from year to year, 
 and with no chance to pay them their lands are gradually taken from them. 
 
 I see no reason why, if these small holders can be judiciously assisted, they could 
 not in time become independent and eventually prosperous, and prosperity in even 
 a small degree would bring contentment to this class who constitute a very large 
 part of the whole population. 
 
 PANGASINAN. 
 
 There is no question but that such an institution, established in this province, 
 would be of the utmost benefit to the farmer, if small loans be made. Land holdings 
 are of small areas in Pangasinan, but the people require more capital in order to 
 improve their farms, place total areas under cultivation, purchase more stock, con- 
 struct irrigating ditches and purchase modern farming implements; such an institu- 
 tion would meet this urgent need and, if conservatively and carefully managed, would 
 itsef be a money maker. 
 
 The institution you refer to would afford an opportunity for landowners to bor- 
 row the capital. I believe this province, with the benefits of such an institution as 
 a bank that would make reasonably long-time loans on real estate, would or easily 
 could furnish the rice, corn, coffee, indigo, alcohol, and many other products for the 
 entire island of Luzon. 
 
 After obtaining the views of many of the principal landowners of this province, I 
 have come to the conclusion that the establishment of such an institution as men- 
 tioned in your letter will be of immense value not only to the individual landowner, 
 but also to the province and the public in general. There are in this province large 
 tracts of good agricultural land at present uncultivated on account of lack of funds. 
 If the necessary funds could be obtained, laborers and animals could be procured, a 
 system of artificial irrigation inaugurated, and the soil be made useful to' all con- 
 cerned. Recent developments show that an abundance of good water can be obtained 
 by means of artesian wells. In fact, it is the belief of the undersigned that the only 
 way of again placing this province on a good financial basis is to advance to the land- 
 owners, at a reasonable rate of interest, funds with which to develop their holdings. 
 Most people of this province seem very poor, not having recovered as yet from the 
 losses inflicted by the war, rinderpest, locusts, and various other calamities. 
 
42 AGEICtTLTtTRAL BANK IN THE PHILIPPINES. 
 
 All my informants claim that at present loans on land can only be obtained from 
 private parties in Manila at an enormous rate of interest, as high as 30 to 35 per cent 
 having been paid. Further, that all landowners would gladly avail themselves of an 
 opportunity to borrow money for the purpose of improving their holdings. 
 
 There is no direct information that I can give you. There seems to be no agricul- 
 tural activity at present, and no loans are being made upon lands in the province; 
 but I feel very confident, from my intercourse with the people, that such an institu- 
 tion would be welcomed and would prove to be of incalculable benefit to the province. 
 The lethargy in agricultural lines is almost entirely owing to the paralyzing result of 
 the war, which has been over less than a year, and I believe that if the government 
 were to father such a project the people would borrow from it, in substantial amounts, 
 for the purpose of replenishing their farms with carabao, implements, etc. 
 
 I do not favor the establishment of an agricultural bank, as far as this province is 
 concerned, for the purpose stated. 
 
 The tendency would be to fritter away such loans for other purposes, leaving them 
 In a worse condition than before. What they need is encouragement to use facilities 
 they already possess and compelling force to lift them out of the idea that they can 
 get along without work. 
 
 The general opinion is that such an institution would be the salvation of the farmers 
 not only in this province, but in nearly all of the provinces; but under strict regula- 
 tions to prevent the abuse of this privilege, such as lending it out again at a higher 
 rate of interest, and using it for other purposes than what it is intended for. 
 
 At present there are very few persons in this province who lend monev, and then 
 only on the very best titles, at from 12 per cent and upward per year. When loaned 
 on the crop the general rate is a cavan of palay for every dollar loaned, or almost 50 
 per cent, as when the wet season arrives the palay is sold back to the borrower at 
 from $1.50 to $1.75 per cavan. 
 
 At the present time there is a great need of something of this sort, as with the loss 
 of the carabao, the locusts, and other calamities the agriculture of the province is in 
 a very bad shape, and unless something is done to aid the people I am afraid that 
 there will be a great deal of suffering before long. 
 
 1 understand that it is the intention of the government to import carabao to be 
 sold to the farmers at a low rate, but as the conditions are at present I do not think 
 it will be possible for many of them to improve the opportunity, as a big majority of 
 the owners are entirely without funds. Several of the towns already have asked for 
 aid in the shape of seed. 
 
 I think that such a bank loaning money at a low rate of interest, say from 6 per 
 cent to 8 per cent per annum, would work a great benefit, and would be the means 
 of driving out of the market the people who are loaning money at such a high rate 
 of interest, and in this way save the small farmer, as there are several cases, or rather 
 a great many, who have lost all their property on account of the rent of the farm 
 having to go to pay the interest on the loan, and then having to borrow more money 
 to live on for the rest of the year. 
 
 The great diflBculty will be that a very high per cent of the borrowers will gamble 
 away their money. If this can be regulated by making such an act criminal, then I 
 am very greatly in favor of such an institution. 
 
 There is no question but what a government agricultural bank along the lines you 
 described would be of great benefit to the people of this province. 
 
 In Tayabas Province there are a large number of small land owners, and con- 
 siderable money is borrowed by them on their land each year, the minimun rate of 
 interest being 24 per cent, usually computed at 2 per cent monthly. Many are pay- 
 ing as high as 36 per cent. All the people with whom I have conferred are eager 
 and enthusiastic on the subject. There is no question in my mind but your idea is 
 a grand one and would work an incalculable amount of good throughout the archi- 
 pelago. 
 
AGEIOTJLTTJEAIj bank in the PHILIPPINES. 43 
 
 ZAMBALES. 
 
 The financial problem for Zambales is a serious one, and unless some measure 
 for relief is taken by the Commission or the insular government the provincial gov- 
 ernment will have to depend on the insular government for its support. 
 
 The people are poor, having no money to improve their lands, consequently less 
 money in the provincial treasury for taxes, etc., for it is imposible to collect taxes 
 and increase the revenues when the people themselves have no money. Therefore I 
 think that if the Commission will establish a government agricultural bank it will 
 not only help the people to improve their property, but will make them contented 
 with the government and above all will bring industries, etc., into the province and 
 increase the revenues for the provincial treasury. 
 
 Unless some cheaper means of registration of property is made there will be a dif- 
 ficulty in having a clear title to property on which money is loaned, as the natives 
 here have not responded to the notices sent out about registering their property. 
 They claim that there in no use in registering property when they have no money 
 and carabao to work with, especially when it entails so much expense, the majority 
 of them having small holdings. 
 
 However, I think that time will do nlfr&y^ith this difficulty when they begin to 
 realize the advantages derived from registering their property and having a govern- 
 ment recognition of the same. 
 
 Again, property here is cheap, and a man would have to have a great deal of land 
 in order to secure a loan from the government, thus benefiting the rich without help- 
 ing the poorer class. In answer to this, time would make a remedy, because if they 
 can get money to work their land it will eventually increase in value, thus allowing 
 greater improvements in the years to come. 
 
 Taking everything into consideration, I am of the opinion that it would ultimately 
 be a success for the people, for this province, and for the bank itself. 
 
 Schedule IV. 
 
 STATEMENT SHOWING — 
 
 A. Agricultural land registered in each of the provinces under the 
 Philippine land registration act. 
 
 B. Agricultural land in each of the provinces applications for the 
 registration of which are pending. 
 
 (This schedule is being prepared by the court of land registration 
 and will be submitted later.) 
 
EXHIBIT C. 
 THE AGBICTn-TUBAL BANK OF EGYPT. 
 
 SCHEDULES. 
 
 I. Extracts from Lord Cromer's reports. 
 II. Concession of Egyptian govemtnent. 
 
 III. Statutes of bank. ^^ ' 
 
 IV. Bank's plan of operation. 
 V. Instructions to borrowers. 
 
 VI. Forms used by bank. 
 
 Schedule I. 
 
 EXTRACTS FROM THE ANNUAL REPORTS OF LORD CROMER WITH REF- 
 ERENCE TO LAND AND AGRICULTURAL CREDIT IN EGYPT. 
 
 INDEBTEDNESS OF FELLAHEEN. 
 
 Report on the year 1898. 
 
 In my reports for the years 1895 and 1896 I explained that, as an experimental 
 measure, the government at one time advanced £10,000 in small sums to the fella- 
 heen. The experiment proved sufficiently successful to afford encouragement for 
 private enterprise to enter this field of action. The Egyptian credit foncier consented 
 to lower the minimum amount of its advances to £100. Inaamuch, however, as the 
 advances made by village money lenders are generally in small sums of less than 
 £10, it was evident that the limit of £100 was still too high to reach the majority of 
 those whom it was desirable to relieve. 
 
 A further tentative step has now been taken in the direction of dealing with this 
 question. The newly created national bank is about to make advances of small sums 
 up to £20 at 9 per cent interest. Further, the bank offers advances up to £100 at the 
 same rate of interest to those who wish to pay off their old debts; repayment to the 
 bank will be made in five yearly installments due in October of each year; that is to 
 say, at the time the cotton crop is gathered. All such advances will be reported 
 to the government, who will instruct the tax collectors to enter them on the 
 ' ' wirdes ' ' and effect the recoveries with the taxes. The ' ' wirde "is the schedule in 
 the possession of each landowner, setting forth the amounts due for land tax and the 
 dates at which payments should he made. 
 
 The 9 per cent interest will be distributed as follows: H per cent will be paid to 
 the local agent of the bank; J per cent will go to the tax collectors; the remaining 
 7 per cent will be retained by the bank, which will be put to some expense, notably 
 in the direction of appointing a thorough trustworthy European inspector, who will 
 visit the villages and control the action of the local agents. The services of an official 
 of this description are indispensable. 
 
 The experiment will, for the present, be tried in one district only. Should it 
 prove successful, the bank will be prepared to extend its operations. 
 
 As the fellaheen at preseirt habitually borrow money at exhorbitant rates of inter- 
 est — sometimes as high as 40 per cent and even higher — it is probable that advantage 
 will be taken of the terms now offered. But I must repeat what I have said before 
 on this subject, viz, that the measures now in course of execution must still he 
 regarded as wholly experimental. The relations between the money lenders and the 
 cultivating classes, which are very similar in character in all backward agricultural 
 countries, constitute an economic problem of extreme difficulty. I am not aware 
 
 44 
 
AGEICTJLTUEAIi BANK IN THE PHILIPPINES. 45 
 
 that anywhere a thoroughly satisfactory solution of this problem has been found. 
 It is, in fact, impossible to feel sanguine of the success of any protective measures 
 divised with the object of safeguarding the poorest class of cultivators against the 
 consequences of their improvidence. In the present instance, all that is possible is 
 to give the cultivator a fair chance of escaping from his financial embarrassments; 
 but no measures devised by the government can prevent his incurring fresh pecuni- 
 ary obligations of a nature to frustrate the intention of the scheme now contem- 
 plated on his behalf. I am well aware of tlie force of these arguments. They do 
 not constitute a sufficient reason for total inaction, but they enjoin watchfulness, 
 with a view to deciding by the light of the practical experience which will eventu- 
 ally be gained, whether it will or will not be desirable to continue the experiment 
 now in course of progress. 
 
 Report on the year 1899. 
 
 * * * It was never intended that the government should embark seriously on 
 a field of enterprise which can more suitably be left to private individuals and 
 institutions. 
 
 The experiment, however, was sufficient to show both that the fellaheen would 
 willingly avail themselves of whatever facilities could be offered for borrowing at a 
 low rate of interest and the practical difficulties in the way of recovering interest and 
 principal on a number of small loans, though considerable, were not insurmountable. 
 
 The next step taken was to induce the Egyptian credit foncier to lower the mini- 
 mum amount of its advances to £100. This measure was practically unproductive 
 of result, the minimum being still too high to meet the requirements of the mass of 
 the borrowing classes. 
 
 The establishment of a national bank in 1898 enabled a further experiment to be 
 made under circumstances which were more favorable to success. Indeed, one of the 
 main reasons, which induced the government to assent to the creation of this bank, 
 was a desire to facilitate the treatment of the question now under discussion. 
 
 Belbeia district, in lower Egypt, was chosen as the field of operations. This district 
 consists of 68 villages. In 18 of these the land is held by large proprietors. During 
 the spring and early summer of 1899, 1,880 advances, amounting in all to £4,780 were 
 made by the bank in the 50 villages, where the land is held in small lots. These 
 loans were all repayable in the autumn. The result, I am informed by Sir Elwin 
 Palmer, the governor of the bank, "has been thoroughly satisfactory; the whole of 
 the money due in the year was collected by the government tax collectors." 
 
 I should explain that the debts of the fellaheen may be divided into two distinct 
 categories. In the first place, it is a very general practice among the Egyptian culti- 
 vators to borrow small sums in the early part of the year and to repay the loan and 
 the interest in the autumn, after the cotton has been sold. In the second place, loans 
 larger in amounts and of longer duration are, for various reasons, contracted. 
 
 It was obvious that very little would be done to relieve the population generally 
 if the bank confined its operations solely to the first of these two categories. It is 
 the second class of loans which is most onerous to the population generally, for the 
 rate of interest usually charged by the village money lenders is so high that the cul- 
 tivator, having once borrowed money, but too frequently finds himself involved in 
 inextricable difficulties as the result of a loan which may originally have been for no 
 very considerable amount of money. 
 
 Guided by these considerations the bank consented to make 870 loans, amounting 
 in the aggregate to £26, 720 and repayable in five yearly instalments, to the cultiva- 
 tors of the Belbeis district. In all these cases the money was advanced to persons 
 who were already indebted, and who were thus enabled to effect a commutation of 
 their debts on favorable terms. 
 
 It is probable that the business has not so far proved sufficiently remunerative to 
 the bank to compensate for the very considerable amount of trouble and expense 
 involved in dealing with a number of these petty transactions. This, however, is due 
 partly to the fact that the operations have so far been conducted on a small scale. 
 The expenses, which are considerable, owing to the absolute necessity of "employing 
 trustworthy and competent supervising agency, will of course proportionately decrease 
 as the operations extend. 
 
 It was felt, however, that no permanent success could be obtained unless the philan- 
 thropic considerations which cluster round the treatment of this subject were so far 
 discarded as to place the matter on a sound commercial basis, and thus insure to the 
 bank an adequate remuneration for their capital outlay. The government therefore 
 consented to allow the bank, in addition to 9 per cent, which is the highest rate of 
 interest allowed by law, -to charge a commission of 1 per cent, which will go to their 
 local agents in the villages. I need hardly say that the provisions of this law are 
 
46 AGEICTJLTURAL BANK IN THE PHILIPPINES. 
 
 habitually evaded by the money lenders and their clients. It is estimated that of 
 the 9 per cent which will be received by the bank about 3 per cent will go m expenses, 
 leaving a net profit of 6 per cent, from which, however, any loss incurred by bad 
 debts will have to be deducted. 
 
 This arrangement, I hope and believe, is of a nature to interest the bank in the 
 extension of the scheme. In fact, the bank has now consented to extend its opera- 
 tions to three more districts, viz, Minet El-Kemh, Mit-Gamit, and Zifta. _ One hun- 
 dred thousand pounds sterling will be advanced in these districts, of which £25,000 
 will be devoted to loans repayable within the year. The balance of £75,000 will be 
 lent on mortgage, the loan? being repayable in five yearly installments. 
 
 The popularity of the measures recently taken in the Belbeis district is suflBeiently 
 shown by the numerous requests which have been received by the bank from per- 
 sons residing in districts which have so far not been comprised within the sphere of 
 operations. 
 
 I must, however, repeat that warning which I have given on previous occasions 
 when dealing with this subject. The project is still in an experimental stage. Its 
 ultimate success, considered in the light of a possible solution of a very important 
 and diflBcult economic problem, depends on whether the majority of the cultivating 
 classes, having once been relieved from any very onerous debts which they may 
 have contracted, will or will not use the comparative financial freedom thus acquired 
 to plunge again into operations from which it will be extremely difficult, if not alto- 
 gether impossible, to extricate them. I should mention that in the Belbeis district, 
 where the experiment has been tried, some applications have been made by culti- 
 vators whose credit was already so deeply pledged as to render it impossible to apply 
 any remedial measures. But whenever the security was sufficiently intact to justify 
 the loan money has been advanced. 
 
 It would be premature at present to express any confident opinion on this point 
 Such little evidence as is forthcoming, however, rather points to the conclusion that 
 it is erroneous to suppose that the Egyptian fellah will almost invariably incur debt 
 up to the maximum amount of his credit. I do not doubt that a certain number of 
 cultivators, after having committed debts on which they are perhaps paying interest 
 at the rate of 40 per cent or even more, into one of which they will pay 10 per cent, 
 will use the margin of income thus rendered available in order to contract further 
 debt; but I contend that the present scheme may be considered a success if the num- 
 ber of individuals who adopt this ruinous procedure constitute the exceptions rather 
 than the rule. 
 
 Much, indeed, has frequently been written and said about the inveterate improvi- 
 dence of the fellaheen population; much, also, on the impossibility of saving one, by 
 legislative or administrative measures, from the consequences of his own folly. I am 
 not prepared to deny that there is much truth in the objections which, on these 
 general grounds, have occasionally been urged against the measures now under dis- 
 cussion. The other side of the question is that, until of recent years, the system of 
 government prevalent in Egypt was certainly not of a nature to encourage thrift 
 Time will assuredly be required to win the Egyptian population from habits acquired 
 during the long period when but little respect was shown for the rights of property 
 and when the demands of the tax gatherers were not merely excessive but also 
 uncertain and capricious. But anyone who has seen much of the fellaheen popula- 
 tion can bear testimony to the fact that they are a very hard working and industrious 
 race, who are keenly alive to such matters affecting their own interests as they 
 clearly understand. 
 
 I know of no reason for holding that, as a class, they are irretrievably thriftless. 
 In any case no harm can be done by affording them a fair opportunity for shaking 
 themselves free of debts by which they are but too often burthened, and thus giving 
 them a starting point for the exercise of economy in the future. Without, therefore, 
 taking a more sanguine view than would be justified by the present facts of the 
 situation, it is permissible to hope that the arrangements now made will be pro- 
 ductive of some real benefit to the mass of cultivators in Egypt. 
 
 Should the operations conducted during the present year afford sufficient encour- 
 agement in that direction it is to be hoped that the sphere of petty loan operations 
 will be gradually extended. In that case the sums advanced will be looked up and 
 it will be necessary for the national bank to increase its capital. 
 
 Report on the year 1900. 
 
 In several previous reports I have alluded to the steps which have of late years 
 been taken to permit of the Egyptian fellaheen borrowing money on reasonable 
 terms. The experiment appears to have excited a certain amount of interest outside 
 
AGEICULTUEAL BANK IN THE PHILIPPINES. 47 
 
 of Egypt. It has been discussed in the European press, and I have received inquiries 
 as to the working of the Egyptian system from such opposite quarters as New Zealand 
 and Bosnia. 
 
 At the risk of repeating much that I have said on former occasions it may be desir- 
 able that I should expl9,in the main features of the Egyptian system. 
 
 There are, broadly speaking, two methods of dealing with this problem, which, in 
 spite of local differences, presents much the same features in all countries where a 
 backward agricultural population is brought in contact with these modern principles 
 on which the relations between debtor and creditor are based in all civilized coun- 
 tries. The first is to protect the cultivator from the possible consequences of his own 
 improvidence, ignorance, or carelessness by protective legislation, -which is devised 
 so that, in one form or another, his freedom of contract is curtailed. 
 
 The other is to dispense with all legislation of a protective character and to seek for 
 a solution by giving to the cultivators facilities for borrowing at reasonable rates, and 
 thus both affording an opportunity to those who are already embarrassed of shaking 
 themselves free from the grip of tjfie usurer and at the same time providing a means 
 to those who have so far escaped financial embarrassments of maintaining themselves 
 in a position of solvency. 
 
 I need not here discuss the merits and demerits of these two methods. It will be 
 sufficient for my present purposes if I state that the second has been adopted in 
 Egypt in preference to the first method. 
 
 There is nothing novel in the principle. Land banks have for a long time past 
 existed in many countries. Such an institution, under the name of the "Credit Fon- 
 der Egyptian," was established some years ago at Cairo. I have explained in my 
 previous reports that this institution, though in many respects of great utility, did 
 not aid in the solution of the special problem now under discussion, the reason being 
 that the minimum advance made by the "Credit Fonder" was £100, a sum in excess 
 of the loans usually contracted by the Egyptian peasantry. 
 
 It is in the detailed application of the principle that, so far as my knowledge of the 
 subject enables me to judge, the Egyptian system possesses some novelty. I need 
 hardly add that in a matter of this sort the details are of great importance. 
 
 Money may be advanced to the cultivators either by the government or by a pri- 
 vate bank.' 
 
 The objections to purely government action in Egypt are twofold. In the first 
 place, the government could not without much inconvenience have provided the 
 - necessary capital. In the second place, the officials of the government have not the 
 time to go among the villagers and seek out those who are in want of loans. Even 
 if they had the necessary time at their disposal, it is not altogether desirable that 
 they should be employed on work of this sort. Further, they have no personal 
 pecuniary interest in the matter. When it has been publicly notified that on appli- 
 cation to some government authority at a certain time and place small loans may 
 be obtained on certain conditions, the government officials, naturally enough, think 
 that they have done all that is required of them. In Egypt a measure of this sort 
 would not suffice to wean the cultivators from their long-established habits. They 
 would continue to resort to the usurer and to borrow money at perhaps 40 per cent, 
 although a notice might be posted in the village informing them that by walking a 
 a few miles they could on certain conditions — which they would often fail to under- 
 stand — borrow at 10 per cent. What was required was that some trustworthy agents 
 should seek out clients and explain to a large number individually the advantages 
 of the plan offered for their acceptance. The Egyptian Government did, indeed, act 
 as a pioneer in this matter. 
 
 In 1896 it advanced a sum of £10,000, confining its operations to a small cluster of 
 • villages. But although the experiment proved successful in so far as the recovery of 
 the money was concerned, enough was learned to show that if the scale of operations 
 was to be extended, resort must be made to private enterprise. 
 
 On the other hand, the employment of private enterprise is not without its special 
 disadvantages. The main obstacle, which stood in the way of its employment in 
 Egypt, was that no bank possessed the administrative agency necessary to insure the 
 punctual collection of the interest and capital due on a very large number of petty 
 loan operations. Neither, under the circumstances, could the agency have been 
 created. It was clear at a glance that any attempt to create it would be so costly as 
 to render it necessary to charge a very high rate of interest in order to cover the 
 expenses and leave a fair margin of profit to the bank. Thus the main object of the 
 scheme would have been frustrated. 
 
 Under these circumstances an endeavor was made to devise a plan which would 
 combine the advantages and obviate the disadvantages of the two systems. This 
 was done in the following manner: The bank incurs the whole financial responsi- 
 
48 AGRICULTURAL, BANK IN THE PHILIPPINES. 
 
 bility of the undertaking. It takes all the profits and bears all the losses. The Gov- 
 ernment has no pecuniary interest in the operations. The bank, also, through its 
 own agents, does all the work of lending. In every district in which operations are 
 undertaken an agent is appointed who receives a commission of 1 per cent per annum 
 on any loan that he may make. These agents are placed under the general supervision 
 of one English inspector, Mr. Scott Dal^leish. Owing to the extension of the opera- 
 tions, a second English inspector has quite recently been appointed. I wish to draw 
 particular attention to this latter detail, as it is an essential part of the scheme. The 
 success which has unquestionably been attained is mainly due to the fact that Mr. 
 Scott Dalgleish constantly visits the villages where operations have been undertaken. 
 He speaks Arabic well and thoroughly understands the habits and customs of the 
 people. He is thus able to control the local agents, both in the interests of the bank 
 and of the borrowers, and he is able to explain verbally to the latter the precise nature 
 of the transactions in which they are engaging. 
 
 It is only when the stage of repayment is reached that the government steps in. 
 The taxgatherers collect the money due to the bank at the same time as the land 
 tax. Thus the bank is relieved of all expenses of collections. 
 
 Money is advanced at the rate of 10 per cent, of which, as I have already men- 
 tioned, 1 per cent goes to the local agents in the form of commission. Of the 
 remaining 9 per cent, it is estimated that about 3 per cent goes in covering the 
 expenses of the bank, thus leaving a net profit of 6 per cent, from which, however, 
 bad debts have to be deducted. 
 
 Such is the plan. I have now to state the nature of the results which ha.ve been 
 so far attained. 
 
 In 1899 operations were undertaken in only one district — that of Belbeis. Two 
 thousand four hundred and fifty advances, amounting in all to £31,500, were made. 
 
 In 1900 the bank extended its operations to ten districts. Quite recently a further 
 extension has taken place. The whole of lower Egypt is now comprised in the 
 sphere of operations. In 1900, 9,500 advances, amounting to £137,781, were made. 
 Of these, 6,213, amounting to an aggregate of £36,216, were loans repayable within 
 the year. The remaining 3,287 advances, amounting in all to £101,565, were repay- 
 able in five years. In all the latter cases the loans were made to persons already 
 indebted, their old debts, on which very high rates of interest were charged, being 
 paid off by the bank. The amount that fell due in 1900 was £28,120, due from no 
 less than 5,035 borrowers. It is with very special pleasure that I am able to record 
 that the whole of this sum was recovered. 
 
 The bank is now prepared to advance money in small loans up to a maximum 
 amount of £250,000. To go further than this will require an increase of capital. I 
 trust that eventually the conditions of the money market will permit of the capital 
 of the bank being increased. 
 
 Sir Edwin Palmer, the governor of the national bank, who has taken a very special 
 interest in this matter, writes to me as follows: "The experiment so far has undoubt- 
 edly been a success, and the relief afforded to some thousands of fellaheen must have 
 been considerable. The fact that the bank is prepared to advance small sums at a 
 fair sum of interest has, in the districts where the bank is working, caused a fall in 
 the rate usually charged by the money lenders, and the fellaheen have indirectly 
 benefited in this way too. In one district the largest money lender left when the 
 bank began operations. In another, the bank was regularly boycotted, and it was 
 impossible to find an agent among the people of the district of any standing, they 
 being nearly all money lenders themselves. An outsider had therefore to be 
 appointed. He had great difficulties at first, but the people of the district now begin 
 to realize the advantages, and are dealing with the bank." 
 
 I stated last year that I considered the scheme as an experiment. I am still of the 
 same opinion. Some long time must, in faf-t, yet elapse before it can be considered 
 as having passed out of the experimental stage. Manifestly, the main danger is that 
 the cultivators, being once free from crushing debt, will use the margin of inconae 
 they thus obtain in incurring fresh debt. That some of them will adopt this pi-ocedure 
 is highly probable; that the majority will fall in the same error is very far from 
 being certain. Any opinion on this subject at present can be little more than a 
 matter of conjecture. Lengthened experience alone can show whether, now that 
 the taxes are no longer arbitrary and capricious and the rights of property are in 
 fact as well as in name secured by law, the fellaheen of Egypt will abandon the 
 habits of extravagance of which they have so often been accused and develop national 
 habits of thrift. I can only speak of my personal opinion, formed after long residence 
 in this country. It is that, under favorable conditions for the exercise of economy, the 
 Egyptian peasant will probably prove more thrifty than the English, though less so 
 than the French member of a corresponding class of society. I am encouraged in 
 
AGKICULTUKAL BANK IN THE PHILIPPINES. 49 
 
 this belief by the following remarks, which have been addressed to me by Sir Ewin 
 Palmer: "There is," he says, "nothing to indicate that the fellaheen, once relieved 
 of their onerous debt to the money lenders, are inclined to plunge again into debt — 
 beyond the debt of the bank. Indeed, the facility with which the recovery of the 
 loans or installments has been affected would seem to show that this is not the case." 
 
 However this may be, it is abundantly clear that the experiment, which is one of 
 great interest and importance, is well worthy of a further and prolonged trial. 
 
 Before leaving this subject I wish to make a few remarks which may be interest- 
 ing, both because they are illustrative of the practices of the village usurers and 
 because they may serve to explain the advantages of the conditions now offered to 
 the villagers by the bank. 
 
 I have occasionally heard it stated that 10 per cent is too high a rate of interest to 
 charge, as the fellaheen can often obtain loans at that rate from the local money 
 lenders. 
 
 I have already explained that, in order that these operations should be properly 
 conducted, it is necessary to employ a somewhat expensive agency. I am convinced 
 that there could be no greater mistake than to employ very cheap, and therefore 
 untrustworthy, agents. 1 do not think that 6 per cent, including bad debts, can be 
 held to be more than a reasonable profit for the bank. Moreover, I greatly doubt 
 whether the fellaheen would confirm the statement that they can without the assist- 
 ance of the bank obtain money. Loans made nominally at 10 per cent generally 
 involve paying in reality interest at a far higher rate, the reason being that through- 
 out the currency of the loan full interest is charged on the total sum originally 
 advanced. No allowance is made for a reduction of interest on account of the annual 
 repayments of portion of the capital. I give an illustration of the two proceedings, 
 viz, that adopted by the bank, and that very commonly adopted by the usurers. 
 Suppose the bank to advance £100 for five years at 10 per cent. The installments 
 due to the bank would be as follows: 
 
 Capital, 
 
 Interest, 
 
 Total. 
 
 First year 
 
 Second year . 
 Third year . . 
 Fourth year . 
 Fifth year . . . 
 
 Total . . 
 
 £20 
 20 
 20 
 20 
 20 
 
 £30 
 28 
 26 
 24 
 22 
 
 130 
 
 The borrower would thus, in the course of 5 years, pay £30 for the use of the 
 money advanced to him. 
 
 Under the alternative procedure he would pay five equal installments of £30, 
 making in all £160, of which £50 would be on account of interest. 
 
 In point of fact, to the fellaheen the bank's charge of £30 is equivalent to a loan 
 contracted from the usurer of 6 per cent, and I do not think that money is ever 
 obtained at so low a rate as this. 
 
 The contracts with the usurers not infrequently render it diflScult for the fellah, 
 who is already indebted, to take advantage of the terms now offered by the bank. 
 A common form of contract is that of a loan of £100 for ten years. The yearly instal- 
 ment for repayment of capital and interest is £20. Then, under the procedure I have 
 explained above, in all £200 is paid in ten years. Supposing that in the course of 
 two years a fellah has paid £40, of which one-half would be interest and one-half 
 repayment of capital. It might be supposed that on payment of £80 he would be 
 free from the debt. But such is not at all the case. Under the terms of the original 
 contract he is often debarred from freeing himself unless he pays the difference be- 
 tween £200, the total amount which would have been paid in ten years, and £40, 
 being the sum he has sClready paid. In other words, in order to liberate himself he 
 has to pay £160, minus discount at the rate of 7 per cent on £160. In cases of this 
 sort the bank can be of but little assistance. 
 
 Report on the year 1901. 
 
 _ I have explained in my previous reports that the distinctive feature of the Egyp- 
 tian plan for dealing with this interesting and important subject is that a certain 
 amount of cooperation is established between the government and the National 
 Bank. The bank makes the advances and incurs the whole financial responsibility 
 
 30795—06 4 
 
50 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 of the undertaking. The government, through the agency of its taxgatherers, col- 
 lects the money due to the bank at the same time as the land tax. Thus, the bank, 
 being relieved of the necessity of maintaining an expensive staff of subordinates, is 
 able to advance money to tne peasantry at a relatively low rate of interest. 
 
 From October, 1900, to September, 1901, 18,191 advances, amounting altogether to 
 £276,100, were made. Of these 13,030, amounting to an aggregate of £78,400, were 
 loans repavable within the year. The remaining 5,161 advances, amounting in all to 
 £197,700, were loans repayable in five years. Of the 13,030 loans repayable within 
 the year more than half, viz, 7,427, were for sums below £5. The total number of 
 advances below £10 was 10, 116. Of the 5, 161 loans repayable in five years more than 
 half, 2,604, were for sums not exceeding £20. These figures clearly show that the 
 main object of the scheme has been attained — assistance has been given to small 
 proprietors. 
 
 Since the bank commenced making these loans iij 1899, over 34,000 loans have 
 been contracted. Relief has, therefore, been afforded to an equivalent number of 
 small proprietors. There are now 15,269 loans outstanding for an aggregate amount 
 of £402,000; of these 3,326 are repayable within the year, and 11,943 repayable in five 
 years. 
 
 The amount that fell due in 1901 was £146,000. This sum was due from over 
 21,000 borrowers. The whole amount with the exception of £600 had been recov- 
 ered on the 31st of December last, and the small sum still owing will probably be 
 collected this year. 
 
 The objection to the plan adopted in Egypt is that the class of operation involved 
 is more properly the work of a land bank than of an ordinary bank. The National 
 Bank of Egypt can not reasonably be expected to lock up more than £400,000 of its 
 capital in an undertaking of this nature. For the moment the difficulty has been 
 met by the government advancing £250,000 to the bank. This will, at all events, 
 enable the operations to continue for the time being. Whether any more complete 
 change of system will be necessary must be a matter for subsequent consideration. 
 There can, I venture to think, be no question of abandoning the experiment which had 
 so far proved eminently successful. There can be no doubt that the Egyptian fellaheen 
 begin to realize the advantages of getting money at a moderate rate of interest, and 
 that they are willing to take the opportunity now offered to them of shaking them- 
 selves free from the grip of the village usurers. From all I hear I do not doubt that 
 it would be quite possible, were the capital available, to extend very considerably 
 the operations of the bank. But in a matter of this sort it is as well to move slowly, 
 more especially as careful supervision is an essential element to the attainment of the 
 object in view. I think, therefore, that for the time being it is not necessary to 
 arrange for any more extended operations than those which may be covered by the 
 additional £250,000 which the government had advanced to the bank. 
 
 I have in previous reports mentioned that the relation of success which should 
 eventually be applied to the experiment which has now been going on for three 
 years, is whether the fellaheen will or will not use the advantages offered them to 
 incur fresh debts. Moreover, sufficient time has not elapsed to enable the experi- 
 ment to have a fair trial. So far, however, as I have been able to judge the alleged 
 irremediable extravagance of the fellaheen has, as I anticipated would be the case, 
 been greatly exaggerated. Up to the present time the number of these who have 
 used their improved credit in order to incur fresh debt has, to the best of my belief, 
 been very small. 
 
 Report on the year 190S. 
 
 I mentioned in my last annual report that the National Bank of Egypt had advanced 
 about £400,000 in small sums to the fellaheen, and that the directors could not rea- 
 sonably be expected to lock up a still larger amount of capital in an undertaking of 
 this nature. At the time I wrote, further demands for loans were coming in. The 
 difficulty was temporarily met by the government advancing £250,000 to the bank. 
 It was evident, however, that the class of operations involved in making these 
 small loans fell more properly within the functions of a land bank than within those 
 of an ordinary bank. Moreover, after a prolonged trial, it appeared that the some- 
 what novel system adopted in Egypt some few years ago had passed out of the 
 experimental stage, and that the institution of a scheme of a more permanent char- 
 acter than that heretofore adopted was jxistifiable. 
 
 Negotiations having this object in view were set on foot, with the result that on 
 June 1, 1902, an agricultural bank was started imder the auspices of the National 
 Bank of Egypt. All loans outstanding with the national bank were transferred to 
 the new bank whose sole business it is to lend money to the fellaheen. The capital 
 of the bank was fixed at £2,500,000, of which half has already been paid up. Interest 
 
AGRICULTUEAl, BANK IN THE PHILIPPINES. 51 
 
 at the rate of 3 per cent is guaranteed by the government. It was at the same time 
 arranged that the rate of interest at which money was advanced to the fellaheen, 
 which was previously 10 per cent, should be lowered to 9 per cent. 
 
 I give below some details as regards the operations of the past years. 
 
 During 1902, 34,532 loans, repayable in fifteen months, and amounting in the aggre- 
 gate to £202,942 were made. Of these 19,785 were for sums less than £5; 7,807 were 
 for sums between £5 and £10; 6,940 were for sums between £10 and £20. 
 
 The number of loans repayable in five annual installments was 20,341, representing 
 in the aggregate a sum of £748,878. Of those, 8,513 were for sums Ijelow £20. Most 
 of the others were for sums less than £100. The maximum amount of any one loan 
 was £300. 
 
 On December 31, 1902, the total number of loans outstanding was 46,572 and the 
 amount £208,200, as against £402,000 on December 31, 1901. 
 
 During 1902, £305,500 had to be recovered from 35,884 borrowers. Of this amount 
 all but £2,360 was actually paid. There is every reason to believe that the balance 
 due at the end of the year will shortly be recovered. 
 
 So far upper Egypt has scarcely been touched, and the bank is as yet only well 
 known in parts of lower Egypt. The demands for small loans continue to be very 
 numerous. There can be no doubt that the assistance afforded to the fellaheen has 
 been greatly appreciated throughout the country, 
 
 The system in Egypt adopted in connection with the interesting and important 
 question appears to have attracted a good deal of attention in other countries. I 
 have received numerous inquiries on the subject. 
 
 The distinctive feature of the Egyptian system is that, although the whole of the 
 management is in the hands of the bank, the government tax collectors collect the 
 sums due on account of interest and sinking fund. 
 
 The reason why the Egyptian system has attained a certain measure of success are 
 mainly two fold. They are: 
 
 1. That, although the action of the government has been so far philanthropic that 
 they have wished to benefit a large and important class of the community, the under- 
 taking has in no degree been established on a philanthropic basis. On the contrary, 
 the basis has been strictly commercial. There was in the first instance some very 
 natural difficulty in convincing capitalists that the business would be fairly lucrative. 
 But when by applying the test of actual experiment this difiiculty was overcome, 
 the main obstacle to success was removed. 
 
 2. The supervision which has been conducted by very carefully selected British 
 agents has been capable, vigilant, and honest. 
 
 When I say that a certain degree of success has been attained in Egypt, I merely 
 mean that, under the new system, it is clear that the fellaheen are anxious to borrow, 
 and that the arrangement for advances and recoveries has worked well. Before it 
 can be said the system has been completely successful, it has to be shown that the 
 fellaheen are not, generally, making use of their improved credit to contract fresh 
 debt at ruinous rate of interest. Time must be allowed before any confident state- 
 ment can be made on this subject. So far the reports which I have received on this 
 branch of the question are satisfactory. As I have frequently stated before, the fel- 
 laheen are generally much less improvident than used to be imagined. 
 
 EXTRACT FROM PARLIAMENTARY PAPER, EGYPT NO. 1 (1904). 
 [Report by the Earl of Cromer, G. C. B., His Majesty's agent and consul-general.] 
 
 INDEBTEDNESS OF THE FELLAHEEN. 
 
 I continue to receive so many inquiries about the system adopted in Egypt for 
 advancing small loans to cultivators that, at the risk of repeating much that I have 
 said on former occasions, it will perhaps be desirable that I should again explain the 
 main features of the Egyptian plan. 
 
 That plan is very simple, but it differs materially from any which, so far as I am 
 aware, has been adopted elsewhere. Notably, it is in no degree to be confounded 
 with the cooperative system in force in some other countries. 
 
 The government guarantees interest at the rate of 3 per cent on the capital of the 
 bank. This guaranty has enabled the requisite capital to be raised on comparatively 
 easy terms. It is in the highest degree improbable that any occasion will arise for 
 calling on the government to make good a deficit. 
 
52 AGEICULTURAL BAXK IN THE PHILIPPINES. 
 
 The rate of interest charged on the advances made by the bank is 9 per cent. The 
 maximum amount lent to any one individual has, up to the present time, been £300, 
 but the government has recently agreed to allow the bank to make advances, 
 amounting in the aggregate to not more than £200,000, up to a limit of £500. Loans 
 are limited in amount to 50 per cent of the selling value of the land on which the 
 advance is made. The maximum value of the best land has so far been taken at 
 £60 an acre, but this figure has now been raised to £80. The bank makes the 
 advances and incurs the whole responsibility of the undertaking. The government, 
 on the other hand, through the agency of its tax gatherers, collects the money due 
 to the bank at the same time as the land tax. Thus the bank, being relieved of the 
 necessity of maintaining an expensive staff of subordinates, is able to advance money 
 to the peasantry at a relatively low rate of interest. 
 
 The facts which led to the establishment of the agricultural bank are briefly as 
 follows: 
 
 In 1896 the Egyptian Government decided to lend £10,000 in small sums to the 
 cultivators. This measure was purely tentative and experimental. It was never 
 intended that the government should seriously occupy a field which can more suit- 
 ably be left to provide individuals and institutions. The experiment proved suc- 
 cessful. Nothing further was done in the matter until 1898, when the National Bank 
 of Egypt was established. The bank, shortly after its creation, advanced about 
 £27,000 to 870 cultivators. (See " Egypt" No. 1 of 1900, pp. 4-6.) In 1900, 9,500 
 advances were made, amounting in the aggregate to about £138,000. ("Egypt" 
 No. 1 of 1901, pp. 6-9.) By the end of 1901 over 15,000 loans were outstanding, 
 amounting in the aggregate to about £402,000. (See " Egypt " No. 1 of 1902, p. 8). 
 The operations had by this time become so extended as to be manifestly outside the 
 scope of an ordinary bank. An agricultural bank, with a capital of £2,500,000 was 
 therefore started, under the auspices of the National Bank of Egypt. All loans out- 
 standing with the National Bank were transferred to the new bank, whose sole busi- 
 ness it is to advance money in small sums to the fallaheen. (See "Egypt" No. 1 of 
 1903, pp. 16-17. ) On December 31, 1902, 46,572 loans were outstanding, for an 
 aggregate sum of about £1,208,000. 
 
 On December 31, 1903, the outstanding loans amounted in the aggregate to 
 £2,186,746. This sum was owing by 78,911 persons, viz: 
 
 Loans of £1 and under , 759 
 
 Loans over £1 to £5 5,963 
 
 Loans over £5 to £20 6,434 
 
 Loans over £20 to £50 63, 481 
 
 Loans over £50 to £100 7, 928 
 
 Loans, over £100 to £150 2, 359 
 
 Loans over £150 to £300 1,987 
 
 Total 78,911 
 
 The average amount of each loan was £27.14. 
 
 Additional capital, to the amount of £2,500,000, is about to be raised in order to 
 extend the operations of the bank. 
 
 Schedule II. 
 
 CONCESSION OF THE EGYPTIAN GOVERNMENT TO THE AGEICULTURAL 
 BANK OF EGTPT (MAT, 1902). 
 
 [Translation.] 
 
 Concession. 
 
 The Egyptian Government, represented by his excellency the minister of finance, 
 duly authorized for this purpose by resolution of the <;ouncil of ministers on the 17th 
 of May, 1902, party of the one part, and the National Bank of Egypt and Sir Ernest 
 Oassel, K. C. M. G., parties of the other part, have executed the following covenant: 
 
 Article I. 
 
 The National Bank of Egypt and Sir Ernest Cassel are authorized to form an 
 agricultural credit company, limited, on the following bases: 
 
 (1) The company shall have a capital of 2,500,000 pounds sterling, part of which 
 shall be in shares and part in obligations. The distribution of its capital in shares 
 
AGBICXTLTirKAL BANK IN THE PHILIPPINES. 53 
 
 and obligations shall be determined by the company itself. This capital shall not 
 be increased except with the consent of the government. 
 
 (2) The company shall be managed by a council to consist of the governor of the 
 National Bank of Egypt, as president, and five members, two of whom shall be 
 selected from amongst the members of the council of administration of the National 
 Bank of Egypt, and it shall be controlled by the government commissioners of the 
 aforesaid bank. 
 
 (3) Its duration shall be fifty years. 
 
 (4) Its sole object shall be to advance money to the small agriculturalists, with the 
 following conditions: (a) Loans not exceeding 300 Egyptian pounds each and pay- 
 able within 5} years. These loans shall be guaranteed by first mortgage on land, the 
 value whereof shall be at least double the amount of the loan, (b) Loans not exceed- 
 ing the sum of 20 Egyptian pounds each, payable within fifteen months. 
 
 (5) The rate of interest charged shall not exceed nine per centum per annum, andi 
 in all cases the conventional maximum fixed by the law. 
 
 (6) The recovery of the loans, principal and accessories, shall be effected through 
 the mediation of the sarrafs of the villages, who shall receive from the company a 
 commission of i per centum on all moneys collected. 
 
 (7) The receipts shall comprise: (a) The interest actually paid each year. (6) The 
 amounts of loans or installments due from preceding years and actually paid during 
 the business year, excepting as stipulated in the last paragraph of this article. 
 (2) From the aforesaid receipts there will be deducted: (a) All the expenses of the 
 company. (6) The total of all the loans or installments thereof which have become 
 due and have not been paid during the business year. 
 
 The difference shall constitute the net profits. Froin the said net profits there 
 shall be paid successively and in the following order: (I) The interest on the obliga- 
 tions. ( II) Five per centum on the interest actually collected each year for the reserve 
 fund. The moneys paid into the reserve fund shall be invested subject to the approval 
 of the Government; the interest accruing on these investments shall be added to 
 the reserve fund. Out of the balance of the profits there shall be paid in the first 
 place the interest on the preferred stock, if there be any, and then five per centum 
 of said profits to the National Bank of Egypt, as stipulated remuneration for carrying 
 on the financial opwations of the Agricultural Bank of Egypt, and the sum necessary 
 for five per centum interest to the holders of ordinary shares on the sums invested 
 by them. The balance shall be distributed as follows: 50 per cent to ordinary stock; 
 50 per cent to the charter members. 
 
 Article II. 
 
 If at any time during the fifty years of the duration of the company the interests 
 collected during any one business year and the moneys paid on loans or installments 
 due from preceding years and not paid, shall not constitute a sum sufficient (a) to 
 cover all the expenses for the year and the amount of loans or installments become 
 due, but not actually paid, during the year, and (6) to leave a net gain representing 
 three per centum of the capital invested in loans to the fellahs: The additional sum 
 necessary for the purposes above mentioned shall be taken from the reserve fund, 
 and in case of said fund being insufficient, the government shall pay to the company 
 the balance of the sum required for said purposes, in the nature of a subsidy, and 
 not later than the 15th of February of each year. 
 
 In the latter case, the loans and installments due and not recovered during the 
 year, which shall be received during the subsequent years, shall be paid to the gov- 
 ernment until the subsidy paid to the company shall have been paid off. 
 
 Done at Alexandria, in three copies, on the 17th of May, 1902. 
 
 The Minister of Finance. 
 (8gd. ) Ahmed Mazloum. 
 
 (Sgd.) El. Palmer. 
 
 Governor National Bank of Egypt. 
 
 For Sir Ernest Cassel. 
 (Sgd.) Von Leonhardt. 
 
 A true copy. 
 (Sgd.) M. Innbs. 
 
54 AGKICULTUBAL BANK IN THE PHILIPPINES. 
 
 Schedule III. 
 
 STATUTES OF THE AGRICULTURAL BANK OF EGTPT. 
 
 [Translated from the French.] 
 
 We, Khedive of Egypt, seeing the concession dated 17th May, 1902, signed by our 
 secretary of finance, in virtue of the decision of our cabinet of ministers of same day, 
 on the proposition of our secretary of finance and with the approbation of our cabi- 
 net of ministers, we decree: 
 Art. 1. The statutes of the Agricultural Bank of Egypt are approved. 
 Art. 2. The secretary of finance will undertake the execution of the present decree. 
 Made at the Palace of Eas-El-Tin, 17th May, 1902. 
 
 (Signed.) Abbas Hilmi. 
 
 By the Khedive: 
 The president of the cabinet, 
 
 (Signed.) Moustapha Pacha Fbhmy. 
 
 Secretary of Finance. 
 (Signed) Ahmed Mazlouni. 
 
 PKELIMINAEY ACT OP ASSOCIATION. 
 
 The undersigned. The -National Bank of Egypt; Sir Ernest Caasel, K. C. M. G., 
 London; J. Aghion & Figlio, bankers, Alexandria; M. Oattani, banker, Cairo; J. L. 
 Merasei Figlio & Co., bankers, Alexandria; 0. M. Salvage & Co., bankers, Alexan- 
 dria; C. G. Zuvudachi & Sons, bankers, Alexandria, united together to found the 
 society which shall be known as "The Agricultural Bank of Egypt," the object of 
 which will be to make advances to small farmers. 
 
 The society will have a capital of 2,500,000, of which 1,250,000 divided into 248,000 
 shares of 5 each and 2,000 deferred shares of 5 each, and 1,250,000 in ordinary shares, 
 bonds, or preferred shares, according to the decision of the board of directors, and 
 of which the conditions will be governed by the said board. 
 
 The bank shall be directed by the following statutes, agreed to by the undersigned: 
 
 The undersigned undertake to follow the authority required by law and to take all 
 the necessary steps which the special character of the institution they propose to 
 found requires. 
 
 The 248,000 shares of 5 each, which form the capital, are already subscribed 
 for by — 
 
 The National Bank of Egypt 80, 000 shares. 
 
 Sir E. Cassel, K. C. M. G 110, 000 shares. 
 
 J. Aghion & Figlio 7, 500 shares. 
 
 M. Cattani 1, 000 shares. 
 
 J. L. Menasci Figlio & Go 1,900 shares. 
 
 C. M. Salvage & Co 22, 900 shares. 
 
 C. G. Zervudachi & Sons 24, 700 shares. 
 
 Of these shares 80,000 are fully paid up, and of the others 40 per cent will be paid 
 by 2d June, 1902. 
 
 The two thousand deferred shares are divided between those whose signatures 
 appeared on the concession of the Egyptian government, &c. 
 
 The amount of said shares has been entirely paid by them. 
 
 The first board of directors of the society will be composed of the following: 
 
 Sir Elwin Palmer, K. C. B., K. C. M. G., governor of the National Bank of Egypt, 
 president; the Right Honble. Arnold Morley; Sir Vincent Caillard; Sir John Rogers, 
 K. C. M. G.; E. W. Percival Foster, C. M. G.; F. Leonhardt. 
 
 Made and signed with the annexed articles of association in eight copies, one for 
 each of the undersigned founders, and the eighth to be lodged with the secretary of 
 the president of the cabinet of ministers. 
 
 17th May, 1902. 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 55 
 
 STATUTES. 
 
 Act I. 
 Name of the society — Head office— Time of duration, and its object. 
 
 Aet. 1. The society, formed under the terms of the decree dated 17th May, 1902, 
 and the present statutes shall be known as the Agricultural Bank of Egypt. It is 
 governed by the mixed code. 
 
 Akt. 2. Its head office is at Cairo, but the board of directors can open agencies in 
 any other parts of Egypt and abroad as it thinks necessary in the interests of the 
 bank. 
 
 Akt. 3. The duration of the society is fixed at 50 years, beginning 1st June, 1902. 
 
 Art. 4. The Agricultural Bank of Egypt has for its sole object the making of 
 advances (loans) to small farmers under the following conditions: 
 
 1st. Advances must not exceed the sum of 500 each one, repayable in 10 J years at 
 the latest. These advances are guaranteed by first mortgage on the land of the 
 value of double the amount of the advance at least. 
 
 2nd. Advances must not exceed the sum of 20, each repayable in 15 months at the 
 most. The interest must not exceed 9 per cent per annum and, in any case, the 
 maximum rate fixed by law. The redeeming of loans, both principal and acces- 
 sory, shall be made by the interposition of the sheriffs, who shall receive from the 
 society a commission of i per cent on all money collected. The society will, moreover, 
 pay to the secretary of finance the expenses of the people employed specially in the 
 service of loans. 
 
 Act II. 
 
 Funds — Shares — Bonds. 
 
 Art. 5. The society shall have a capital of 5,000,000, of which 1,250,000 is divided 
 into 248,000 ordinary shares of 5 each and 2,000 deferred shares of 5 each; and 
 1,250,000 divided into 125,000 preference shares of 10 each, and 2,500,000 in bonds, 
 of which the conditions will be fixed by the board of directors. 
 
 Art. 6. The amount of the shares and bonds is payable at the head office at 
 Cairo, or anywhere which may be determined by the board of directors, and on the 
 terms fixed by them. 
 
 Art. 7. Any sum of which the payment is late loses all right, in favor of the 
 bank, interest at 7 per cent per annum from due date, without the right of judicial 
 suit. 
 
 Art. 8. In default of payment at due date the bank has the right, one month after 
 publication of the number of the unpaid coupons in a paper designated for the publi- 
 cation of legal announcements at Cairo, to proceed to sell, together or separately, at 
 the same time or in succession, shares or bonds on the Bourse at Alexandria, by 
 brokers or jobbers for account and risk of the owners, without any order or legal 
 proceedings. 
 
 The shares thus sold will become null and void and new shares will be delivered 
 to the purchasers, bearing the same numbers. 
 
 Any share which does not show that the payments due have been regularly made 
 will cease to be negotiable. 
 
 The proceedings authorized by the present article are no reason for the simulta- 
 neous exercise by the bank of its ordinary legal rights. 
 
 The proceeds of the sale, after deducting costs, belong to the hdrik, and imply, in 
 the terms of the law, that which is due by the ex-share or bondholder, who remains 
 liable for the difference if there should be a deficit, but who also profits if there 
 should be a surplus over the amount due. 
 
 Art. 9. The bank can make its shares and bonds to order or bearer. The shares 
 will be to order until their full discharge. The scripts are numbered and furnished 
 with the signatures of two directors. They bear the stamp of the bank. 
 
 Art. 10. The order shares will be negotiated by a transfer on the books of the 
 bank. For this purpose a declaration of transfer and acceptance of transfer, signed 
 by the giver and receiver, are sent to the bank. 
 
 Transfers are of no value either between the parties or the bank, except they be 
 made as above stated and inscribed on the registers of the bank and signed by two 
 directors or two members of the board of directors. 
 
 The bank can exact that the signatures and the position of the parties be legally 
 certified to. 
 
 The shares or bearer are transferred by simple delivery. 
 
56 AGBICULTTJEAL BANK IN THE PHILIPPINES. 
 
 Art. 11. Any shareholder or bondholder can deposit his certificates with the bank 
 and take in exchange an "order receipt." 
 
 The board of directors shall determine the conditions, manner of delivery, cost of 
 the receipt, and costs of the transfer. ... 
 
 Art. 12. Each share carries an interest in the assets and in the division of the net 
 profits of a part in proportion to the number of shares issued. 
 
 The dividends on each share, whether order or bearer, are payable to bearer on 
 presentation of the coupon. 
 
 Art. 13. Shareholders are only liable for the face value of each share; over and 
 above that sum any call for funds is forbidden. The holding of a share is an 
 acknowledgment of agreement with the statutes of the bank and of the decisions of 
 the committee. 
 
 The heirs or creditors of a shareholder can not, under any pretext whatsoever, 
 embarge or seize the property of the bank or demand its liquidation or sale, or inter- 
 fere in any way with its administration. They have recourse for the execution of 
 their rights by bringing the matter before the committee and having it discussed at 
 a general meeting. 
 
 Ajrt. 14. No share or bond can be divided. The bank only recognizes one pro- 
 prietor for one share or for one bond. The rights and obligations which it carries 
 must follow the laws, in whatsoever hand it passes. 
 
 Act III. 
 
 Board of directors — Commissioners — Judges — General meetings. 
 
 Art. 15. The society is managed by a board composed of the governor of the 
 National Bank of Egypt as president and of seven (7) members, of whom three are 
 chosen from the administration of the National Bank of Egypt. 
 
 Three, or at most four, of these members constitute a special committee, meeting 
 at London, where they ought to reside. The board of directors should have its seat 
 at Cairo. At the same time the president can, under exceptional circumstances, call 
 a meeting at London, if the service needs it. This board must keep the committee 
 at London informed of affairs every week. It will follow the advice of the committee 
 and count their votes when it moves — 
 
 1st. To decide to make a call for more funds, to propose increasing its working 
 capital or the distribution of shares of a future creation which the shareholders have 
 not the right to apply for or who do not subscribe for. 
 
 2nd. To suspend the order of the day of general meetings, to agree to the calling 
 of extraordinary meetings, or to propose reforms to the statutes. 
 
 3rd. To approve the final balance which ought to be submitted each year to the 
 general meeting. 
 
 4th. When it decides upon the liquidation and dissolution of the society. 
 
 5th. In any questions relative to the increase of capital or issuing of bonds, to the 
 conditions of said increase or said issuance of bonds, and to their distribution. 
 
 6th. In any other instance where the intervention of the committee be demanded 
 by the president of the board of directors. 
 
 Art. 16. The president must see that the orders of the board of directors are duly 
 executed, and has charge of the management of all the affairs of the society. 
 
 Art. 17. Each member of the board of directors must be the proprietor of at least 
 two hundred shares of the society deposited with the bank. These shares can not be 
 removed or alienated during bis term of office, nor until the general meeting has 
 approved the accounts for the period corresponding to the time he held oflSce. The 
 receipts for these deposits shall be stamped with a stamp denoting their statutory 
 character. 
 
 Art. 18. The members of the board of directors must not, in view of their duties, 
 contract any personal obligation. They will only attend to the execution of their 
 duties. 
 
 Art. 19. The duty of a member of the board of directors is personal; it can not be 
 performed by proxy or by power of attorney. 
 
 Art. 20. The board shall meet as often as it deems suitable. The board meeting 
 shall be called by the president or by one who fills the office of president. 
 
 Art. 21. The governor of the National Bank of Egypt, or in his stead the assistant 
 governor of the said bank, shall preside over the board of directors. In order that 
 the resolution of the board be valid, it is necessary that at least three members be 
 present. The proposals of the board shall be taken by majority of votes. In case 
 of division, the vote of the president carries. 
 
AGEICULTUEAL BANK IN THE PHILIPPINES. 57 
 
 Abt. 22. The resolutions of the board of directors are established by minutes of 
 transactions written into special registers and signed by the president or his deputy. 
 Also the copies or extracts produced for any motive whatsoever shall be certified 
 correct by the president or his substitute. 
 
 Art. 23. The board of directors has the widest powers in the administration of 
 the affairs of the bank within the limit of the statutes. It will act with justice as 
 much in demanding as in defending; it forms the last recourse; it makes all recusa- 
 tions; it gives full power. It negotiates, settles, makes compromises, arranges dis- 
 putes amicably where possible, adjusts differences by mutual consent, gives any kind 
 of allowances and abandonments, gives over all rights, has free hand and desists 
 from all privileges, stops seizures and relinquishes all privileges and mortgages, can- 
 cellation of acts, oppositions or obstacles whatsoever, and consents to the withdrawal 
 of all titles, the whole with or without payment. It consents to all priorities, sub- 
 rogations, and mentions. 
 
 Aht. 24. The writ of the members of the board of directors is for five years. It 
 can always be renewed under the same conditions. The board will be renewed each 
 year by fifths (i. e., a fifth part of the board). By derogation the first board of 
 directors is named in the preliminary act of association. The duties of this first 
 board will remain in force five years. At the expiration of this period it will be 
 done by drawing, choosing the numbers in succession. Afterwards the renewing 
 will take place by seniority. 
 
 The board of directors can appoint any one provisionally to fill any vacancies which 
 may occur. These nominations are then submitted to the first general meeting. 
 The members then named to replace other members will exercise their right until 
 the time expires of those whom they replace. The business years will be counted 
 from one ordinary general meeting to another. 
 
 The oflicers will not cease to hold ofiice until after the general meeting and nomi- 
 nation of their successors. 
 
 Aet. 25. The remuneration of the board cf directors is fixed at £2,600 a year. 
 The distribution of this sum between the directors shall be determined by the board. 
 
 Akt. 26. The government commissioners delegated by the minister of finance, 
 with the National Bank of Egypt, have equally to strictly observe the statutes of the 
 agricultural bank of Egypt. They can at any time examine the books of this bank. 
 They can assist at the meetings of the board with privilege of being consulted. 
 
 In case of the breaking of the statutes of the bank they will present their written 
 observations to the board, and if they are not taken into consideration they will 
 immediately report to the minister of finance. 
 
 Abt. 27. The ordinary general meeting will name annually an auditor. He is 
 reeligible indefinitely. He will receive an indemnity fixed annually at the general 
 meeting. 
 
 The first auditor shall be named by the board of directors, together with the 
 government commissioners. 
 
 The duties of the auditor are to examine the accounts of the current year and to 
 give his advice at the ordinary general meeting following. He will not take part in 
 any meeting of the board of directors unless invited. 
 
 To be auditor it is necessary to be the proprietor of twenty shares and deposit them 
 in the bank,- where they will remain untouched during the whole term of his office. 
 This deposit will be made and received under the same conditions as those of the 
 members of the board of directors. 
 
 GENERAL MEETING. 
 
 Art. 28. The ordinary general meeting shall name the members of the board of 
 directors, excepting the president, and in conformity with the rules of art. 15 of the 
 present statutes, as well as the auditor on the majority of votes. 
 
 It will hear the reports of the committee and the auditor. 
 
 It will examine and approve the accounts if in order or call for corrections. 
 
 It will fix the amount of the dividends. At the same time the dividends cannot 
 be greater than those proposed by the board of directors. 
 
 It will discuss all the interests of the society within the limits of the statutes. 
 
 The extraordinary general meeting, on the proposal of the board of directors, can 
 make to the present statutes any modifications or additions, of which the need is 
 recognized, with the approbation of the Government; it can especially decide: 
 
 The increasing or reduction of the capital, both shares and bonds; the prolonga- 
 tion or shortening of the duration of the society; the anticipated dissolution; the 
 modification of the object and the denomination of the society. This enumeration 
 is simply enunciative and by no means limited. 
 
58 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 Art. 29. The general meeting is composed of all the shareholders of the society 
 having a right to vote, acting for themselves or for their clients. 
 
 Art. 30. Shareholders possessing at least five shares have a right to vote at the 
 general meeting. 
 
 Any shareholder, if he has not more than one hundred shares, will have a vote 
 for every five shares. If he possesses more than one hundred shares he will have 
 for the shares exceeding this number as many votes as there are twenty shares, and 
 if he possesses more than one thousand, as many votes as he has times one hundred 
 shares. Shareholders having a right to vote can be represented at the general meet- 
 ing by legal proxy or by agreement. 
 
 Shareholders having a right to vote who wish to take part at general meetings 
 must deposit their shares at the head oflBce or at the establishment designated by 
 the board of directors five days at least before the general meeting. A card of 
 admission to bearer, bearing the number of votes he is entitled to, will be handed 
 him with the deposit receipt for his shares. 
 
 The shares deposited at the bank for the meetings will be returned after the clos- 
 ing of the meeting and on receipt of the deposit receipt. 
 
 Art. 31. The ordinary general meetings take place each year in the month of 
 February at the head office of the bank at Cairo at the date fixed by the board of 
 directors. 
 
 The extraordinary general meetings take place at the head office of the bank at 
 any time the board deems it necessary to call them. 
 
 Art. 32. The calling of general meetings will be made by a notice published in 
 the official journal of the Egyptian Government and in a paper designed for legal 
 announcements at Cairo, as well as in a London paper. 
 
 They will be inserted twice, with an interval of eight days at least, the second 
 insertion appearing at least eight days before the date of the meeting. 
 
 The board can order any supplementary publication in Egypt or abroad. 
 
 When an extraordinary general meeting is called it ought to indicate briefly the 
 object of the meeting. 
 
 Art. 33. The general meeting, meeting for the first time, will discuss in due form 
 when the shareholders present or represented constitute the fifth part of the shares 
 issued. 
 
 In extraordinary general meetings the shareholders present or represented ought 
 to represent the fourth part of the shares issued. 
 
 In either case, if these conditions are not fulfilled, a second meeting must be called 
 in the same manner, but with an interval of fifteen days at least. In this case one 
 insertion is sufficient. In this second meeting the board shall duly consider the 
 number of shares produced by the members. No modification of the statutes can 
 be made without calling a general meeting, in which three-fourths of the capital — 
 that is, shares — are present or represented. Any decision to modify ought to consist 
 of at least the half of the capital. Nevertheless, if the general meeting does not con- 
 sist of a number of shareholders representing three-fourths of the capital, it can by 
 a simple majority of shareholders present or represented make a provisionary reso- 
 lution. In this case a new general meeting is called in the terms of the preceding 
 paragraph. 
 
 The meeting makes known to the shareholders the provisionary resolution adopted 
 by the first assembly, and this resolution only becomes definite if it is approved by 
 the new assembly, composed of a number of shareholders representing the quarter 
 part at least of the capital. 
 
 Art. 34. The general meetings shall be presided over by the governor of the 
 National Bank of Egypt, or in his absence by the vice-governor of the said bank, 
 who will form the office by choosing from the members present at the meeting two 
 examiners and one secretary, of whom the nomination shall be subject to the confir- 
 mation of the meeting. 
 
 The president shall direct the discussions. In this capacity he is invested with 
 the fullest powers. Only those questions can be discussed which bear upon the pro- 
 gramme of the day, ruled by the committee at the meetings and which the president 
 has outlined at the commencement of the debate. The programme of ordinary 
 meetings comprises clearly everything which enters within the province of these 
 meetings. 
 
 The programme of extraordinary meetings allows only those subjects which were 
 indicated on the notice of the meeting. Nevertheless, the programme will consider 
 propositions which shall have been presented to the board, ten days at least before 
 the meeting, signed by twenty shareholders at least, having the privilege of assisting 
 at the meeting and representing together at least the tenth part of the capital. 
 
 Art. 35. The resolutions formed by the meeting are put to the vote by the presi- 
 dent. They are settled absolutely by majority. 
 
AGKICULTUKAL BANK IN THE PHILIPPINES. 59 
 
 Aet. 36. The resolutions of the general meetings are binding on all shareholders, 
 whether present or absent. 
 
 Art. 37. The minutes of the general meetings shall be arranged in order. These 
 minutes shall be inscribed in a special register and signed by the president, the 
 examiners, and the Secretary. The copies or extracts of the minutes shall be certi- 
 fied to either by the president of the board or by a director. 
 
 The minutes of each general meeting shall be attached to the documents relating 
 to the calling of said general meeting and the attendance sheet mentioning the names 
 of the shareholders assisting at the meeting in person or by proxy, as well as the 
 number of shares represented. 
 
 Act IV. 
 
 Annual statement — Balance sheet — Dividends — Reserve fund. 
 
 Art. 38. The working year begins on 1st January and ends on 1st December. 
 However, the first period shall include the time between 1st June, 1902, and 31st 
 December, 1903. 
 
 Art. 39. At the end of each year a general statement of assets and liabilities shall 
 be prepared. This statement, the balance sheet, and the profit and loss account will 
 be placed at the disposal of the government commissioners, of the auditor, and of 
 the shareholders at the head office ten days before the date fixed for the assembly of 
 the general meeting. 
 
 The committee will present these accounts to the general meeting and submit 
 them for its approbation. 
 
 Art. 40. The receipts compose^ 
 
 [a) The interest actually collected every year. 
 
 (6) The amount of loans expired or periods expired for the previous year and 
 actually recovered during the current year, except those stipulated in the last line 
 of art. 41. 
 
 The undermentioned receipts must be deducted: 
 
 fa) All the expenses of the society. 
 
 (b) The amount of all expired loans or parts thereof expired and not recovered 
 at the end of the year. The difference will be the net profit. 
 
 To this net profit will be charged, in the following order: , 
 
 1. The interest on the bonds. 
 
 2. Set a^ide for the reserve fund 5 per cent on the interest actually collected each 
 year. If this interest exceeds £22.5,000, the amount charged will be increased 2 per 
 cent on the surplus. This sum of £225,000 being calculated on the basis of 9 per 
 cent actual rate of placing the loans, should if this rate happened to have been reduced 
 later, the amount shall be diminished in proportion to this reduction. In case the 
 interest to be paid by the society on the bonds issued, calculated on the net product 
 of these bonds, should absorb a rate below 4 per cent per annum, the difference 
 between 4 per cent and the rate thus calculated should be carried to the reserve fund. 
 In calculating the rate of interest as above, consideration should be taken of the 
 charges resulting from the reimbursement at par of obligations which should have 
 produced less than par. 
 
 The sums placed to the reserve fund will be done so by acts approved by the gov- 
 ernment; the interest resulting from these amounts will be added to the resources of 
 the reserve fund. On the profits remaining there will first be deducted the interest 
 belonging to the preferred shares, if any, then 5 per cent of the said profits remuner- 
 ation agreed for the performance of the financial operations of the agricultural bank 
 of Egypt, and the sum necessary to give interest of 5 per cent per annum to the pro- 
 prietors of ordinary shares on the amount of their payments. 
 
 The balance will be divided as follows: 50 per cent to the ordinary shareholders, 
 50 per cent to the preferred shares. 
 
 Art. 41. Each time that during any year of the 50 years' duration of the society 
 the interest received during the year, as also the sums received on the expired loan 
 or part payments of loans and not recovered during the preceding years, should not 
 reach the necessary amount: 
 
 1st. To cover all the expenses of the year and the amount of loans or part pay- 
 ments not actually recovered in that year. 
 
 2nd. To leave a net profit of 3 per cent of the capital employed in loans to the 
 fellahs. 
 
 The sums necessary to meet the above will be taken from the reserve fund, and 
 in case of insuflSciency of said funds the Government will pay over to the society, in 
 the form of a subsidy, on the 15th February of each year at the latest, the balance 
 of the sum necessary for the above needs. 
 
60 AGKICULTUKAX, BANK IN THE PHILIPPINES. 
 
 In the latter case the loans or part loans unredeemed during the year, which will 
 be paid in during the following year, will be paid over to the government until the 
 amount of the said subsidy has been redeemed. 
 
 Art. 42. The payment of dividends will be made annually at times fixed by the 
 board of directors after the general meeting has decided the amount. The board of 
 directors can, during the year, make part payments on account of the profits. 
 
 Any dividend which remains unclaimed after five years shall be placed to the 
 profit of capital account. 
 
 Act V. 
 Dissohition — lAguidation — Disputes. 
 
 Art. 43. At the expiration of the society or in case of anticipated dissolution, the 
 extraordinary general meeting on the proposal of the board of directors shall arrange 
 the mode of liquidation, name the liquidators, and define their powers. 
 
 The assets, after deducting all debts and charges, shall be employed first and in 
 the following order, to liquidate: 
 
 1st. The paid up capital on preference shares, if any exists. 
 
 2nd. The paid up capital of ordinary shares. 
 
 3rd. The paid up capital of deferred shares. 
 
 The balance, if any, will be divided as follows: 50 per cent to ordinary sharehold-. 
 ers; 50 per cent to deferred shareholders. 
 
 The reserve fund, after first deducting and paying over to the government all mon- 
 eys and interest which it has paid in subsidies and which has not been returned to 
 it, will be divided in the same proportion, namely: 50 per cent to the ordinary share- 
 holders; 50 per cent to the deferred shareholders. 
 
 Art. 44. During the whole time of the liquidation the general meeting retains its 
 powers. They will especially approve the balance sheet after liquidation and pass it. 
 
 Art. 45. The nomination of the liquidators puts an end to the powers of the board 
 of directors. 
 
 Art. 46. Any disputes or questions touching on the general and collective interest 
 of the society can only be directed against the administrative board or one of the 
 members in the name of the shareholders and in view of a resolution of the general 
 meeting. Any shareholder wishing to make a like protest must advise at least a 
 month before the next general meeting the board of directors which meets to put 
 the proposition to the vote at the meeting. 
 
 If the proposition is thrown back at the meeting, no other shareholder can take it 
 up in his own name. 
 
 If it is accepted, the meeting will place one or several commissioners to look into 
 the protest. 
 
 All notices must be addressed to the commissioners only, under penalty of nullifi- 
 cation. 
 
 Schedule IV. 
 
 THE AGRICULTURAL BANK OF EGYPT, ITS METHODS AND PLAN OF 
 
 OPERATION. 
 
 The sole business of the agricultural bank is to advance money to small landown- 
 ers. The loans are of two kinds only, viz: 
 
 (a) Loan from £i up to £20 and exceeding as a rule twice the annual land tax 
 which the landowner pays the government. These loans are repayable with interest 
 in one sum the following crop season, but if made only two or three months before 
 that season they are not recovered until the following year. The maximum period 
 for which these loans are granted is fifteen months. 
 
 (b) Loans from £10 to £300, and not exceeding as a rule ten times the tax which 
 the landowner pays the government. These loans are repayable by five annual 
 installments at the crop season. 
 
 In special rich parts of the country where the land is very fertile more than twice 
 or ten times the tax is sometimes advanced, but never more than 50 per cent of the 
 value of the land the applicant owns. 
 
 The A. loans have no special security beyond the crop. On the other hand, the B. 
 loans are secured by a duly registered mortgage on land. 
 
 The recoveries are effected by the government tax collector at the time the taxes 
 are collected, the agreement between the landowner and the bank being that the 
 first payment he makes to the tax collector shall be taken as refund of the loan. 
 
AGKICTJLTUEAL BANK IN THE PHILIPPINES. 61 
 
 This is done to enable the seizure of the crops by the government should he not pay 
 up both the loan and the tax, the government having the right to seize the crops 
 administratively for nonpayment of taxes. There is, however, an understanding 
 between the government and the bank that should there be any deficit the taxes 
 are first to be covered. 
 
 The tax collector is allowed by the bank one-half of 1 per cent on all recoveries. 
 
 The following is the procedure that is adopted: 
 
 Demand forms (No. 1 for A loans and No. 6 for B loans) are deposited in each village 
 with the omdeh (head official of the village). A landowner requiring a loan obtains 
 one of these forms and fills up the part that concerns him, or if he can not write gets 
 this done by a writer. He then takes the form to the tax collector who keeps the land 
 register and gets him to fill up and sign the first certificate on the form. In the case 
 of B loans he has also to get the village measurer to give at the foot of the form the 
 delimitation and measurement of the land to be mortgaged, which have to be certi- 
 fied to also by the omdeh of the village. This having been done, the applicant presents 
 the demand to the bank's agent in his district, who, after consideration of the value 
 of the land owned by the applicant, from his general knowledge of that part of the 
 country, admits or rejects the demand. If the demand is admitted, the bank's agent 
 sends it under sealed cover direct to the tax collector (by the village official messen- 
 ger) for him to fill up his second certificate. This latter procedure is adopted to 
 prevent falsification of the tax collector's signature by the applicant. The bank's 
 agent also makes the applicant when presenting his demand place his seal on form 
 No. 2 for the purpose of identification when the money is paid. It is further under 
 contemplation to make the applicant put his thumb mark on the form as an extra 
 check. 
 
 When the bank's agent receives the demand form back from the tax collector he 
 sends it to the head office of the bank in Cairo, where it is carefully checked and 
 examined. If it is all in order, in the case of an A loan, the bank at once issues a 
 pay order (form No. 3) to its agent to pay the amount to the applicant. 
 
 In the case of a B loan a pay order (form No. 8) is sent to the agent, but only after 
 the mortgage on the applicant's land has been duly registered. 
 
 When the payments are made, and this is done aa much as possible in the presence 
 of an English inspector, so as to insure the applicant's getting the full sum, the bank's 
 agent takes a receipt (form No. 2 for A loans and form No. 7 for B loans) and after 
 entry in his registers (form 4 for A loans and form 9 for B loans) he sends them to 
 the head ofiice of the bank in Cairo. Here each loan is registered (form No. 10 for 
 A loans and No. 11 for B loans) and the interest calculated. 
 
 The lists (form No. 5) of sums to be recovered by the government tax collectors 
 are prepared by the bank's agents, who likewise calculate the interest, and are sent 
 to the head office of the bank, where they are checked. They are prepared sepa- 
 rately for each village, and are sent to the ministry of finance, by whom they are 
 passed on to the tax collector with instructions to recover on the due dates. 
 
 The interest is charged to the end of the month in which recovery is due, and all 
 money collected that month is credited to the bank by the government on the 1st of 
 the following month, thegoverument sending lists (form No. 12) of recoveries effected 
 to the bank as soon after the end of the month of recovery as possible. 
 
 Should a loan not be recovered in the month in which it is due interest for the 
 extra period is charged and intimation given to the government for subsequent 
 recovery. 
 
 The registration of the mortgage deed in the case of B loans is effected as follows: 
 
 The agent of the bank in the district at the same time as he sends the demand for 
 a B loan to the head office of the bank in Cairo sends to the tribunal where the deeds 
 have to be registered a list of applicants with particulars of the lands they propose 
 to mortgage. In each tribunal the bank has a clerk, who on receipt of these lists 
 checks them with the court registers of mortgages to see that there exists no legal 
 charge already on the land. Although the tax collector has certified on the demand 
 that there is no such charge this further check is necessary as the owner of the land 
 may have mortgaged the land and the tax collector not have had cognizance of the 
 fact owing to the communication of the court not having at the time reached him. 
 
 The bank's clerk at the tribunal after he has checked the lists forwards a report to 
 the head office of the bank at Cairo. If this report is favorable the mortgage deeds are 
 at once prepared in the legal department of the bank, and intimation is sent to the 
 applicants to appear on a certain date at the tribunal where the deed is to be passed. 
 The cost of passing the act is borne by the applicant, and the sum (about 1 per cent) 
 deducted from the amount paid to the applicant. The registration charge would be 
 much higher, but the government exempts the applicante from payment of most of 
 the court fees. 
 
62 
 
 AGBICULTURAL BANK IN THE PHILIPPINES. 
 
 Schedule V. 
 
 AGEICDLTUHAL BANK OF EGYPT. 
 
 Instructions regarding advances to small cultivators, as per forms A. and D. 
 
 Form A. 
 
 The conditions put forward on form A remain in force unchanged, but at the back 
 of the present must be indicated extension and limits of the lands belonging to the 
 person who asks for an advance, and signed and sealed by the village chief aa well as 
 by the district surveyor, as per form A. 
 
 FOKM B. 
 
 1. The agricultural bank of Egypt grants advances as per the conditions mentioned 
 on form B, repayable in ten yearly instalments. 
 
 2. The amount of the advances is fixed at fifteen times the new land tax for the 
 districts where the tax has been recently revised. For districts where the tax has 
 not yet been changed the amount of the advance will be based on the tax as hereto- 
 fore paid. For example, if the intending borrower' owns 10 feddens, advance of 
 £150. 
 
 3. The borrower must hypothecate to the bank all the lands to which the loan 
 has been appropriated. 
 
 4. The borrower must state on form B all particulars and limits of the lands to be 
 hypothecated. The value of the lands must be at least double the amount of the 
 loan asked for. 
 
 5. The loans will vary from £10 to £300 maximum without fractions of pounds. 
 
 6. The rate of interest will be 9 per cent per annum for twelve months, fractions 
 of a month to be taken as full. 
 
 7. All legal expenses in connection with the registration or cancellation of mort- 
 gages to be borne by the borrower. 
 
 8. These cultivators who have already borrowed money from the bank under the 
 old regulations will have the option of extending the repayment of the balance due 
 to the bank over ten years, instead of five years, as formerly stipulated, or to continue 
 the repayment by five yearly installments. If they wish to increase their loan to 
 fifteen times the amount of the taxes they pay to the government, the new loan will 
 be added to the amount of the old one or to its balance, and the total will be repay- 
 able over a period of ten years. 
 
 9. In order to facilitate the borrower to calculate the amount they have to pay 
 yearly to the bank, viz, amount of the annuity plus the interest, the following table 
 gives an example in the case of a loan of £100: 
 
 
 Amount 
 payable. 
 
 Composed of— 
 
 Year. 
 
 One year's 
 interest at 
 9 per cent. 
 
 Yearly in- 
 stalment of 
 capital. 
 
 Flret 
 
 £19 
 18.100 
 17. 200 
 16.300 
 1.5. 400 
 14.600 
 13.600 
 12.700 
 11.800 
 10. 900 
 
 £9 
 8.100 
 7.200 
 6.800 
 5.400 
 4.600 
 3.600 
 2.700 
 1.800 
 .900 
 
 £10 
 
 
 10 
 
 Third 
 
 10 
 
 Fourth 
 
 10 
 
 Fifth 
 
 10 
 
 Sixth 
 
 10 
 
 
 10 
 
 Eighth 
 
 10 
 
 Ninth 
 
 10 
 
 Tenth 
 
 10 
 
 
 
 
 149.600 
 
 49.600 
 
 100 
 
agkicultukal bank in the philippines. 63 
 
 Schedule VI. 
 
 FOHMS USED BY AQRICULTUKAL BAKK OF EGYPT. 
 [Translation.] 
 
 In account current with the Agricultural Bank of Egypt. 
 
 Org £0.350 
 
 Fols 280 
 
 Copy 360 
 
 Stamp 120 
 
 1.110 
 ' Recorded and charged, payment not having been made on the spot. 
 
 Vol. Fol. No. Cairo, ,19... 
 
 The Cleek. 
 
 Opening of credit, with security consisting in a mortgage on property situate in 
 the village of , markaz of , moudirich of 
 
 In the year 19.., on , at the office of the clerk of notarial records of the 
 
 mixed court of Cairo, before us, , Clerk, and in the presence of the 
 
 witnesses, Messrs , domiciled at Cairo and possessing all the conditions 
 
 and qualifications required by the law, and attesting the identity of the persons here- 
 inafter named, there appeared Mr , the son of , dom iciled 
 
 at Cairo, of the Agricultural Bank of Egypt, acting in the name and behalf of 
 
 said bank, a limited stock company with domicile at Cairo, by virtue of a power 
 
 annexed to the record filed in this office on , under No , party of 
 
 the one part, and , party of the other part, who entered into the following 
 
 covenant: 
 
 Article I. 
 
 The Agricultural Bank of Egypt opens in favor of , who accepts, a credit in 
 
 account current, until the sum of £ shall have been paid, bearing interest at 
 
 the rate of three-fourths per centum for each month or fraction of month, beginning 
 with the dates of the loans. 
 
 This credit is destined exclusively for the reimbursement in full of the indebted- 
 ness of the debtor hereinbefore named, and is granted with the condition that on 
 the land hereinafter mortgaged as security there does not exist an inscription or 
 transcription of real rights of any kind, excepting the mortgage or lien that may 
 exist in favor of the aforesaid creditor as security for the aforesaid credit. 
 
 This credit shall be available until , and only for the reimbursement in 
 
 reference. 
 
 During the month of the person in whose favor the credit has been opened 
 
 shall pay to the bank the amount of the interest accrued until the end of said month, 
 and reimburse at the same time one-tenth of the amount of the loans. 
 
 The balance shall be reimbursed at the rate of one-ninth each year during the 
 
 month of of each of the subsequent nine years, together with the total of the 
 
 interest due at each due date. 
 
 Article II. 
 
 For the security and guarantee of the sums which shall be owing by him to the 
 bank for principal, interests, expenses, and other accessories in consequence of the 
 credit above mentioned, the debtor shall execute a mortgage in favor of the bank, 
 which latter accepts through the intermediary, Mr , on the agricul- 
 tural land hereinafter designated, which he declares to belong to him as exclusive and 
 lawful owner thereof, in the existing condition with all constructions thereon and 
 appurtenances thereof and all real property thereunto belonging, and all improve- 
 ments which may be made on the aforesaid property. 
 
 Article III. 
 
 In case of failure on part of the debtor to fully comply with any of the clauses of 
 the aforesaid agreement for the opening of credit, the bank shall be fully entitled to 
 discontinue the credit and to demand forthwith the payment of the entire sum due 
 for principal and accessories with interest at the rate above mentioned, which shall 
 continue to accrue and shall be capitalized annually until payment in full. 
 
64 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 Article IV. 
 
 The obligations of the debtor shall be indivisible, whatever may occur, and con- 
 sequently his heirs shall be jointly responsible. 
 
 This instrument was received and approved in this clerk's office and, after being 
 read, given by us to the persons appearing before us, in the presence of the witnesses, 
 
 in French, a language known to Mr , and a translation into Arabic 
 
 made, by Mr , interpreter of this court, and accepted by the petitioners, 
 
 who all signed with us. 
 
 [Translation.] 
 
 No 
 
 Payment made; Dpp (?) 
 
 [Stamp] 
 
 [Eg. Pds.] 
 
 On 190... 
 
 The Clerk. 
 
 DEBIT. 
 
 Orig £0. 350 
 
 Folios 
 
 Certif 200 
 
 Vol. fol. No. 
 
 On , 190... The Clerk. 
 
 Notice of a conventional mortgage the registration whereof is requested from the 
 mortgage office of the mixed court of 
 
 In favor of the Agricultural Bank of Egypt, a limited stock company with domi- 
 cile at Cairo, selecting for the effects of registration as domicile 
 
 By virtue of an authentic act opening a credit and executing a mortgage as security 
 
 therefor, received of the notarial records of the mixed court of , 
 
 on , under No 
 
 As security 1, for the sum of Egyptian pounds {£ ), the amount (principal) 
 
 of the credit opened as aforementioned, bearing interest at the rate of 3/4 per 
 centum each month or fraction thereof, beginning with the dates of the loan until 
 fully paid. It has been stipulated that the payment of the aforesaid sum can be 
 
 demanded in ten annual instalments, beginning with the month of of 
 
 the year, together with the interest, so that in the month of of each of 
 
 the years 19.., 19.., 19.., 19.., 19.., 19.., 19.., 19.., 19.., and 19.., said debtor 
 
 shall reimburse one-tenth of the sum advanced to by the bank, 
 
 together with the interest accrued, until each due date, and at the rate of interest 
 above mentioned, £ 
 
 (2) For the interest on the loans made during the duration of the credit at afore- 
 said rate of f per centum for each month or fraction thereof, beginning with the dates 
 of the loans, and subsequent interest at the ordinary rate, £3. 
 
 (3) For the eventual expenses of this registration and of its execution, etc. 
 Memorandum, £3. 
 
 Total to be registered, excepting memorandum. 
 
 With the proviso that the credit is granted with the condition that on the land 
 mortgaged as security there exists no inscription or transcription of real rights of any 
 kind. 
 
 2. That in the case of failure on part of the debtor to fully comply with any of the 
 clauses of the aforesaid agreement for the opening of credit the bank shall be fully 
 entitled to discontinue the credit and to demand forthwith payment of the entire 
 sum due for principal and accessories, with interest at the rate aforementioned, which 
 shall continue to accrue and shall be capitalized annually until payment in full. 
 
 3. The obligations of the debtor shall be indivisible, whatever may occur, and con- 
 sequently his heirs shall be jointly responsible. 
 
 Done in duplicate on 
 
 By request. 
 
 [Marginal note:] Registered at the mortgage office of .on .. — 19.., at 
 
 o'clock. 
 
 No 
 
 The Clerk. 
 Fr. 
 
AGEICULTTJKAL BANK IN THE PHILIPPINES. 
 
 65 
 
 [Translation.] 
 
 Release of mortgage granted by the Bank of Egypt in favor of , on 
 
 property situate in the village of , district of , Moudirieh of 
 
 In the year of 19 , on the , at the office of the clerk of notarial records of 
 
 the mixed court of Cairo. 
 
 Before us, , clerk, and in the presence of Messrs and 
 
 , witnesses, domiciled at Cairo, and having all the qualifications and 
 
 requirements necessary, there appeared Mr. G. Scott Dalgleish, son of the late _W. 
 Scott Dalgleish, known to us, born at Edinburgh, Scotland, and resident at Cairo, 
 manager of the Agricultural Bank of Egypt, acting m the name and behalf of the 
 
 , a limited stock company, the domicile whereof is at Cairo, by virtue 
 
 of powers conferred upon him by an instrument filed at the office of the clerk of this 
 court on the 5th of June, 1902, under No. 3737. 
 
 Who, by virtue of his office, declares that he executes by these presents a release, 
 pure and simple, waiving all hypothecary rights, and consents to the full and final 
 
 cancellation of the entry made in the mortgage office of the mixed court of on 
 
 , under No ,infavorof the Bank of Egypt against , on 
 
 real estate situate at the village of , district of , by virtue of the instru- 
 ment relative to the opening of credit filed with the clerk of notarial records of the 
 
 mixed court of , on , under No In canceling said entry 
 
 the curator of mortgages will be fully and validly released. 
 
 The instrument being received and approved in this office, was given by us, after 
 having been read to the petitioner, in the presence of the witnesses, in French, a 
 language known to said petitioner and witnesses, all affixing their hands together 
 with us. 
 
 [Translation.] 
 
 MEMORANDUM OF RELEASE. 
 
 The mortgage office of the mixed court of is requested to make a memoran- 
 dum of release on the margin of the entry appearing on , under No , in 
 
 favor of the National or the Agricultural Bank of Egypt, against , on property 
 
 situate at the village of , district of , Moudirieh of 
 
 Said memorandum of release is requested by virtue of an authentic instrument of 
 release filed in the office of the clerk of notarial records of the mixed court of Cairo 
 on , under No 
 
 Province 
 
 AGRICULTDRAL BANK OF EGYPT. 
 
 Demand form for "A" loans. 
 ., district , village 
 
 (No. 1.) 
 
 Number. 
 
 Name of applicant. 
 
 Quantity of land 
 owned. 
 
 Amount of 
 tax. 
 
 Amount of 
 loan ap- 
 plied for. 
 
 Notes. 
 
 (1) 
 
 (2) 
 
 (3) 
 
 (*) 
 
 I, or we, the undersigned, named in the above column, request you to advance us 
 the amount above mentioned, which amount I, or we, engage to repay in the month 
 of , with interest at the rate of 9 per cent per annum, calculated monthly. 
 
 The repayment will be made at the same time as the government tax. 
 
 And for further guaranty I, or we, agree that the first payment made by me, or 
 us, to the government shall be considered as a repayment of the amount advanced, 
 and not as a payment of the government tax. 
 
 (Signature) 
 
 TAX collector's FIRST CERTIFICATE. 
 
 I, , tax collector of the village of , certify that there is 
 
 entered in the land register of village, in the name of , in his 
 
 quality of , the lauds above mentioned to the extent of feddans, ...... 
 
 kirats, sahms. 
 
 And that there exists on the said register at the present date no indication that 
 these lands are mortgaged or bear any legal charge. 
 
 OR...... 
 
 And that there is inscribed on the said register a mortgage on feddans 
 
 kirats sahms of the said land. 
 
 (Signature) 
 
 (Alternative certificate. ) 
 
 30793—06 5 
 
66 
 
 AGKICTJIiTURAL BANK IN THE PHILIPPINES. 
 
 TAX COLLECTOR S SECOND CERTIFICATE. 
 
 I, tax collector of the village of , declare that the certificate 
 
 given by me concerning this demand has been really written by me and that the 
 signature apposed thereto is mine. 
 
 (Signature) 
 
 AGKICULTUKAL BANK OF EGYPT. (No. 2.) 
 
 Engagement foTTn and receipt for "A" loans. 
 Province district village 
 
 No. 
 
 Name of applicant. 
 
 Amount of advance. 
 
 Note. 
 
 (Seal or signature. ) 
 
 ENGAGEMENT. 
 
 I or we, undersigned, acknowledge having been fully paid the amount above men- 
 tioned, and engage to repay it in the month of , 190 , with interest at 9 per 
 
 cent per annum, as stated on the demand form bearing the same number, and agree 
 that the first payment made by me or us to the government shall be considered as 
 repayment of this advance and not as payment of the tax. In case the payment of 
 the advance and of the tax is delayed, the government shall have full right to seize 
 and sell my or our crops to the value of the amount, and I or we further bind our- 
 selves not to sell or dispose of the whole or any part of our land until payment of the 
 amount due to the Agricultural Bank of Egypt. 
 
 (Seal or signature. ) 
 
 AGKICULTUKAL BANK OF EGYPT. 
 
 (No. 3.) 
 
 Form of pay order for "A" loans. 
 
 Pay order addressed by the head office of the Agricultural Bank of Egypt, Cairo, 
 to , agent of the above bank, district , (date) 
 
 Please pay to the following persons the amount placed against each name; total, 
 £ , mill 
 
 No. 
 
 Name of applicant. 
 
 Village. 
 
 Amount. 
 
 Notes. 
 
 
 
 
 
 
 
 
 Total 
 
 
 
 The Aqkicultukal Bank of Egypt, 
 , Manager. 
 
 AQEIOULTtlBAL BANK OF EGYPT. 
 
 Form of register of "A" loans kept by the bank's agent. 
 
 (No. 4.) 
 
 Total to 
 be re- 
 paid. 
 
 No. 
 
 Name of ap- 
 plicant. 
 
 Name of 
 village. 
 
 Amount 
 of land 
 owned. 
 
 Amount 
 of tax. 
 
 Amount 
 of loan. 
 
 Date of 
 appli- 
 
 Date of 
 bank's 
 order 
 to pay. 
 
 Date of 
 pay- 
 
 Notes. 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 67 
 
 AGEICULTDEAL BANK OF EGYPT. (No. 5.) 
 
 Form of list of sums to be recovered sent to government. 
 
 Statement of sums to be repaid on loans ("A" or "B") in tlie village 
 
 of , district , province , in the month of , 190 
 
 No. 
 
 Name of debtor. 
 
 Amount to be Total amount 
 repaid. of loan. 
 
 AGRICULTUEAL BANK OF EGYPT. 
 
 Demand form for "B" loans. 
 Province , district , village 
 
 (No. 6.) 
 
 No. 
 
 Name of applicant. 
 
 Total 
 area of 
 
 land 
 owned. 
 
 Amount 
 of tax. 
 
 Amount 
 
 Qf 
 advance. 
 
 Area of 
 land to 
 be mort- 
 gaged. 
 
 Costa 
 of mort- 
 
 Date af 
 passing 
 act of 
 mort- 
 gage. 
 
 I, or we, undersigned, sons of (state whether fathers alive or dead) , born in 
 
 the village of and residing at ( here state if able to write or not) , 
 
 whose names appear in the column above, request the advance of the sum above- 
 mentioned which I, or we, engage to repay in five equal annuities, in the month 
 
 of of each year, with interest at 9 per cent per annnm, such payment to be 
 
 made at the same time as that of the government tax. In further guarantee I, or we, 
 agree that the first payments made by me, or us, to the government shall be con- 
 sidered as repayment of this loan and not as payment of the tax. 
 
 I, or we, also agree to mortgage to the Agricultural Bank of Egypt, at my, or our, 
 own expense, and before receiving payment of the advance, the land above men- 
 tioned, which is delimited on the back of this form. 
 
 (Seal or signature. ) 
 
 TAX collector's FIRST CERTIFICATE. 
 TAX collector's SECOND CERTIFICATE. 
 
 (Exactly as on demand form for "A" loans.) 
 
 QUESTIONS TO BE ANSWERED BY APPLICANT. 
 
 1. Is the land mentioned in this demand form your property? Do you possess it 
 entirely in your own right, or, if not, in what proportion and by what right? If by 
 coproprietorship, what is the extent of your share, and do you hold it by seniority 
 or otherwise? 
 
 2. Has this land been constituted a wakf (chancery bequest) or is it subject to any 
 mortgage or other legal charge? 
 
68 
 
 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 STATEMENT OP LAND TO BE MOKTGAGED. 
 
 Measurement and delimitation of land to be mortgaged to be signed by public 
 measurer and by headman of village or his representative. 
 
 AGHICULTUHAL BANK OP EGYPT. 
 
 Engagement form and receipt for "B" loam. 
 Province , district , village, 
 
 (No. 7.) 
 
 Name of applicant. 
 
 Amount of ad- 
 vance. 
 
 Amount paid to 
 applicant (costs of 
 mortgage de- 
 ducted). 
 
 Notes. 
 
 (Signature or seal.) 
 
 (Copy of signature or seal is affixed here before the demand form is sent to the 
 bank's head office to assist agent in afterwards being sure of identity of parties.) 
 
 I, or we, undersigned, acknowledge having been fully paid the amount above 
 
 mentioned and engage to repay it in nve years, in the month of of each year, 
 
 with interest at the rate of 9 per cent per annum, in account current as stated in the 
 demand form bearing the same number as this engagement; and I, or we, agree that 
 from the first payment made by me, or us, to the government the amount due shall 
 be deducted before payment of the tax. 
 
 In case the payment of the tax and repayment of the advance is delayed the gov- 
 ernment shall have full right to seize and sell my, or our, crops to the value of the 
 amount due, and I, or we, further bind ourselves not to sell nor dispose of the whole 
 or any part of our land until payment of the whole amount due to the bank. 
 
 For further security I, or we, have mortgaged to the Agricultural Bank of Egypt 
 the land described in the demand form. 
 
 (Signature or seal. ) 
 
 AGRICULTXJEAL BANK OP EGYPT. (No. 8.) 
 
 Form of pay order for "B" loans. 
 
 Pay order addressed by the head office of the Agricultural Bank of Egypt, Cairo, 
 to , agent of the above bank, district , (date) 
 
 Please pay to the following persons the amount placed against each name; total, 
 £ 
 
 Number. 
 
 Name of applicant. 
 
 Village. 
 
 Amount to 
 be paid. 
 
 Expenses (deduct- 
 ed from total 
 of loan to give 
 amount in pre- 
 vious column). 
 
 Notes. 
 
 
 
 
 
 
 
 
 
 Total 
 
 
 
 
 The Ageicultubal Bank op Egypt, 
 , Manager, 
 
AGEICTJLTX7EAX, BANK IN THE PHILIPPINES. 
 
 69 
 
 AGEICULTUEAL BANK OF EGYPT. 
 
 Form of register of "B" loans kept by hank's agents. 
 List of "B" loans. — Province , District 
 
 (No. 9.) 
 
 
 
 
 •o 
 
 0) 
 
 
 
 ._!, 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 a 
 
 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Name of 
 
 Name of 
 
 ^i 
 
 o 
 
 i 
 
 1 
 
 2 
 
 c 
 
 a 
 
 g 
 
 a 
 
 § 
 
 a 
 
 1 
 
 1 
 
 1 
 
 a 
 
 1 
 
 <u 
 
 1 
 
 1 
 
 Notes. 
 
 
 applicant. 
 
 village. 
 
 ^ 
 
 *t-i ^ 
 
 •s 
 
 a 
 
 Sg 
 
 1 
 
 d 
 
 1 
 
 1 
 
 & 
 
 i 
 
 8 
 
 
 03 
 
 .2 
 
 
 
 a 
 
 ^a 
 
 a 
 
 ^ 
 
 3 
 
 .B 
 
 •^ 
 
 
 g 
 
 •ti 
 
 a 
 
 •4-1 
 O 
 
 ■s 
 
 o 
 
 o 
 
 
 p 
 
 
 
 
 
 
 
 
 
 
 
 
 
 s 
 
 OJ 
 
 (U 
 
 a> 
 
 CU 
 
 
 
 
 ■< 
 
 1 
 
 a 
 
 s 
 
 a 
 < 
 
 £ 
 S 
 
 s 
 
 s 
 
 H 
 
 £ 
 
 i 
 
 1 
 
 fl 
 
 
 fl 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (No. 10.) 
 
 Form of registers of "A" loans kept at the head office of the bank. 
 
 Capital. 
 
 Interest. 
 
 Date of 
 pay- 
 m.ent. 
 
 Total 
 
 amount 
 
 due. 
 
 Village. 
 
 Name of borrower. 
 
 No. 
 
 (No. 11.) 
 
 Form of register of "B" loans kept at the head office of the bank. 
 
 190... 
 
 
 
 Expenses of 
 
 Amount 
 
 paid to 
 
 mortgager. 
 
 Interest 
 
 
 Total 
 
 
 Date oi pay- 
 ment. 
 
 Total repaid. 
 
 
 mortgage. 
 
 
 due. 
 
 Capital. 
 
 Interest. 
 
 
 
 
 
 
 
 
 
 Capital. 
 
 Interest 
 charged 
 for 190... 
 
 Arrears 
 
 of 
 interest. 
 
 Total 
 
 amount 
 
 due. 
 
 Total repaid. 
 
 Village. 
 
 Name of mort- 
 
 Capital. 
 
 Interest. 
 
 gager. 
 
 
 
 
 
 
 
 
 
 AGKICULTUSAL BANK OF EGYPT. 
 
 Form of list of recoveries made by government tax collectors. 
 
 (No. 12.) 
 
 List of collections of loans effected by the tax collector of the village of 
 district , province , in the month of , 190 
 
 Category 
 (AorB). 
 
 No. 
 
 Name of applicant. 
 
 Amount to Amount re- Balance 
 covered. still due. 
 
EXHIBIT D. 
 
 provisions of the code oe commerce concerning mort- 
 gage and agricultural banks. 
 
 Section Eleven. 
 
 mortgage loan associations or banks. 
 
 Art. 199. The following shall be the principal transactions of these 
 associations or banks: 
 
 1. To make loans on real estate on time. 
 
 2. To issue mortgage bonds and certificates. 
 
 Art. 200. Loans shall be made on mortgages of real estate, the 
 ownership of which is recorded in the registry in the name of the 
 person creating said mortgage, and shall be repaid in annual payments. 
 
 The mortgage certificates of mortgage banks shall bear stamp of 10 
 centimos, which shall be placed on the original and on the stub, accord- 
 ing to article 168 of the law of September 15, 1892. 
 
 Art. 201. These associations and banks can not issue bonds nor cer- 
 tificates to the bearer during the time the privilege actually enjoyed 
 by virtue of special laws by the Mortgage Bank of Spain continues. 
 
 Art. 201. (Cuba, Porto Rico, and the Philippines.) The power to 
 issue bonds and certificates payable to bearer, referred to in the second 
 paragraph of article 199, will not modif}^ the concessions made by the 
 government in favor of other associations or banks, in accordance 
 with the royal decree of August 16, 1878. 
 
 Art. 202. Loans made to provinces and to towns are excepted from 
 the mortgage required by article 200 when said provinces or towns are 
 legally authorized to contract loans within the limit of said authoriza- 
 tion, and provided the repayment of the capital loaned, together with 
 interest and expenses, is assured by revenues, taxes, capitals, or sur- 
 taxes, or special imposts. 
 
 Loans to the state are also excepted, which can be made, further- 
 more, on promissory notes of purchasers of national property. 
 
 Loans to the state, to provinces, or to towns may be repaid within 
 a period of less than five years. 
 
 Art. 203. In no case may loans exceed half the value of the prop- 
 erty on which the mortgage is to be created. 
 
 The basis and manner of appraising the real property shall be fixed 
 exactly in the by-laws or regulations. 
 
 Art. 204. The amount of the coupon and the rate of amortization 
 of mortgage certificates which are issued by virtue of a loan shall 
 never exceed the amount of the net annual profits which the real estate 
 offered and taken in mortgage as security for the said loan produce on 
 an average during the five years. The computation shall always be 
 made wifti relation to the loan, the income of the property mortgaged, 
 
 70 
 
AGEICULTUKAL BANK IN THE PHILIPPINT^S. 7l 
 
 and the annual premium of the certificates issued by virtue of said 
 mortgage. This annuity may at any time be less than the net income 
 of the respective real estate mortgaged as security for the loan and for 
 the issue of the certificates. 
 
 Art. 205. When the real estate mortgaged diminishes in value by 40 
 per cent, the bank may request the increase of the mortgage in order 
 to cover said depreciation, or the annulment of the contract, and the 
 debtor shall choose between these two measures. 
 
 The provisions of this article and those of article 206 are suspended 
 in the peninsula and adjacent islands as a consequence of the privi- 
 lege established in article 201. 
 
 Art. 206. Mortgage loan banksmay issue mortgage certificates to 
 an amount equal to the total value of the loans on real estate. 
 
 They may, furthermore, issue special obligations for the amount of 
 the loans to the state, to provinces, or to towns. 
 
 Art. 207. The mortgage certificates and special obligations treated 
 of in the foregoing article shall be payable to order or to bearer, with 
 or without amortization, for short or long periods, with or without 
 premium. 
 
 These certificates and obligations, their coupons and the premiums, 
 shall be the basis for an execution in the manner prescribed in the law 
 of civil procedure. 
 
 With regard to the procedure to be pursued in order to obtain the 
 cash value of the mortgage certificates, obligations, etc., see Title XV 
 of the Law of Civil Procedure, articles 1429 to 1543 for the peninsula, 
 1427 to 1478 of that for Cuba and Porto Rico, and 1411 et seq. of that 
 for the Philippines. 
 
 Art. 208. The mortgage certificates and special obligations, as well 
 as their interest and coupons, and the premiums assigned to them, shall 
 be secured, with preference over all other creditors or obligations, by 
 the credits and loans in favor of the bank or association which may have 
 issued the same and which represent said credits and loans, being 
 therefore jointly and severally liable for the payment thereof. 
 
 Without prejudice to this special guaranty, they sh^U enjoy the spe- 
 cial guaranty of the capital of the association, also with preference in 
 regard to the latter over the credits resulting from other transactions. 
 
 Art. 209. Mortgage-loan banks may also make loans secured by 
 mortgage, repayable in a period of less than five years. 
 
 These loans at short time shall be without amortization and shall not 
 authorize the issue of mortgage obligations or certificates, and must 
 be made from the capital of the common funds and from the accrued 
 profits. 
 
 Art. 210. Mortgage-loan banks may receive, with or without inter- 
 eat, deposits and employ half thereof in making advances for a 
 period not to exceed ninety days on their mortgage obligations and 
 certificates, as well as on any other deeds which banks of issue and 
 discount receive as security. 
 
 In case of default in payment on the part of the person who secured 
 the loan, the bank may demand the sale of the certificates or deeds 
 given as security, in accordance with the provisions of article 323. 
 
 Art. 211. All combinations for mortgage loans, including mutual 
 associations of landowners, shall be subject, in so far as the issue of 
 mortgage certificates and obligations is concerned, to the rules con- 
 tained in this section. 
 
72 agriculttjeal, bank in the philippixes. 
 
 Section Twelve. 
 
 special rules foe agricultural banks and associations. 
 
 Art. 212. The following shall be the principal transactions of these 
 associations: 
 
 1. To make loans in cash or in kind, for a period not to exceed three 
 years, on products, crops, cattle, or other special pledges or securities. 
 
 2. To guarantee with their signature promissory notes and paper 
 demandable within a period not to exceed ninety days, in order to 
 facilitate its discount or negotiation to the owner or farmer. 
 
 3. Other transactions, the purpose of which is to favor the breaking 
 or improving of ground, draining of lands, and the development of 
 agriculture and other industries related thereto. 
 
 , Art. 213. Agricultural loan banks or associations may have agents 
 outside of their domicile who may personally answer for the solvency 
 of the landowners or tenants who request the assistance of the associa- 
 tion, placing their signature on the promissory note which said asso- 
 ciation is to discount or indorse. 
 
 Art. 214. The guaranty or indorsement placed by these associations 
 or their representatives, or by the agents referred to in the foregoing 
 article, on the promissory notes of the landowner or farmer shall 
 entitle the bearer thereof to demand their payment directly and to 
 obtain an execution on the day any of the subscription falls due. 
 
 Art. 215. The promissory notes of the landowner or farmer, be they 
 either held by the association or negotiated by the same, shall, when 
 they fall due, give rise to the execution which may be proper, in accord- 
 ance with the law of civil procedure, against the property of the land- 
 owner or farmer who may have subscribed them. 
 
 According to No. 5 of article 1429 of the Law of Civil Procedure in 
 force in the Peninsula (1427 of that for Cuba and Porto Eico and 1411 
 of that for the Philippines). 
 
 Art. 216. The interest and commission which the agricultural loan 
 associations and their agents or representatives are to receive shall be 
 unrestrictedly stipulated within the limits fixed by the by-laws. 
 
 Art. 217. Agricultural loan associations can not devote to the trans- 
 actions referred to in paragraphs 2 and 3 of article 212 more than 50 
 per cent of the common capital, applying the remaining 50 per cent to 
 the loans referred to in No. 1 of the same article. 
 
EXHIBIT E. 
 STATUTE OF THE EAST PRUSSIAN LANDSCHAFT. 
 
 [Quoted from translation contained in The Report Regarding tiie Possibility of Introducing Land 
 and Agricultural Banks into the Madras Presidency. (Volume II, pages 6 to 9)] . 
 
 Statute of the Peusstan Landschaft. (Land Bank. ) (Founded 
 
 IN 1788.) 
 
 DEBENTURES. 
 
 5. The bank's debentures are debt bonds issued by the bank against 
 the mortgages held by it on properties mortgagalDle (sec. 23) to the 
 bank. 
 
 The total amount of such issue shall at no time exceed the total value 
 of the outstanding mortgages held by the bank. 
 
 All debentures are to bearer, and shall be governed by the rules of 
 this statute. 
 
 The holders of debentures can not claim (at will) the repayment of 
 the value of their debentures, but the bank can call in and repay such 
 debentures at any time upon six months' notice." 
 
 6. (The interest is fixed at 3i per cent per annum, with leave to the 
 general committee to issue at other rates from 3 to 4i per cent.) 
 
 7. The interest payable by the bank's borrowers shall be the same 
 as that payable by the bank on its debentures, and shall be paid half- 
 yearly. 
 
 8. The bank must pay the interest on its debentures without delay 
 or cost to the holders on presentation of the interest coupons. The 
 debenture holders have no connection with the borrowers from the 
 bank, to which alone the holders must look for the satisfaction of their 
 claims. 
 
 9. Besides interest and sinking fund (sec. 178) the borrowers must 
 pay to the bank the amount fixed by the general meeting for covering 
 the costs of administration. Any changes in the rate of such contri- 
 bution require royal confirmation. 
 
 10. The bank is authorized to collect all its legal claims from its 
 mortgagors (debtors) without any court proceedings and by the coer- 
 cive processes allowed to it. 
 
 "That is, although all such debentures are repayable gradually and completely 
 within a certain period under the operation of a sinking fund, the holder of any 
 particular debenture can not demand at pleasure such repayment; he must wait till 
 it is drawn or till the bank calls it in. On the other hand, the bank has the power 
 of repaying any debenture at any time on notice. 
 
 As the debentures are excellent investments and are all issued to bearer, a holder 
 in want of his money simply sells his debenture in the market. 
 
 73 
 
74 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 The coercive processes special to the bank are — 
 
 (1) The distraint of all movables including claims due (to the debt- 
 ors) by their debtors; 
 
 (2) Attachment of the estate; 
 
 (3) Forced sale of the estate. 
 
 Distraint is made according to the rules for administrative coercive 
 process. The general board is the authority for ordering and con- 
 ducting coercive process. 
 
 11. The courts are bound to take into consideration the registered 
 debt due to the bank when a property mortgaged to the bank forms 
 an item in the schedule of a bankrupt's property, or is the object of 
 coercive attachment or sale. The bank is entitled in cases where such 
 property is under its management to be recouped as a first charge in 
 the actual costs of such management and of any costs of restoration 
 (to a good condition), as also in any arrears of interest, and to claim 
 such dues in priority to other creditors out of the sale price. Only 
 after the bank has been satisfied (in such matters) shall the surplus 
 income or sale price be divided. 
 
 12. (Debtors in arrears must pay at the rate of 5 per cent per annum 
 on all advances made by the bank to debenture holders and others, on 
 account of such arrears. If such advances are borrowed by the bank, 
 the debtor is bound by the terms agreed upon with the bank's creditor. 
 In case of these advances the bank's debtor must give and register 
 security to the amount of 0.5 per cent of his original loan.) 
 
 13. The holder of a debenture is entitled to punctual payment of 
 interest, and of the principal when the debenture is publicly drawn 
 for payment. 
 
 14. Debenture holders have, as their security for the payment of 
 interest and principal and of any other claims under this statute — 
 
 (a) The bank and all its funds, and, above all, the whole mass of 
 mortgage claims held b}' the bank; 
 
 (b) The general guaranty of (1) all the properties mortgagable to 
 the bank (all bepfandbriefungsfahigen Landguter) by the law of 1808, 
 whether mortgaged or not, within its area of operation; (2) all other 
 landed properties (e. g. , peasant (bauerliche) section 23 a) actually 
 under mortgage to the bank; (3) all urban properties which by entry 
 in the land register (Grundbuch) are subject to the general guaranty. 
 
 15. The registered mortgages held by the bank are exclusively 
 assigned as security for the debentures and can in no wise be made 
 answerable for the dues payable to any other creditors of the bank. 
 
 16. All debentures have equal privileges. 
 
 17. Debentures against a specified property shall no longer be 
 issued." 
 
 18. The total amount loaned upon a property shall never exceed 
 two-thirds of its value as appraised and determined. 
 
 19. Should a mortgaged property be split up or be so badly man- 
 aged as to deteriorate, or suffer loss of its stock, or the dilapidation of 
 
 oThis marks the great change in the land-bank system. The bank was at first a 
 mere intermediary between a creditor and a particular debtor; the debentures were 
 issued against and actually specified particular properties and loans, and the unpaid 
 creditor had his claim against such property. Subsequently the bank became a 
 genuine credit bank, issuing debentures merely against the mass of its mortgages 
 and other assets, and excluding any direct connection between a debenture holder 
 and a particular debtor. 
 
AGKICULTUBAL BANK IN THE PHIJJPPINES. 75 
 
 its buildings, or be cleared of its timber, or should the buildings not 
 be properly insured, the bank may either require the immediate pay- 
 ment of a corresponding part of its loan, or may, on three months' 
 notice, call in the whole loan, and may, without preliminary proceed- 
 ings, enforce its claims by attachment or sale. The bank may, in case 
 its security appears for any of the above reasons to be endangered, 
 proceed without notice to attachment and management of the property. 
 (Other paragraphs provide for calling in part or the whole of the 
 loan in case the property is entered in an association, even for land 
 improvements, which is burdened with charges or demands which may 
 endanger recovery of the bank's claims; also that the mortgagor shall 
 inform the bank of any sale of its stock to a tenant, and, if necessary, 
 shall give security. In case of receiving no such notice the bank may 
 proceed as in paragraph 1.) 
 
 20. The bank is entitled to inspect the registration books and land 
 records relating to properties within its area of operations and to take 
 extracts therefrom gratis; it is also entitled to demand simple or cer- 
 tificate copies. 
 
 21. The mortgages must not be preceded in the registration bo'oks 
 by any prior mortgage or other obligation which would lessen the inter- 
 est of the bank in the property or in its proceeds. 
 
 The candidate for a loan must prove that prior mortgages have been 
 redeemed, or must obtain the cession of such mortgages to the bank, 
 or must arrange that the bank shall have priority over all other regis- 
 tered entries, before debentures can be issued. 
 
 ******* 
 
 23. Loans may be granted on the following properties: (a) All prop- 
 erties within the ai'ea of operation, including royal domains and forests, 
 bearing an estimated value of at least £75. Properties defined in sec- 
 tion 14 b. (2), (i. e., peasant pi'operties) must be possessed in full own- 
 ership without incidental servitudes (i. e. , apparently, without owing 
 any feudal dues or duties to over-lords); (b) (certain urban properties 
 with buildings of the value of at least £750); (c) (certain other urban 
 properties worth at least £76). All proprietors of the class mentioned 
 in section 14' b. (2) (peasant), who obtain credit from the bank, are sub- 
 ject without further or express declaration, to the conditions of the 
 statute, and are charged with the guaranty mentioned in section 14. 
 
 THE OFFICIALS OF THE BANK. 
 
 31. The business of the bank shall be carried out under the general 
 supervision of a Koyal Commissioner as president of the bank and 
 according to the resolution and under the control of the general meet- 
 ing as elected by the circle meetings, through (1) the general board; 
 (2) the valuation committee; (3) the full committee (Plenar-Kollegium) ; 
 (4) the audit committee. 
 
 ******* 
 
 33. All officials of the bank are indirect public officials. They must 
 take oath on appointment. 
 
76 AGKICULTURAL BANK IN THE PHILIPPINES. 
 
 37. A commissioner or president appointed by His Majestj' shall be 
 placed at the head of the bank, his special care shall be that the founda- 
 tion principles of the system shall be strictly observed by all concerned, 
 and that not the least infraction of duty toward the King and the con- 
 stitution of the country shall be admitted. 
 
 He is also entitled to preside, when he thinks necessary, at all the 
 bank's meetings and committees without exception, and to expect and 
 demand detailed reports. This right especially belongs to him with 
 reference to the general meeting and the general board. He is also 
 especially entitled, whenever he thinks necessary, to institute exami- 
 nations of the cash and audit of the accounts, and he must particularly 
 see that proper regulations are issued and obeyed by all the depart- 
 ments of the bank. 
 
 38. The departmental authorities of the bank are public depart- 
 ments with the rights mentioned in the general law, section 114 ff. 
 Part II, Chapter X. 
 
 All documents issued in their official capacity have the status of 
 public documents. No suit lies (findet der Rechtsweg nicht statt) 
 against resolutions issued in their official capacity. 
 
 THE AUDIT COMMITTEE. 
 
 89. This committee consists of three members and as many deputies 
 who shall be appointed for three years by the ordinary general 
 meeting. - 
 
 90. Its duty is the annual final revision of the whole of the bank's 
 accounts, including the audit of the bank's work for the year, which 
 is to be made before the ordinary general meeting. This committee 
 meets once a year, as soon as the settlement of accounts for the past 
 business year has been completed by the office. The accounts must 
 be placed in complete condition for audit with all vouchers and notes. 
 
 THE ENFORCING OF THE BANK's ORDERS. 
 
 107. Every proprietor of an estate belonging to the credit associa- 
 tion is bound to submit to all such orders of the several departments 
 of the bank as relate to the due maintenance and execution of the pro- 
 visions of this statute, especially as regards orders of the general 
 board to undertake inquiry into estates which have deteriorated, 
 and the representation of circle deputies when they are prevented from 
 making valuations of properties. 
 
 This rule is applicable also to the occupants of mortgaged estates 
 and to tenants of the same, especially to lessees under the circum- 
 stances mentioned in sections 164 and 165 (relating to the leasing of 
 estates under attachment). 
 
 108. The authorities of the bank are entitled to enforce obedience 
 to their orders by fines which they may themselves impose and which 
 they may collect by coercive process without the intervention of a 
 court, or by such other coercive means, including the attachment of 
 estates, as may seem good to them. 
 
 All courts are bound promptly and without objection to assist the 
 bank in such cases. 
 
AGBICTJLTTJEAl, BANK IN THE PHILIPPINES. 77 
 
 109. Should these means not succeed in inducing the parties con- 
 cerned to do their duty, the general board is entitled to demand repay- 
 ment by them of their loans, and for this purpose, should threats prove 
 unavailing, to proceed in the last resort to the forcible sale of the 
 mortgaged property. Such sale must be carried out by the court hav- 
 ing jurisdiction without previous inquiry. 
 
 110. Should the offender be dissatisfied with the action of the gen- 
 eral board (sections 108 and 109) he can make a complaint to the general 
 meeting, the decision of which shall be final. 
 
 ■ On complaint being made, execution of the penalty shall be postponed 
 unless such penalty be a mere fine. 
 
 THE COLLECTION OF OUTSTANDING INTERESTS. 
 
 149. On the expiry of the date fixed for payment of interest a list 
 of arrears shall be drawn up in full detail, and a notice shall be sent 
 direct to the debtor that coercive process will issue. 
 
 150. On the expiry of the time mentioned in the notice the general 
 board will proceed to coercion, at first against the movable property 
 of the debtor. 
 
 The debtor can not, in such case, raise the objection that the creditor 
 must first seek his remedy against the estate. 
 
 Only such articles of the stock of the estate shall be sold as are not 
 necessary for its working. 
 
 151. Should the proceeds of the distrained property not cover the 
 arrears with the cost of distraint, or should the general board consider 
 it advisable with reference to the amount of arrears or other circum- 
 stances to abstain from distraint, proceedings maj' be taken for the 
 attachment or sale of the property. 
 
 152. Should the board decide to attach the estate it must, as a rule, 
 appoint for that duty the councilor in whose circle the estate is sit- 
 uated. In exceptional circumstances another councilor or a circle 
 deputy may be appointed. 
 
 One of the bank's legal advisors, or in his absence a judge, must 
 always assist at such attachment. 
 
 * * * * * * * 
 
 168. (3) The courts are bound, on the request of the general board, 
 to proceed to sell an estate without previous inquiry. 
 
EXHIBIT F. 
 
 STATUTE OF THE NEW WEST PBTJSSIAN IjA.NDSCHAFT. 
 
 [Quoted from translation contained In the report regarding the possibility of introducing land and 
 agricultural hanks Into the Madras Presidency. (Volume II, p. 9 to 11.)] 
 
 Statue of the New West Prussian Landschaft. 
 
 1. A credit institution entitled "The New West Prussian Land- 
 schaft" is hereby established for the jjroprietors of estates excluded 
 from the " West Prussian Landschaft Association" in the districts of 
 Marienwerder and Danzig. 
 
 It shall be represented and managed by the general board of the 
 West Prussian Landschaft, with the proviso that such relationship 
 may be dissolved. 
 
 loans. 
 
 2. The bank will grant mortgage loans to such of the above land- 
 holders as enter the association. Funds for such purpose will be found 
 by the issue of debentures called "New West Prussian Debentures;" 
 these shall be made out to bearer, and shall carry an annual interest of 
 4 or 4:i per cent. 
 
 3. For entry to the association, and for the receipt of loans only, 
 such estates are admissible as (a) do not belong to the West Prussian 
 Landschaft Association; (b) are held in full ownership; (c) are worth, 
 upon valuation by the bank, at least £225; (d) and (e) relate to pecuh- 
 arities of German land tenure. 
 
 ******* 
 
 5. Loans may not exceed in amount half the estimated value of the 
 property. 
 
 ******* 
 
 8. A borrower must undertake the following obligations: (a) To pay, 
 in two half-yearly installments, an annuity of 41 or 5i per cent, accord- 
 ing as the debentures (representing the loan) were issued at 4 or 4^ per 
 cent; (b) to pay toward a working capital (section 27) 1 per cent on the 
 loan amount at the issue of the debentures; (c) to repay the loan prin- 
 cipal, in whole or in part, upon six months' notice in the Cases men- 
 tioned in section 15 infra; (d) in case of arrears to pay, as penal inter- 
 est, 6 per cent upon such arrears for the quarter in which the pay- 
 ment fell due; (e) especially to submit to the conditions of this statute. 
 ******* 
 
 12. The annuity shall be allotted as follows: (a) Four or, as the case 
 may be, 4^ per cent as interest upon the debentures; (b) one-half of 
 1 per cent to the accumulation of the insurance and sinking fund 
 
 78 
 
AGKICULTUEAL BANK IN THE PHILTPPINES. 79 
 
 respectively (eines Sicherheits und resp. Amortisations-(Tilgungs-) 
 Fonds); (c) one-fourth of 1 per cent for the defrayal of the charges of 
 administration." 
 
 14. The bank shall, upon the occurrence of arrears, issue its demand 
 for such arrears and for the penal interest due thereon, and shall sub- 
 sequently proceed against the movables of the debtor, or to the attach- 
 ment and sale of the land by the courts having jurisdiction. 
 
 The debtor can not demand that the bank shall in the first place 
 proceed against the estate, nor can he object to the simultaneous car- 
 rying out of the attachment and sale of the estate; still less can he 
 claim any delay. 
 
 At the auction of an estate the bank can, for the avoidance of any 
 loss, itself buy it in without special authority from government; in 
 each case, however, it must resell the estate within three years. 
 
 15. The bank has the right of requiring the repayment of its loan 
 at six months' notice: (a) When the mortgage estate shall have so 
 decreased in value that it is no longer worth £226; partial repayments 
 may be demanded in the case of other diminutions in value; (b) when 
 the proprietor fails to make his bounden payments to the bank punc- 
 tually; this right ceases when the arrears and all costs are paid up; 
 (c) when the proprietor is unable to prove that he has regularly paid 
 the public dues upon his estates; (d) when the estate comes under 
 attachment or public sale (subhastation); (e) when the proprietor man- 
 ages his estate so badly that, on the examination of two commission- 
 ers, a serious deterioration of the estate and a danger to the bank's 
 security are evident, and the proprietor fails to remedy the defects 
 found according to the orders of the directors and within an appointed 
 time; (f) when the borrower fails according to the condition of sec- 
 tion 11 to insure his buildings, stock, and stores against fire; (g) when 
 the borrower does not meet his obligations in the matter of his loan 
 contract as mentioned in section 3; (h) when he refuses to undertake 
 the office of bank commissioner upon due election or nomination unless 
 he has already served as such. 
 
 16. Properties under mortgage are subject to the inspection of the 
 bank commissioners of the circle in so far as there may appear acts or 
 omissions or other circumstances which may endanger the security of 
 the loans or of the interest thereon. 
 
 THE FUNDS OF THE BANK AND THEIR MANAGEMENT. 
 
 27. Working capital.'' — The working capital shall be accumulated 
 from the 1 per cent deducted made from all loans at the time of issue, 
 as provided in section 8-b. This capital is the property of the bank, 
 
 "1. It will be noticed that these banks are managed most economically, and 
 therefore with the least possible cost to the borrower. An, annual charge of 0.25 per 
 cent on the loan, and a lump payment (8 (b) ) of 1 per cent at the issue of the loan, 
 suffices for the whole cost of administration, and for the accumulation of a small 
 cash capital for immediate and current expenses. It is the absence of a share capital 
 with dividends and the adoption of the mutual principle, together with the enforced 
 and but shghtly paid for services of the various members, that bring about the result. 
 
 2. This is not a working capital in the sense of a capital by which the business of 
 a bank is carried on or loans granted, but merely a fund from which cash expenses 
 salaries, etc. , are provided. 
 
 6 See note 2 above. 
 
80 AGKICTJLTUKAL BANK IN THE PHILIPPINES. 
 
 and shall furnish funds for unavoidable outlays (not otherwise pro- 
 vided for). 
 
 The select committee is ) ■■ cially charged with the employment of 
 this fund. 
 
 28. hwirancefand. — The insurance (guaranty) fund is accumulated 
 (a) from 0.75 per cent, whiph the borrowers pay in excess of the 
 interest due to the debenture holders, and 0.25 per cent as costs of 
 administration, for seven years from the grant of the loan; (b) from 
 the penal interest on arrears; (c) from the proceeds of expired 
 (unclaimed) interest coupons; (d) from any extraordinary receipts; 
 (e) from interest on the fund itself. 
 
 29. The insurance (guaranty) fund is formed to cover any losses of 
 capital or interest which are not covered by the share of the proprietor 
 of the estate in question (which has caused the loss) in the sinking 
 fund (tilgungsfonds). 
 
 It is the own property' of the association, and outgoing members are 
 not entitled to any repayment of any portion thereof. 
 
 30. Sinking fund. — The sinking fund is accumulated from the pro- 
 ceeds of the annual 0.75 per cent mentioned in section 28 (a), which 
 the borrowers pay to such fund after the expiry of seven years from 
 the grant of the loan, together with the interest accruing on the fund. 
 This fund is the property of the owners of the mortgaged estates, and 
 (so far as the contributions of such estates are concerned) is de jure an 
 appurtenance of the estates. 
 
 MANAGEMENT OF THE BANK. 
 
 This section provides that the statute and working rules of the West 
 Prussian Landschaft shall serve for the new bank except in so far as 
 the present statute alters them. 
 
 1. Appendix No. II to the statute provides rules for the issue of 
 Series No. II of debentures. Rule 1 is similar to section 12 of the 
 statute, but subsequent royal ordinances permit the issue of deben- 
 tures at 3 and 3^ per cent. 
 
 2. The insurance (guaranty) fund is placed under the conditions of 
 section 29 of the statute. It is composed from the following contri- 
 butions: (a) 0.5 per cent annually, as mentioned in rule 1, until the 
 fund reaches 5 per cent of the debentures issued to the respective 
 borrowers; (b) half of such interest on debentures as has not been 
 claimed within four years; (c) penal interest on arrears; (d) all 
 extraordinary receipts. 
 
 3. The 0.5 per cent above mentioned as part of the annuity shall be 
 credited to the siqking fund and ledgered against each borrower as 
 soon as it is no longer required for the insurance fund. 
 
 ******* 
 
 5. The holder of debentures of Series II has the right — (a) to the 
 punctual payment of his interest; (b) to the payment of his principal 
 in cash when publicly drawn. 
 
 Should the bank fail to satisfy his claims he is entitled to seek satis- 
 faction by the ordinary legal methods against the bank — (a) first of 
 all from the insurance (guaranty) fund; (b) next from those mortgages 
 against which the bank has issued debentures; (c) subsidiarily from the 
 
AGEICXJLTUBAIi BANK IN THE PHILIPPINES. 81 
 
 sinking fund with reference to the debentare of Series II issued 
 against particular estates. 
 
 So long as the insurance fund shall not have reached the amount of 
 5 per cent of the pending debentures, the debenture holder has further 
 the right to seek' satisfaction — 
 
 (d) from the old insurance fund, but without prejudice to the rights 
 already acquired therein by holders of debentures of the first series. 
 
 The valuation rules of this association are particularly minute and 
 too lengthy for translation here, while their chief interest would be 
 the secondary one of showing the very moderate amount of loan 
 obtainable per acre and the extreme care with which the bank safe- 
 guards its loans, by demanding the most scrupulously minute inquiries. 
 The inability of such banks to reach the small peasant is fully accounted 
 for by the necessity, gained from experience, for such rules. 
 
 30795—06 6 
 
EXHIBIT G. 
 
 FRENCH LAW RELATING TO SOCIETIES FOB THE GRANT OF LAND 
 
 CREDIT. 
 
 [Quoted from translation contained in the report regarding the possibility of introducing land and 
 agricultural banks into the Madras presidency. (Volume II, pages 11 to 18.)] 
 
 Law Relating to Societies fok the Geant of Land Credit 
 (France), February 28, 1852. 
 
 Chapter I. — Land credit societies {land hanks). 
 
 1. Land banks, which are founded with the object of enabling pro- 
 prietors who borrow on mortgage to repay the mortgage amount by 
 means of Jong-term annuities, may be authorized by decree of the 
 president of the republic after consultation with the council of state. 
 On such authorization they shall become possessed of the rights and 
 be bound by the rules of the present law. 
 
 2. The above authorization may be granted either to societies of 
 borrowers or to societies of lenders. 
 
 3. The operations of the banks shall be limited to the area fixed by 
 the decree of authorization. 
 
 4. Land banks have the right of issuing debentures. 
 
 5. In order to assist the early operations of the banks, the state 
 and departments (districts) may invest in a certain quantity of such 
 debentures. The budget shall annually settle the maximum to be 
 invested by the treasury in this manner; such amount shall be divided 
 among the banks as determined by their respective decrees of author- 
 ization. The same decree shall determine what share shall be received 
 by each bank of the sum of £400,000 set apart for the establishment 
 of land banks. 
 
 Chapter II. — Loans made hy lomd hanks. 
 
 6. Land banks may only lend on first mortgage (with a certain excep- 
 tion of no general importance). Loans by which all prior creditors 
 are paid off both as to capital and interest are considered as first mort- 
 gages. In case of such loans the bank shall retain in its own hands so 
 much as will effect the above payments. 
 
 7. No loan shall, in any case, exceed one-half of the value of a prop- 
 erty; the articles of each bank shall determine the minimum loan to 
 
 be granted, 
 o * * * 
 
 If any claim is registered during the period allowed, the provisional- 
 loan deed will be held null and void. 
 
 Q * * * 
 
 10. Borrowers shall repay their debts by annuity, but shall always 
 possess the right of repayment in advance either in full or in part. 
 
 82 
 
AGRICXJLTUKAL BANK IN THE PHILIPPINES. 83 
 
 11. The annuity shall of necessity comprise (1) the interest agreed 
 upon, which shall not exceed 5 per cent; (2) the sum allotted as sink- 
 ing fund; (3) (a contribution toward) the cost of management, together 
 with such charges as are fixed by the articles of the bank. 
 
 12. In case of nonpayment of the annuities the bank may, in addi- 
 tion to its rights as creditor under the general law, have recourse to 
 the methods of recovery contained in Chapter IV, infra. 
 
 Chapter III. — Debentures issued hy land hanks. 
 
 13. The (land mortgage) debentures or bonds of land banks shall be 
 to order or to bearer. Debentures to order are transferable by mere 
 indorsement, without other guarantee than that provided by section 
 1693 of the Code Napoleon. 
 
 14. The aggregate value of the debentures issued shall not exceed 
 that of the loans granted. (They must be countersigned by the gov- 
 ernor of the bank; law of 6th July, 1854) and shall be registered at a 
 fixed rate of 10 centimes (Id.) each. 
 
 15. No debenture shall be issued of less value than £4. 
 
 16. The debentures shall bear interest. In the course of each year 
 debentures shall be redeemed to the value of the sums paid in toward 
 the sinking fund. 
 
 17. The holders of debentures can recover their principal and inter- 
 est only by proceeding against the bank itself. 
 
 18. No attachment is valid against the payment of either the cap- 
 ital or interest (of the debentures), save only in case of the loss of a 
 debenture. 
 
 Chapter IV. — Privileges granted to land hanks for the safety and 
 recovery of tlteir loans. 
 
 19. For the postponement of known claims at law a notice contain- 
 ing an extract from the mortgage deed executed in favor of the bank 
 shall be served: (a) upon the woman and her husband; (b) upon the 
 guardian or substituted guardian of the minor or incapable; (o) upon 
 the minor freed (from wardship) and his trustee; (d) upon all unregis- 
 tered creditors possessed of a claim at law. 
 
 20. (Particulars of the mortgage contract are to be entered in the 
 notice.) 
 
 It shall, moreover, contain a notice that if desired that such claim 
 shall maintain its priority as against the bank, it must be registered 
 within fifteen days from the date of the notice, with an allowance for 
 distance. 
 
 21 to 23. (Precautions to be taken in serving the notice where the 
 woman is the wife of the person obtaining the loan, or when the 
 borrower is a guardian of a minor, etc.) 
 
 24. For the postponement of unknown claims at law, an extract 
 from the mortgage deed must be sent to the government pleader of 
 the court of the taluk (arrondissement) in which the borrower is 
 domiciled and of that in which the propeity is situated. 
 
 The extract shall also be inserted, with a note that the above notices 
 have been sent, in one of the newspapers appointed for publishing the 
 judicial notices of the taluk in which the property is situated. 
 
84 AGBICULTURAL BANK IN THE PHILIPPINES. 
 
 Registration (of any unknown charges) must be made within forty 
 days of the above advertisement. 
 
 25. The postponement takes effect in default of any such registra- 
 tion within the periods fixed by the above sections. 
 
 Such postponement gives to a land bank priority over claims at law. 
 
 But such postponement shall not benefit third parties, who remain 
 subject to the formalities prescribed by sections 2193, 2194, and 2195 
 of the Code Napoleon. 
 
 B. RIGHTS AND MODES OF EXECUTION BY A BANK AGAINST BORROW- 
 ERS FROM IT. 
 
 26. The courts shall not grant any postponement of the payment of 
 annuities." 
 
 27. The payment of annuities shall not be stayed by any attachment.' 
 
 28. Annuities not paid at due date bear interest de jure. 
 
 The bank may, moreover, proceed to the attachment and sale of the 
 property mortgaged in the manner and under the conditions pre- 
 scribed by the following sections. 
 
 29. Attachment. — When a debtor is in arrears, the bank may, by 
 means of an order which shall, on its request, be made by the court of 
 first instance (having jurisdiction), and within fifteen days of service 
 of such order, take possession of the mortgaged property at the risk 
 and cost of the defaulter. 
 
 30. During such attachment the bank shall collect, notwithstanding 
 any (other) attachment or distraint, the whole of the proceeds or pro- 
 duce (of the property), and, by (special) privilege, shall apply the 
 same to the clearance of all annuities and costs due up to date. 
 
 This privilege takes rank immediately after those enjoyed on account 
 of the expenses of maintaining the property, the wages of labor and 
 of sowing the crops, and the rights of the treasury for the collection 
 of the taxes. 
 
 31. In case of dispute regarding the balance sheet of an attachment, 
 the matter shall be decided by the court summarily. 
 
 32. Eviction and mle. — Whenever an annuity is in arrears and 
 whenever by reason of the deterioration of an estate or for any other 
 cause mentioned in the articles, the repayment of the principal (of a 
 loan) may be demanded, the sale of the immovable propertj' (under 
 mortgage) may be proceeded with. 
 
 If objection is raised thereto, the matter shall be decided as a sum- 
 mary suit, by the court in the jurisdiction of which the property is 
 situated. The judgment is such suit shall not be subject to appeal. 
 
 33. In proceeding to the sale of an immovable, a land bank shall 
 issue to the defaulter a demand notice (commandement) in the form 
 prescribed by section 673 of the civil procedure code. This demand 
 
 « Since the interest on debentures lias to be paid by the bank to the very day, it 
 is equally necessary that the bank should be paid by its debtors with similar punc- 
 tuality. Hence not even the courts can grant a debtor any privilege in the way of 
 postponement of dues or payment of the annuities by installments, etc. This pro- 
 vision modifies the general law (section 1244, civil code) by which the judges can 
 grant moderate delays. 
 
 ' This is a large privilege, by which the bank obtains a certain precedence for its 
 dues when once established by the contract deed. No creditor or claimant, not 
 even a decreeholder, whether of the bank or of the borrower, can attach an annuity 
 on its way to the bank. 
 
AGKICUIiTXJEAL BANK IN THE PHILIPPIKES. 85 
 
 notice shall be registered in the office of the registration area in which 
 the property is situated. 
 
 In default of payment within fifteen days, three advertisements, 
 with at least ten-day intervals, shall, within the six weeks following 
 the above registrations, be made in certain newspapers as provided in 
 section 42 of the code of commerce, and two notices shall, at fifteen- 
 day intervals, be affixed (a) in the court room (auditoire) of the court 
 where the sale is to take place, (b) at the door of the office of the may- 
 orality in which the property is situated, and (c) on the property 
 when it is a building. 
 
 The first affixture of the notice is communication within eight days 
 to the defaulter and to registered creditors at their place of domicile 
 with a summons to take service of the notice of the conditions of sale. 
 
 Fifteen days after the execution of these formalities the auction sale 
 may be proceeded with in the presence of the defaulter or, after he 
 has been duly notified, before the court within whose jurisdiction the 
 property or the larger part thereof is situated. 
 
 The court may, if moved by the bank before the appearance of the 
 first advertisement, order that the sale shall take place either before 
 another court or at the office of a notary of the canton or taluk 
 (arrondissement) in which the property is situated. This order is not 
 open to appeal, nor can any objection be raised (to the proposal of the 
 society) save within three days plus an allowance for distance after 
 due notice given to the defaulter. 
 
 34. From the date of registration of the demand notice (section 33), 
 the defaulter shall not be able to alienate the mortgaged property to 
 the prejudice of the bank, nor burden it with any real charges. 
 
 35. The demand notice, the copies of the newspaper containing the 
 advertisements, the memorandum attesting the affixture of the notices, 
 the summons to take service of the list of conditions of sale and to be 
 present at such sale, shall be annexed to the sale proceedings (proces 
 verbal). 
 
 36. Any objections or pleadings must be entered on the memoran- 
 dum of conditions at least eight days before that fixed for the sale. 
 Such notice of objection must appoint a solicitor. 
 
 The court shall take cognizance of any objection upon due exchange 
 of notices between solicitors. It will decide the matter on a summary 
 inquiry, but such inquiry shall not postpone the sale. 
 
 37. If, at the registration of the demand notice (section 33), there 
 shall be in actual existence a prior attachment made on demand of 
 another creditor, the land bank may, after simple notice to the solicitor 
 of such creditor, and provided that the memorandum of sale conditions 
 has not been already deposited (in court by the other creditor), pro- 
 ceed to sale in the manner provided by the preceding articles. 
 
 If the memorandum of the sale conditions has been already deposited 
 prior to the registration by the bank of its demand notice (section 33), 
 the bank shall not enjoy the privilege of being substituted for (of 
 preceding) the attaching creditor. 
 
 No postponement of the sale shall be allowed if the bank objects 
 thereto. 
 
 In case of any negligence on the part of the bank the attaching 
 creditor may resume his right of proceeding (to sale). 
 
 38. Within eight days of the sale the purchaser is bound to pay to 
 the bank provisionally the amount of the annuity due. 
 
86 AGRICULTURAL BANK IN THE PHILIPPIKES. 
 
 After the period allowed for further bidding has elapsed the bal- 
 ance of the purchase money shall be paid over to the bank up to the 
 full amount due to it, notwithstanding any attachments, objections of 
 registered claims by creditors of the defaulter; provided, however, 
 that such creditors shall have the right to sue for recovery of any 
 excess (en repetition) should the bank have been unduly paid to their 
 prejudice. 
 
 39. If the property has been sold by lots, or if there are several 
 purchasers without joint interest, each purchaser is only bound as 
 regards the bank up to the amount of his bid. 
 
 41. * * * 
 
 42. All rights granted in the present chapter may be exercised 
 against third persons in possession of the property after due service 
 of the demand notice (section 33) on the defaulter. 
 
 Proceedings begun against a defaulter are valid as continued against 
 him until any third parties to whom the defaulter may have alienated 
 the property shall have given notice to the bank of such alienation. 
 In such case proceedings shall continue against such third parties. 
 
 Chapter V. — General. 
 
 43. (Treats of the supervision of land banks. ) 
 
 44. Banks are forbidden to undertake any business other than that 
 prescribed by the present law. 
 
 45. Banks may deposit their disposable funds in the treasury on 
 conditions to be laid down by Government. ' ^ 
 
 46. The funds of incapacitated persons and of communes may be 
 invested in land bank debentures. So also may be invested disposable 
 funds belonging to public institutions, or institutions of public useful- 
 ness, in all cases in which such institutions are entitled to invest their 
 funds in Government paper. 
 
 J'T * * * 
 
 48. The articles of a bank to be approved under section 1 supra 
 must particularly mention — (1) the mode of valuing properties; (2) 
 the nature of properties not admissible on mortgage, ana the minimum 
 loan which may be made on each class of (admissible) property; (3) 
 the maximum loan which may be granted to a single borrower; (4) the 
 tables for the calculation of annuities; (5) the method and conditions 
 for payments in advance; (6) the interval between the payments made 
 by borrowers and the payment of interest by the bank; (7) the mode 
 of issuing, recalling, and repaying debentures whether with or without 
 premia (bonuses) and the method to be adopted for canceling redeemed 
 debentures; (8) the building up of a guaranteed or reserve fund; (9) the 
 conditions which shall lead to dissolution, and the methods and condi- 
 tions of liquidation; (10) the security and other guaranties to be 
 demanded from the managers and other employees, as also the mode 
 
 of their appointment, 
 ^g * * * 
 
EXHIBIT H. 
 
 ARTICLES OF THE "CREDIT FONCIER OF FRANCE." 
 
 [Quoted from translation contained in the Report Regarding the Possibility of Introducing Land 
 and Agricultural Banlcs into the Madras Presidency. (Volume II, pages 18 to 24.)] 
 
 Articles of the "Ckedit Fonoier of France." 
 Chapter I. — General. 
 
 1. The bank takes the name of the "Credit Fonder de France." 
 Its objects are as follows: 
 
 (1) To make to the owners of immovable property mortgage loans 
 either over a long term by annuities or over a short term by annuities 
 or in lump; 
 
 (2) To issue and circulate land mortgage debentures (obligations 
 fonci^res or letters de gage) to an amount not exceeding that of the 
 sums due to the bank by its borrowers. 
 
 It may, with the sanction of Government, make use of any other 
 system with the object of facilitating loans on immovable property, of 
 improving the soil, of developing agriculture, and of extinguishing the 
 (existing) debt on immovable property (ladette fonciere). 
 
 The bank may treat with French or foreign assurance companies 
 with the view of facilitating the liberation of borrowers (from debts to 
 such companies). 
 
 In no case, whatever be the origin or nature of the funds available, 
 shall the bank do any business, whether in the form of purchases or 
 repurchases, advances or renewals, on paper other than land mortgage 
 or communal debentures or on paper accepted by the bank of France 
 as security for advances. 
 
 The bank is prohibited from buying or making advances upon its 
 own shares. 
 
 2. The bank may receive deposits at interest or without; the total 
 of such deposits shall not exceed £4,000,000. 
 
 Deposits shall be invested as follows: 
 
 (1) One-fourth at least in account current with the treasury at such 
 rate of interest as shall be fixed by the finance minister; a larger pro- 
 portion may be similarly with his consent. Securities to the above 
 value may be deposited instead of cash, if accepted by the minister. 
 
 (2) The balance in Government paper or treasury bonds, or in 
 advances for terms not exceeding ninety days on the security of deben- 
 tures issued by the Credit Foncier or of securities as accepted by the 
 Bank of France for advances, or, finally, in bills of at most ninety days, 
 bearing at least two good signatures and made out to the order of the 
 bank. 
 
as AGKICULTTJRAL BANK IN THE PHILIPPINES. 
 
 Chapter II. — Capital and shares. 
 
 4 to 7. (The capital is fixed at present at £6,820,000 in 341,000 shares 
 of £20 each, but may be increased to £8,000,000, when one-fourth at 
 least shall be invested in Government paper; the capital shall be main- 
 tained at a sum equal to at least one-twentieth of the total debenture 
 issue. The special function of the capital is to secure the business 
 engagements of the bank and especially its debenture issue; it is a 
 guarantee fund rather .than a working capital. Shares are to bearer 
 or personal, the latter being only transferable by a transfer in the 
 bank's registers based upon a written document. The liability of 
 shareholders is strictly limited to the amount of the shares held by 
 them.) 
 
 Chapter III. — Administration. 
 
 18 to 22. (Describe the powers and duties of the governor and sub- 
 governors. The shares necessary held by them (200 and 100 respec- 
 tively) are inalienable so long as they hold office, and are specially 
 charged as security for their good conduct.) 
 
 23 to 35. (Deal with the council of administration (board of directors), 
 which has from 20 to 23 members, exclusive of the governor, subgov- 
 ernors, and supervisors (censeurs) ; the ordinary members are appointed 
 by the general meeting; -three must be high finance officers (Tresoriers 
 payeurs generaux des finances).) 
 
 28. Every director must, within eight days of his appointment, 
 deposit in the office of the bank 100 shares, which shall be inalienable 
 so long as he holds office. 
 
 29. The duties of directors are gratuitous; they are allowed sitting 
 fees (jetons de presence), the amount of which shall be settled by the 
 general meeting. 
 
 36. Supervisors {censeurs, auditors). — The supervisors are three in 
 number, appointed by the general meeting. They hold office for three 
 years, retire at the rate of one per annum, but are reeligible. Arti- 
 cles 27, 28, and 29 apply to supervisors. 
 
 37. The duty of the supervisors is to watch over the strict execution 
 of the articles. They attend the meetings of the board of directors, 
 assist with their opinions (but not with their vote). They supervise 
 the preparation and issue of debentures, examine the balance sheet and 
 annual accounts, and report on these matters to the general meeting 
 when necessary. The books, accounts, and all documents must always 
 be presented for their examination when so required. They may at 
 any time verify the cash balance and bill case, and they may, when all 
 three agree to that effect, require the convocation of an extraordinary 
 general meeting. 
 
 38_. Gene7'al meeting. — Represents the mass of shareholders, but 
 consists only of the 200 largest holders. Proxies can only be given to 
 shareholders. Forty qualilied members form a quorum if they hold 
 one-tenth of the total -share issue. Failing such conditions, a second 
 meeting shall be called, which shall have full powers, whatever the 
 number of members present or of shares held. The other provisions 
 are of an ordinary nature. 
 
AGKICULTUKAL BANK IN THE PHILIPPINES. 89 
 
 Chapter IV. — Loans. 
 
 51. Agreeable to article 1 the bank will grant mortgage loans of two 
 classes, viz: 
 
 (1) Long-term loans repayable by annuities so calculated as to pay 
 off the debt in a period of ten years at the least and seventy-five years 
 at most, whether in France or in Algeria. 
 
 (2) Short-term loans, repayable in lump or by installments. Loans 
 may be made either in cash or in land mortgage debentures. 
 
 52. The bank will only lend to owners of immovable property on 
 first mortgage save only in such cases as are contemplated by the law 
 and these articles. (Repeats the conditions of the law, section 6.) 
 
 53. When the bank deems it necessary to undertake the formalities 
 of the "purge," it shall proceed in conformity with section 1 of the 
 law of June 10, 1853. 
 
 54. The bank shall not grant loans (1) on theaters; (2) on mines and 
 quarries; (3) on undivided property, unless the mortgage extends to 
 the whole of such property and has the consent of all the cosharers; 
 (4) on property in which possession and ownership (I'usufruit et la 
 nue propriete) are not united unless all those interested join in in 
 agreeing to the mortgage. 
 
 55. The bank will only accept mortgages on properties which yield 
 a certain and durable income. 
 
 56. The amount of a loan shall not exceed that of one-half of the 
 value of the mortgaged property. 
 
 It shall not exceed one-third of such value in the case of vineyards, 
 woods, and other properties of which the income depends upon plan- 
 tations. Factory buildings shall only be estimated at their intrinsic 
 yalue irrespective of their value as attached to the enterprise. 
 
 57. In no case shall the annuitj' to the payment of which the bor- 
 rower binds himself exceed the total income of the property mort- 
 gaged. "• 
 
 58. The rate of interest on loans shall be fixed by the board of 
 directors, but shall not exceed by more than 0. 60 per cent the actual 
 rate (prix de revient) payable by the bank on debentures in issue at 
 the time the loan is granted.'' 
 
 59. The annuities shall be paid in cash and shall include (1) the inter- 
 est, (2) the sinking-fund contribution as determined by the rate of 
 interest in combination with the duration of the loan. 
 
 " This is a noteworthy precaution adopted in security both of the bank and of 
 the borrower. The bank will not allow reckless engagements to be entered into, it 
 being obvious that if a man's income or circumstances are such that he must borrow, 
 that income can not suffice to maintain him and also repay the loan, except where 
 the loan is intended for a bona fide and certain improvement. This point is too 
 often lost sight of by borrowers and by lenders — the latter often with intention — in 
 this country. 
 
 ''This condition marks the care with which the bank, in conformity with the 
 law, seeks to make its loans aa cheap as possible. If the bank can borrow at 4 per 
 cent, the interest payable to it by the borrower shall not exceed 4.60; if it succeeds 
 in placing its debentures at 3J per cent, the charge to borrowers ipso facto falls to 
 4.10. The cost, however, must be the actual cost to the bank; its debentures may 
 be issued at %\ per cent, but at a considerable discount, or there may be additional 
 charges for lottery prizes, bonuses on repayment, etc. This must be taken into 
 account in calculating the actual rate paid by the bank. 
 
90 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 60. Annuities are paid by half-yearly installments at the dates fixed 
 by the board of directors (now April 30 and October 30). 
 
 At the time of granting the loan the bank will retain such amount 
 as will cover the interest, etc., due up to the end of the first half- 
 yearly period. 
 
 61. (Interest at 5 per cent is-payable on all arrears, whether of annu- 
 ities or costs of any sort.) 
 
 62. Moreover, default in the payment of a half year's dues renders 
 the defaulter liable to a demand for the repayment of his whole debt 
 in full one month after accrual of the arrear. 
 
 63. Borrowers are entitled to repay their debts in advance, whether 
 in whole or in part. 
 
 Repayments in advance may be made at the choice of the debtor, 
 either in cash or in land-mortgage debentures of the series mentioned 
 in the loan deed. When repaid in debeutures such debentures shall 
 be received at par, whatever may be their market value. 
 
 A borrower repaying in advance must pay compensation (indem- 
 nite) to the bank, which shall not exceed 3 per cent of the sum so 
 repaid. 
 
 Sums repaid in cash in advance shall be expended in redeeming or 
 purchasing land-mortgage debentures, or in granting new loans. 
 
 64. A borrower is bound to notify the bank, within one month, of 
 any alienation, whole or partial, which he may have made (of the 
 property mortgaged). In default of such notification in due time, the 
 bank may demand full repayment of his loan, together with compen- 
 sation as mentioned in section 63. 
 
 65. A borrower must also notify, within the period mentioned above, 
 of any deteriorations which the property may have sufl'ered and all 
 natural events which might diminish its value or disturb his possession 
 or injuriously affect his rights of ownership. 
 
 In default of such notification, and in any case should the interests 
 of the bank be compromised by such deterioration or events, the bank 
 may, in conformity with section 82 of the law of 28th February, 1852 
 (see supra, p. 84), demand repayment of the loan. 
 
 66. The loan shall equally be liable to recall, with the compensation 
 mentioned in section 63 supra, should the borrower conceal any suits 
 upon claims at law (hypotheques legales) or for cancellation or rescis- 
 sion (of a contract affecting the property) which may form a charge 
 upon the property mortgaged to the bank. 
 
 67. Property liable to damage by fire must be insured at the cost of 
 the borrower, unless the bank at the same time holds in security of the 
 debt not only the property in question but also other property not 
 liable to damage by fire and double the value of the debt. 
 
 The loan deed shall contain a condition transferring (to the bank) in 
 case of damage the amount insured. 
 
 The policy must be maintained throughout the whole duration of 
 the loan. 
 
 The bank may require that the policy shall be made out in its own 
 name and that the premia shall be paid by itself. In this case the 
 amount of the annuity (payable by the borrower) shall be correspond- 
 ingly increased. 
 
 68. In case of damage the amount assured shall be paid direct to 
 the bank. 
 
 During one year from the date of the damage the debtor shall have 
 
AGEICULTUBAL BANK IN THE PHILIPPINES. 91 
 
 the right of restoring the property to its original condition. During 
 that period the bank will hold the amount of insurance as a security; 
 after the property has been restored to its original condition it shall 
 pay over the amount to the debtor after deducting any dues. 
 
 If at the end of a year the debtor has not used his right of restor- 
 ng the property, x)r if, before that time, he has notified the bank 
 he does not intend to restore it, the bank shall definitely credit itself 
 with the assurance amount, setting it oflf against the debt as a payment 
 in advance. 
 
 69. Repa3'ments in advance arising from such damage do not carry 
 the compensation sanctioned in section 63. 
 
 The bank may demand (the immediate) repayment of any balance 
 due, should it deem that its interests are endangered by the damage. 
 
 70. In the valuation of properties offered in mortgage, all docu- 
 ments, lease deeds, and other sources of information tendered by the 
 proprietor seeking the loan shall be considered. The bank may also 
 cause a valuation to be made by experts. In all cases the valuation 
 shall be made upon a consideration both of the actual income and of 
 the market value. 
 
 71. When the property is in order and the security sufficient, the 
 board of directors will determine the amount of the loan to be made 
 and will proceed to the execution of the conditional loan deed. 
 
 72. After obtaining the supplementary statement of registered 
 claims, including that of the bank, the formalities of the "purge" 
 will be carried out if necessary; after such formalities or at once, 
 should the "purge" not be necessary, a deed shall declare the condi- 
 tional deed to be cancelled or rendered absolute, according as regis- 
 tered claims burdening the property shall or shall not have been dis- 
 covered. 
 
 In the first case the document must contain a withdrawal of the reg- 
 istration in favor of the bank, and must be signed by the governor 
 only. In the second case the document must be signed by both the 
 governor and the borrower; it shall recite the completion of all for- 
 malities, the delivery of bonds (debentures) to the amount of the loan, 
 and the date from which interest shall run. 
 
 73. All costs and disbursements necessitated by the request for a 
 loan shall be at the expense of the candidate for the loan even where 
 such loan is not finally granted. 
 
 Chaptee V. — Land-inortgage debentures. 
 
 74. The land-mortgage debentures issued by the bank shall be to 
 order or to bearer (nominatives) (ou au porteur). 
 
 75. Debentures to order are transferable either by mere indorse- 
 ment without further guarantee than that provided by section 1693 of 
 the Code Napoleon (see section 13 of the law, supra) or in such other 
 way as may be determined hj the board of directors. 
 
 The bank is free from further responsibility when it has paid the 
 person holding the debenture (tiers porteur); in no case is it respon- 
 sible for the regularity of a transfer. 
 
 Debentures to bearer are transferred by mere change of hands. 
 
 76. The amount derived from the issue of land mortgage or com- 
 munal debentures shall not exceed that of the mortgage or communal 
 loans granted by the bank. The amount derived from such issue shall. 
 
92 AGKICTJLTTJRAIi BANK IN THE PHILIPPINES. 
 
 pending their regular employment (in loans), be invested in the pro- 
 portion to be decided by the board, in Government paper, in deben- 
 tures of the city of Paris, of districts, and of communes, in shares of 
 the Bank of France, in land mortgage and communal debentures, and 
 in debentures of railway companies, the interest on which is guaranteed 
 by the State. « 
 
 7T. No land-mortgage debenture shall be issued below £4 in value. 
 
 78. Holders of debentures have no right of action for the recovery 
 of their principal and interest save directly against the bank. 
 
 79. Debentures shall bear interest, the rate, date, and mode of pay- 
 ment of which shall be fixed by the board of directors. No longer 
 period than three months shall intervene between the payment of 
 interest by the bank's borrowers and the payment of interest to the 
 debenture holders. 
 
 In whatever form the debentures are issued (whether to order or to 
 bearer), the payment of interest to the holder is valid. 
 
 80. Debentures shall be in the form of documents, which shall be 
 taken from a stub. They shall be signed by a director, stamped with 
 the seal of the bank, and countersigned by the governor. 
 
 81. The board of directors may authorize the deposit of such deben- 
 tures in the safe; a certificate in the name of the depositor shall be 
 issued to be returned at withdrawal. The board shall determine the 
 conditions, etc. 
 
 82. Debentures shall bear no fixed date for repayment of the capital. 
 The particular debentures to be repaid shall be determined by lot 
 (tirage au sort). 
 
 Every repayment shall include so many debentures as may be neces 
 sary to prevent those remaining in circulation from exceeding in value 
 the amount outstanding on mortgage. 
 
 83. With the permission of government, debentures may be made 
 payable with prizes and bonuses." 
 
 The board of directors shall determine the rates and amount of such 
 distribution. 
 
 8-i. The drawings are carried out by the board of directors in 
 presence of the supervisors (censeurs). 
 
 "One great secret of the market value of these debentures lies in this article. The 
 "tirage au sort" is not necessarily a lottery; it is merely a determining by lot (by 
 withdrawing numbers at random from a wheel) the particular debentures to be 
 repaid; this is frequently resorted to in England for the same purpose. But in Con- 
 tinential Europe it is usual to increase the popularity of these securities by adding 
 the chance of prizes or bonuses — e. g., in the Credit Foncier, at each of the four or 
 six drawings per annum for each issue or series of debentures (loans of 1853, 1863, 
 1879, etc.) many hundreds or thousands of debentures each of, say, £20 will be 
 drawn by lot and repaid at par, but, in addition a certain number^e. g., the 50 or 
 100 first drawn, will obtain prizes varying in value from £4,000 to £50 each. This, 
 though partaking of the spirit of gambling, since the prizes are in reality obtained 
 from a share of the excess paid by the many over the true market value of a deben- 
 ture at the nominal interest of the debentures, is not a regular gambling lottery 
 where a few gain everything to the total loss of the many; every debenture holder 
 is eventually repaid at par and may gain a prize. 
 
 The method of repaying with a universal bonus is wholly free from the real gamb- 
 ling spirit; a debenture costs an original purchaser £20, and is repayable, not at par, 
 but at, say, £25 — e. g. , the loan of 1853-54 is wholly repayable at this rate. Here 
 everyone obtains a bonus, and the only element of chance is in the accident of draw- 
 ing, whereby some holders obtain early repayment of their investment plus the 
 bonus. Occasionally the prizes and bonus system are combined. 
 
AGEICULTUEAL BANK IN THE PHILIPPINES. 93 
 
 85. Within eight days of each drawing the numbers drawn must be 
 published by notice at the banls office and by advertisement in two of 
 the newspapers in which the bank's notices customarily appear. 
 
 86. The debentures of which the numbers are drawn shall be repaid 
 on the day mentioned in the published notices, from which date 
 interest thereon ceases. 
 
 87. Debentures drawn by lot must, on repayment, be immediately 
 marked with a canceling stamp. They must be destroyed in presence 
 of the governor, of a director, and of a supervisor, and a memorandum 
 of the fact duly drawn up. 
 
 88. Debentures which return to the bank through payments in 
 advance, must be marked with a special stamp, and can not be reissued 
 without fresh countersignature by the governor. They take part like 
 other debentures in the periodical drawings. 
 
 Chaptek VI. (Deals with the annual balance sheet.) 
 Chapter VII. — Division of profits. 
 
 89. The actual profits are distributed as follows: 
 
 (1) Five per cent on the paid-up capital is allotted to the holders; 
 
 (2) An amount not less than 5 cent and not exceeding 20 per cent of 
 the remainder is passed to the obligatory reserve; other sums may 
 also be allotted to optional reserves, if so proposed by the board and 
 approved by the general meeting. 
 
 The remainder will be added to the dividend due to the shareholders. 
 
 90. Every dividend not claimed within five years from date of decla- 
 ration accrues to the bank. 
 
 Chaptee VIII. ^ — The obligatory reserve. 
 
 m 
 
 91. ,The obligatory reserve is accumulated from the proceeds of the 
 annual allotment from profits as per article 89 supra. 
 
 When such reserve reaches the amount of one-half of the bank's 
 own capital, such allotment may cease, but is renewed should the 
 reserve be drawn upon. 
 
 This reserve is intended to meet unexpected emergencies. Should 
 the dividend of any year fall below the amount of 5 per cent the deficit 
 may be met from the reserve. 
 
 The investment of the funds of the reserves, both obligatorj' and 
 special, are determined by the board of directors. 
 
 (The remaining chapters treat merely of changes in the articles, and 
 of dissolution and liquidation, and do not call for translation.) 
 
 LAW OF JULY 6, 1860. 
 
 (Authorizes the Credit Foncier of France to lend to districts, com- 
 munes, and syndical associations.) 
 
 1. The " Credit Foncier" is authorized to lend on the following con- 
 ditions to districts, communes, and syndical associations such sums as 
 they may have been permitted to borrow. 
 
 2. Loans may be granted with or without mortgage, and repayable 
 either over a long term by annuities or in a short period in lump or 
 by installments. 
 
 3. Loans are payable in cash only. 
 
94 AGEICULTUBAL BANK IN THE PHILIPPINES. 
 
 4. The commission payable to the bank toward costs of manage- 
 ment shall not exceed 0.45 per cent per annum. 
 
 6. The bank is authorized to issue debentures in representation and 
 to the amount of its loans (to the above bodies), in conformity with 
 the rules contained in Chapter V of the articles of the bank. 
 
 These debentures shall enjoy all the rights and privileges attached 
 to land mortgage debentures by the laws governing the Credit Foncier. 
 
 6. The sums due to the bank on account of loans to communes, dis- 
 tricts, and associations are specially and preferentially assigned for 
 the payment of the debentures issued under the present law. 
 
 The sums due to the bank on account of land mortgage loans remain 
 assigned specially and preferentially for the payment of the deben- 
 tures issued in representation of such loans. 
 
 7. The bank may, before granting any loans under the present law, 
 issue temporary debentures for a sum not exceeding £200,000. 
 
 8. The shares issued by the bank shall be kept at the ratio of at 
 least one-twentieth of the debentures in circulation. 
 
 9. In case of repayment in advance, the compensation payable by 
 the debtor is fixed at 0.5 per cent of the amount repaid. 
 
 In modification of article 63 of the articles of the bank, the preced- 
 ing rule shall apply to all operations with the bank. 
 
EXHIBIT I. 
 
 LAWS AND REGULATIONS RELATING TO THE HUNGARIAN 
 BODEN-KREDIT INSTITUT. 
 
 [Quoted from translation contained in the Report Regarding the Possibility of Introducing Land and 
 Agricultural Banks into the Madras Presidency. (Volume II, pages 24 to 30.)] 
 
 LAW OF 8th JUNE, 1871, RELATING TO THE BODEN-KREDIT INSTITUT 
 
 (HUNGARY). 
 
 1. The land bank is placed under the jurisdiction of the commercial 
 court of first instance in Pesth in so far as regards all actions by or 
 against the bank. There shall be no exception to this rule unless 
 expressly so provided by the present law. 
 
 2. Questions relating to the repayment of the debentures or bonds 
 issued bj^ the bank shall be dealt with by the said court. 
 
 3. The said court shall also proceed to execution against the debtors 
 of the bank in so far as relates to their movables found within the 
 limits of the city of Pest-Ofen; when their movables are beyond such 
 limits execution shall be had on application to the judicial authority of 
 the locality in which such debtors are domiciled. 
 
 When execution is sought against immovable property, recourse 
 shall be had to the court within whose jurisdiction such property is 
 situated. 
 
 4. When proceedings in bankruptcy are begun against a debtor, 
 recourse must be had to the court adjudicating thereon. 
 
 5. The bank may, as plaintiflE, sue for the fulfillment of its dues under 
 the procedure mentioned in the present law, whether before the court 
 in which its debtor would ordinarilj'^ be sued or before any court 
 expressly mentioned in the debt bond. 
 
 6. The courts mentioned in the above sections are bound to expedite 
 the disposal of demands of the bank, placing them extra seriem (out- 
 side of the ordinary cause list) and hearing them on the next court day; 
 they are similarly bound in the case of applications by private persons 
 which refer to loans granted by the bank. In all such cases the 
 decisions shall b.e announced without delay. 
 
 7. The books are to be kept in conformity with Law XVI of 1840; 
 extracts from the principal books and accounts signed by the directors 
 are admitted as complete proof (of their contents). 
 
 8. Receipts, acceptances, orders, and drafts drawn in the form of 
 promissory notes in the marker's handwriting or letters in favor of the 
 bank and signed by the marker shall, when the parties are in (busi- 
 ness) relations with the bank, be admitted in full proof against the 
 marker or his lawful heirs without the necessity for any legal visa or 
 for the attestation of two witnesses or a certificate that the amount has 
 been paid in cash. 
 
 95 
 
96 AGKICULTUBAL BANK IN THE PHILIPPINES. 
 
 9 and 10. (Relate to the probative force of the signature of persons 
 in relation with the bank.) 
 
 11 to 15. (Repealed by Law XLV of 1879.) 
 
 16. A property mortgaged to the bank and registered in a single 
 survey folio may not be sold without the consent of the bank. 
 
 17 and 18. (Repealed by Law XLV of 1879.) 
 
 19. When a loan has been granted by the bank, such loan shall not, 
 without the consent or order of the borrower, be subject to any claim 
 upon a guaranty, or to any distraint, or to any injunction on behalf 
 of a third party, and the bank, so far as regards loans granted b}^ it, 
 is not bound to take notice of any injunctions, whether by the judicial 
 or by the revenue authorities. 
 
 The bank is bound to take notice of judicial execution or similar 
 injunctions upon the deposits of private persons, so far as regards the 
 return of the deposit note (polizza di deposito); but even in this case 
 the prior claim of the bank, and especially the right of recouping its 
 dues from the deposits, shall not be affected when the bank has taken 
 action against the owner of such deposit, save where the claim of the 
 third party upon the deposit was in actual existence when the deposit 
 was made and the bank nad notice thereof at the time of making such 
 deposit. 
 
 20 to 23. (Repealed by Law XLV of 1879.) 
 
 24. All the correspondence, whether received or dispatched, of the 
 bank with the district authorities shall be exempt from postal charges 
 when the covers bear the seal of the bank and the indorsement "on 
 land bank business." 
 
 25. All applications (for loans?) made to the bank shall be free of 
 stamp duty. In other matters the bank is bound as regards stamp 
 duty by sections 3 and 11 of Law XVI of 1869. 
 
 26. The bank will deduct the income tax from the interest due on 
 its debentures. 
 
 27. So much of the annual profits of the bank as are allotted to the 
 reserve shall be exempt from income tax. The bank must pay income 
 tax in conformity with Law XXVI of 1869, section 2 (1), but only 
 upon such amount as shall be due to "founders" as interest upon 
 these founders' shares. 
 
 28. The ministers of justice, of commerce, and of finance are 
 charged with the execution of the present law. 
 
 LAW XXI OF 5th JUNE, 1876. 
 
 The conditions of Law XXXVII of 1875 regarding societies are 
 applicable with the following modifications to the Hungarian Boden- 
 kredit Institute: 
 
 1. The following shall be members of the general meeting: 
 
 (a) Those members of the bank who are indebted to the bank on a 
 mortgage of at least 50,000 florins (rupees). 
 
 (5) Representatives chosen in the district meetings of such persons 
 as are indebted to the bank on mortgage individually less than 50,000 
 florins, at the rate of one representative per 400,000 florins of mort- 
 gage debt. 
 
 (c) Foundation members. 
 
 2. One-half of the committee of supervision shall be triennially 
 elected by the founders' meeting and the other half by the general 
 meeting. 
 
AGEICTJLTTJBAL BANK IN THE PHILIPPINES. 97 
 
 3. The committee of supervision, in addition to the powers granted 
 to the audit committee (under the general law above mentioned) shall 
 have the power of laying down rules for the conduct of business, of 
 settling the number of directors, of appointing and dismissing the 
 ordinary members of the directorate, and of agreeing with them, by 
 regular contract, as to the conditions of employment. To this extent 
 
 . the committee is responsible to the bank. 
 
 i. The chairman of the directorate shall be elected by the general 
 meeting from three nafties to be submitted by the founders' meeting. 
 
 5. Any proposal to alter the articles shall be submitted to the gen- 
 eral meeting only when it has first been approved of by the founders' 
 meeting. 
 
 A resolution modifying the articles must obtain the confirmation of 
 government before being put into operation. 
 
 A royal commissioner shall be appointed in view to insure the strict 
 observance of the articles, but such appointment shall not in any way 
 diminish the legal responsibility of the several authorities of the bank. 
 
 7. The ministers of agriculture, industry and trade, of justice, and 
 of finance are charged with the execution of this law. 
 
 ARTICLES OF THE HUNGARIAN BODEN-KREDIT INSTITUTE (lAND BANK). 
 
 Chapter I. 
 
 1. The object of the land bank is to procure safe credit for landed 
 property the owners of which are associated in mutual and unlimited 
 liability (riunita in associazione sulla base della solidarieta) ; such credit 
 shall extend to one-half of the value of the mprtgaged property. 
 
 4. The bank shall be situated at Budapest. 
 
 Chapter II. 
 
 5. The members of the bank are the founders and the borrowers on 
 mortgage. 
 
 6. Founders (soci fondatori) are those 209 proprietors who deposit 
 in cash and bonds a guarantee fund of 1,677,000 florins (rupees) and 
 whose duty is the organization of the bank on a sound footing. 
 
 7. Founders exercise their functions under these articles throxigh 
 the founders' meeting, the committee of supervision, and in the general 
 meeting. 
 
 8. The smallest foundation share shall be 5,000 florins; a founder 
 may subscribe for one or more shares. Ten per cent of the sum sub- 
 scribed bj' each founder shall be paid in cash and the remainder in nine 
 bonds, each of which shall be equal to one-tenth of the subscribed 
 amount. 
 
 9. These nine bonds (deposited by each founder) shall be returned 
 one by one to each founder in proportion as the reserve fund increases. 
 When the reserve fund shall have passed the sum of half a million 
 florins, exclusive of the 500,000 florins granted bv the provincial (dis- 
 trict) funds, or a total of 1,000,000 florins, and "when this 1,000,000 
 florins shall show a further increase of 10 per cent of the original 
 foundation fund (sec. 6, supra), one bond shall be returned to each 
 
 30795—06 T 
 
98 AGRICULTUBAL BANK IN THE PHILIPPINES. 
 
 founder for every successive addition of 10 per cent until all the nine 
 bonds shall have been returned. The 10 per cent paid in cash shall be 
 held permanently in the reserve and interest thereon shall be paid at 
 5 per cent. 
 
 10. Foundation shares shall not be transferred without the consent 
 of the bank. If a founder dies his share shall be entered in the name 
 of such heir in the direct line as shall prove his title to the satisfaction 
 of the directors. If there are several heirs .that one to whom the 
 others give a proxy shall exei'cise the rights of member. 
 
 If there are no heirs in the direct line the founders' meeting shall 
 select the person admissible as legal heir. In this case, however, the 
 value of the foundation share with interest shall be paid to such suc- 
 cessor, and the vacancy thus caused shall be filled up by a new founder 
 to be approved by the founders' meeting. 
 
 If a founder becomes bankrupt, or if the bank has to lev^- upon his 
 shai'e amount bj- way of distraint, he shall finally lose his rights as a 
 founder. In such case the founders' meeting shall, after repaying 
 the share value, decide whether a new founder shall or shall not be 
 admitted in his place. 
 
 11. The (ordinary) members of the bank are all proprietors who, 
 being in possession of an estate within Hungarian territory, which is 
 registered in the survey books and which is capable of providing 
 security under these articles for a loan of at least 1,000 florins, shall 
 have applied for and obtained a loan from the bank. 
 
 12. A person becomes a member (a) on obtaining a loan from the 
 bank; (b) on acquiring an estate on which a loan has alreadj' been 
 granted by the bank. 
 
 13. On acquiring an estate on which a loan has been granted the 
 acquii'er must notify the bank of the fact within fifteen days of the 
 registration (of his acquisition) or of his taking possession; otherwise 
 the directors may call in the loan as provided by section 75. 
 
 11. A member quits the bank (a) when, on the complete repayment 
 of his loan, the bank returns to him his debt bond; (5) when the estate 
 on which the mortgage loan was granted passes legally into the hands 
 of a third person, and the original debtor obtains from the bank a 
 declaration absolving him from responsibility for the debt. 
 
 Chapter 111. — Authorities {organ) of the hank. 
 
 15. The bank authorities consist of (1) the founders' meeting, (2) 
 the general meeting, (3) the committee of supervision, (4) the chair- 
 man of the board of directors, (5) the board of directors, and (6) the 
 district committees. 
 
 * * * *■ * * * ' 
 
 34. The committee of supervision is charged with the duty of vigor- 
 ously and continuously (senza interruzions) supervising the administra- 
 tion of the directors in such wise that nothing shall be done contrary 
 to these articles or that may endanger the safety of the bank. 
 ******* 
 
 38. If a member of the committee of supervision or of directoi-ate 
 becomes bankrupt, he is considered to have vacated office. * * * 
 
AGRICULTUEAL BAJ^K IN THE PHILIPPINES. 99 
 
 48. Local committee. — To assist in the work of the bank in the dis- 
 tricts local committees shall be established in every district or other 
 area^ consisting of members of the bank; these shall, in conformity 
 with instructions issued b.y the board of directors, represent the bank 
 in making valuations, paying dues, in testing securities, in making 
 distraints, and in observing carefully the condition of the properties 
 of the several members of the bank. 
 
 Except for very strong and good reasons, the validity of which shall 
 be considered by the board of directors, every member of the bank 
 is bound to undertake the duties above mentioned. 
 
 Chapter IV. — Biisinef<s of the lank. 
 
 49. The bank will grant loans either in cash or in land mortgage 
 debentures. 
 
 50. Loans in debentures shall be made upon mortgages repayable 
 by sinking fund as laid down in the following chapter. 
 
 51. Loans in cash shall be made when funds are available either 
 on short-term mortgages or on bills or on (the deposit of) securities. 
 
 52. Short-term mortgage loans of three or six months at most maj^ 
 be made {a) to members whose estates are not mortgaged or other- 
 wise charged up to one-half of their value as fixed by the bank; {h) to 
 nonmembers who possess estates free of mortgage or other charges. 
 
 53 to 57. (The borrower gives a bond for a sum of one-half larger 
 than the credit to be opened to him; the bond amount must not exceed 
 30 per cent of the value of the estate, or 50 per cent with any prior 
 debts thereon to the bank. Short-term loans may be converted into 
 regular long-term loans with the issue of debentures. Loans must be 
 paid up punctually, failing which the bank may proceed to execution 
 against the debtor or may convert the loan into a loan with deben- 
 tures.) 
 
 Chapter V. — Conditions of mortgage loans. 
 
 58 to 81. (Loans granted by means of land mortgage debentures must 
 not exceed 50 per cent of the Value of the mortgaged estate, calculated 
 either by actual valuation or at sixteen times the net income, as entered 
 in the tax registers, less taxes and cesses. Loans may, as a rule, only 
 be granted on estates free of prior mortgages or when the prior cred- 
 itors yield their priority to the bank; where loans on estates with prior 
 mortgages are granted, the aggregate, with the bank's loan, must not 
 exceed the above 50 per cent, and the debtor must annuallj' produce 
 proof that he is regularly paying the dues on the prior mortgages, 
 failing which the bank maj' call in its loan. The borrower may request 
 the bank to pay off all prior debts from the proceeds of the loan 
 granted by it. No loan can be granted on an undivided property held 
 by several persons, unless all of them consent thereto. All fields (par- 
 cels) mentioned in a single folio (register entry, protocoUo) of the land 
 register must be made subject to the mortgage; single fields can not 
 be accepted. The borrower must regularly pay in advance his annui- 
 ties comprising (a) interest, (b) sinking fund, (c) a charge for adminis- 
 tration not exceeding 0.25 per cent annually, {d) a contribution to the 
 reserve. Any borrower falling into arrears without the prior consent 
 of the bank must pay penal interest with an additional 1 per cent con- 
 
100 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 tribution to the reserve if the delay exceeds T-t days; the bank may 
 grant delays when the debtor has sustained losses from no fault of his 
 own or in case of his death, interest at market rates being charged on 
 the arrears. Within five days of default the bank may take out execu- 
 tion against a defaulter, and may proceed both against the mortgaged 
 property and against the other movables and immovables of the 
 defaulter. The directors have the i-ight of calling in the loan in the 
 following cases: (a) When the borrower manages his property so 
 negligently that there is danger of his becoming unable to pay his 
 annuities owing to the deterioration of the estate; {b) when he fails 
 to prove that he is paying the dues punctually on prior debts due on 
 the estate to third parties; (c) when a private creditor takes out court 
 execution against the bank's borrower and the latter is moreover in 
 arrears with a half A'ear's dues; (d) when the property charged with 
 the loan, or part of such property is transferred, whether inter 
 vivos, or by succession to a third person who fails to accept the 
 conditions of the bank's loan within a period fixed by the bank; 
 {e) when the debtor does not carrj' out, within the prescribed period, 
 the conditions agreed upon; (f) when the debtor is in arrears with 
 three consecutive installments, so that coercive process is necessary to 
 obtain payment by calling in the loan and by proceeding to obtain the 
 execution (as above) for the arrears. In the cases (a) to {ej notice of the 
 recall may be made either through the courts, or it may be made direct 
 after three advertisements in the official Gazette; within six months 
 from such notice or from such advertisement, the whole capital 
 interest and other dues shall be payable. If the debtor objects to 
 the notice, he must do so before the commercial court at Budapest. 
 Should the debtor fail to repay his loan, etc., within the time fixed by 
 the notice, the bank may either claim execution or may withdraw from 
 circulation debentures corresponding to the loan, debit the defaulter 
 with their value at the market rate of the da}-, and obtain collection of 
 such sum by coercive process. If a debtor becomes bankrupt or when 
 his property is sold at auction, the bank has the right of transforming 
 its claims into a cash debt as above and to obtain execution. All costs 
 for processes and appearances (in court) shall be at the charge of the 
 debtor.) 
 
 Chapter VI. 
 
 82 to 90. (Relate to the extinction of the loan by amortization, 
 through fixed annuities, with the right of whole or partial repayment 
 in advance, in which case the annuity may be proportionately reduced 
 in amount the number of years remaining the same, or the annuity 
 may remain the same, but the number of annuities may be decreased. 
 After the extinction of (every) 1,000 florins of debt, the borrower may 
 demand a corresponding diminution of the mortgage entered on the 
 land register.) 
 
 Chapter VII. — Land mortgage debentures. 
 
 91. Land mortgage debentures are bonds by virtue of which the 
 bank is bound to pay to the holder the principal therein mentioned, 
 together with interest on the conditions contained in the bonds. The 
 bank has the right of repaying such debentures at par on six months' 
 
AGEICTJLTXJEAIj bank in the PHILIPPINES. 101 
 
 notice, but the holder does not possess the converse right of requiring 
 repayment (at any given time). 
 
 92. The debentures must be properly signed and sealed, and must 
 contain a declaration by the chairman of the committee of supervision 
 that the sum secured thereby is guaranteed by mortgage debts (due to 
 the bank). 
 
 93. The rate of interest shall be determined b^^ the money market 
 with a view to the advantage of the bank's borrowers. The deben- 
 tures shall mention a period within which they must be repaid in 
 lawful currency, with or without bonuses. 
 
 Articles 94 to 108 present no special interest; they lay down rules 
 similar to those of other banks in Germany, Italy, and France. iSee 
 translation supra. 
 
 Chapter VIII. — Rights of debenture holders. 
 
 109. The debentures of the bank are secured not only by the founda- 
 tion capital and by the mortgages against which the debentures are 
 issued, but also by the mutual and joint liability (reciproca solidarieta) 
 of the members. With this view a special guaranty fund shall be 
 contributed by these latter. 
 
 110. (The capital and the interest of debentures must be punctually 
 paid.) 
 
 111. (The funds available to secure such repayment are the reserve 
 fund (Chapter IX), the sinking fund, and the members' guaranty 
 fund (Chapter IX). 
 
 112. For the information of the public the bank shall publish quar- 
 terly a balance sheet, a statement of the sinking-fund accumulations, 
 of the reserve, and of the members' guaranty fund. 
 
 113. If the bank does not meet its engagements with the debenture 
 holders, they have the right of proceeding to execution against the 
 bank in the commercial court at Budapest, which in such cases shall 
 take cognizance by summary oral proceedings. 
 
 114. Such execution shall first proceed against the special guaranty 
 fund; after that is exhausted, against the reserve; finally, against the 
 mortgages held by the bank. In this last case the amount levied shall 
 not exceed that for which the mortgage was granted to the bank. 
 
 Chapter IX. — The reserve. 
 
 115. The reserve comprises {a) the funds subscribed by the founders; 
 (S) the 500,000 florins assigned from provincial (qusre district) funds 
 for that purpose; (c) the net annual profits of the bank; {d) the mem- 
 bers' guaranty fund (articles 109 and 111). 
 
 From this reserve a sum amounting to at least one twentieth of the 
 value of debentures in circulation must be set apart and separately 
 managed (as a special guaranty for the debentures). 
 
 116. The reserve may be invested (a) in advances upon land-mort 
 gage debentures up to three-fourths of their market value and for 
 terms not exceeding three months, with permission to renew; (5) in 
 advances on other good securities quoted on the exchange and fully 
 paid up to an amount and for terms as in {a) ; (c) in the discount of 
 securities of not more than six months' echeance, approved by the 
 
102 AGEICXJLTTJEAL BANK IN THE PHILIPPINES. 
 
 directors and by the committee of supervision; {d) in the discount of 
 bills with at least three signatures and for not more than three months; 
 (e) in good securities bearing fixed interest and quoted on the exchange; 
 {f) in immovable propert}^. 
 
 (The conditions of the law of 19th June, 1876, on land-mortgage 
 debentures must be strictly adhered to in the matter of purchasing 
 landed property from the fund speciallj' securing such debentures. It 
 appears that such property may only be obtained where borrowers fail 
 to pay their dues.) 
 
 117 to 119. (Rules for term and other deposits. These are appar- 
 ently inserted here as a means of providing money for current needs.) 
 ******* 
 
 121. When the reserve shall have passed 1,500,000 florins, the gen- 
 eral meeting shall decide whether the expenses of management cannot, 
 either wholly or in part, be met from the interest accruing thereon, 
 and whether the borrowers can not be relieved from the payments due 
 for such expenses. 
 
 122. The members' guarantee fund shall be accumulated from a con- 
 tribution ad hoc by each borrower of 1 per cent of the sums borrowed. 
 
 123. This amount shall be held as a deposit in favor of the depositor 
 until complete extinction of his debt, and shall accumulate at simple 
 interest; the interest upon such interest shall go to the reserve. 
 
 124 and 125. When the bank has sustained a loss which is not 
 covered by that part of the reserve accumulated from profits the deficit 
 shall, in the first place, be made good from the members' guaranty 
 fund, and each member must then make up the consequent deficit in 
 the guaranty fund. Six weeks' notice shall be given of such demand 
 and such notice shall be deemed compulsory. 
 
 Chaptek X. — Miscellaneous. 
 
 128. The judicial privileges of the bank, its exemptions in the mat- 
 ter of taxation and postal charges are governed by XXXIV of 1871, 
 XXI of 1876, and XLV of 1879. 
 
 129. A government commissioner shall supervise the exact observ- 
 ance of the articles, the authorities of the bank remaining legally 
 responsible. 
 
 130. etc. (The remaining articles relate to liquidation: 135 provides 
 for the restoration in such cases to the government of the reserve 
 fund and of the foundation endowment to the founders.) 
 
 HUNGARIAN LAW OF 19tH JUNE, 1876, EELATING TO LAND MORTGAGE 
 
 DEBENTURES. 
 
 (1) Land mortgage debentures may be issued {a) by joint stock com- 
 panies, (J) by associations of proprietors with a view to provide credit; 
 \2) the articles of such banks shall contain full rules for the grant of 
 mortgage loans and the valuation of properties; (4) and each such bank 
 must provide beforehand a reserve of at least 200,000 florins as a 
 special guaranty fund for the debentures to be issued; (5) this fund 
 snail serve as guaranty for the whole mass of debentures, and shall 
 not be liable to any sort of execution (save on account of the deben- 
 
AGRICULTUBAL BANK IN THE PHILIPPINES. 103 
 
 tares themselves); (6) this fund shall be invested in land mortgage 
 debentures, state paper, loans on such securities up to three-fourths of 
 their value and for three months at most with renewals, discount of 
 securities and bills, and in buying in immovable property' mortgaged 
 to the bank up to the amount necessary fully to cover the mortgage 
 amount; (7) the part of the guaranty fund invested as in section 6 
 must be completely separated from the general funds and managed 
 separately; (8) and a special entry must be made in the land register 
 against immovables that the sums invested therein belong to the 
 guaranty fund only; (9) all documents relating to such registration 
 entry shall, as regards such registration, be exempt from charges; 
 (10) when the property thus charged is sold to a third party, the 
 registration entr}^ ipso facto becomes void; (12) debentures may only 
 be issued up to the amount of loans fully covered by mortgages; 
 (13) that is, where the value of the mortgaged property is at least 
 twice the amount of the loan, or three times in the case of vineyards 
 and woods; factories and mines are not admissible as securities for a 
 loan; (14) debentures shall be withdrawn in proportion to the repay- 
 ment of the mortgage loans. The mortgages of a bank shall continue 
 as charges on properties notwithstanding any forced sale of such 
 properties by the bank, and shall serve as security for the debentures 
 until the bank shall declare the charge to be extinct; (15) the value 
 of debentures in circulation shall at no time exceed for each bank 
 twenty times the amount of its special guaranty fund; (17) the mass 
 of mortgages of each bank shall be the guaranty for the mass of 
 debentures issued hy it, and shall not be liable to execution (attachment); 
 (18) this legal privilege shall be entered against each such mortgage 
 in the land register; (20) this special entry shall ipso facto become 
 null on the extinction of the mortgage; and (21) an}' document pre- 
 sented at the registration office for the above entry or for the can- 
 cellation of the same shall in that respect be free of stamp charges; 
 (21 to 25) if any attachment is made against a bank, the court must 
 appoint a trustee for the debenture holders, but attachment is void 
 against the funds entered in sections 4, 5, and 17 as securities for 
 the debentures, and the court shall so decide, even without hearing 
 the opposite party, on application bj^ the trustee; (27) should a bank 
 become bankrupt debenture holders must be satisfied before any other 
 creditor from the funds mentioned in sections 4. 5, and 17; (28) the 
 funds mentioned in sections 5 and 17 shall be kept separate and man- 
 aged by a delegate of the debenture holders; (29) the directors of a 
 mortgage bank must publish half yearly in a newspaper and in the 
 Gazette a statement showing precisely (a) the nominal value of deben- 
 tures in circulation, (i) the amount of the mortgage loans which, under 
 section 17, serve as security for the debentures, (c) the value of the 
 properties as estimated for the purpose of the mortgage loans granted 
 on them, (d) the amount of the fund set apart, under section 4, as a 
 special guaranty for the debentures and a statement of the modes in 
 which the several portions of the fund have been invested as per sec- 
 tion 6; (30) this statement must, within eight days from publication, 
 be sent to the court having jurisdiction; (31) the holder or holders of 
 debentures, to the value of one-tenth of those in circulation, may, in 
 depositing the debentures and a sum for expenses, require the court 
 having jurisdiction to arrange for an examination by experts of the 
 management of the bank's business so far as relates to the debentures 
 
104 AGEICTJLTUKAL BANK IN THE PHILIPPINKS. 
 
 and for a report on the same; the court shall hold the debentures till 
 such examination be concluded; (32) directors may be condemned by 
 the proper tribunals by imprisonment, which may reach three months, 
 even when no offense under the penal law has been committed (a) if 
 they knowingly issue debentures to a value greater than that of the 
 mortgages, (5) if they willfully omit to withdraw from circulation 
 debentures to the value of mortgage amounts repaid, {c) if they 
 knowingly publish incorrect facts in the statement required by section 
 29, (d) if they disobey the directions of section 6, (e) if the bank 
 reduces the guaranty fund below the limits mentioned in section 11, 
 (_/) if a bank issues land mortgage debentures before creating a special 
 guaranty fund as mentioned in section 4, (g) if a bank issues deben- 
 tures beyond twenty times the amount of the special guaranty fund 
 (section 15); the penalty of imprisonment may be commuted to a fine, 
 which may reach 1,000 florins, if there are extenuating circumstances; 
 § (34) directors are also punishable with fine, which may extend to 
 1,000 florins, (a) for delaying to obtain the registration entry men- 
 tioned in section 18 within the prescribed period, (5) for neglecting to 
 nominate a trustee under section 23 should the court omit to appoint 
 one, (c) for omitting to publish in due time the statement provided by 
 section 29 or to send it to the court, (d) for omitting to provide that 
 the special guaranty fund, so far as it is invested in movable securities, 
 shall be separately managed. 
 
EXHIBIT J. 
 
 EXTRACTS FROM THE LAWS AND REGULATIONS REGARDING 
 REAL CREDIT IN ITALY. 
 
 [Quoted from translation contained in the Report Regarding the Possibility of Introducing Landand 
 Agriculture Banks Into the Madras Presidency. (Volume 11, pages 30-38.)] 
 
 LAW OF 22d FEBRUARY, 1886, REGARDING REAL CREDIT (ITALT). 
 
 1. Real credit shall be granted by the following eight banks (names- 
 given, including the savings bank of Milan). Each of these may ope- 
 rate throughout the Kingdom. 
 
 The government may sanction, by royal decree, the exercise of real 
 credit by (any other) societies or institutions which have a paid up 
 capital of £400,000, these may also issue land mortgage debentures up 
 to the amount of ten times their paid up capital as soon as they prove 
 their possession of mortgages to the value of half their paid up capital. 
 
 These mortgages shall be entered into without any corresponding 
 issue of debentures, and as they are paid off their place shall be taken 
 by other similar mortgages, or by an equivalent amount of debentures 
 withdrawn from circulation, which are to be charged (vincolate, i. e., 
 as securities for the general mass of debentures) and kept in deposit 
 in the bank. 
 
 As entered in section 9 of this law all mortgages accepted by the 
 banks, societies, and institutions form preference guarantees for the 
 interest on and repaj'ment of the debentures. The debentures spe- 
 cially charged and deposited (paragraph 3, supra) form preference secu- 
 rities to guarantee the interest and repayment of the debentures in 
 circulation. (See rules 1, 2, 3, and 4, of the rules of business.) 
 
 2. The government may also sanction, by royal decree, the grant 
 of real credit by mutual associations of proprietors, provided that the 
 estates of such proprietors have an aggregate value of not less than 
 £200,000. The articles of such association, which shall be approved 
 by the said decree upon the motion of the minister of agriculture, 
 trade, and industry, shall lay down the conditions to be satisfied by 
 such proprietors, and shall fix the amount ofj guaranty (reserve) fund 
 of the working capital and of the fund intended to secure the deben- 
 tures. These debentures shall not exceed in amount one-half of the 
 value of the mortgaged properties. 
 
 The associations of proprietors maj- not depart from the provisions 
 of this law as regards the conditions on which loans are to be granted 
 and repaid, and the issue and repayment of debentures. 
 
 3. Every institution shall, in the cities mentioned in a royal decree, 
 establish agencies in such wise as to facilitate the grant of loans and to 
 promote the development of real credit business. 
 
 Corporate bodies, such as savings banks, Monts de Piete, etc. , may, 
 with the authorization of government, undertake the dutj' of such 
 agencies. 
 
 105 
 
106 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 4. The objects of real credit are as follows: 
 
 (a) To make loans on the first mortgage of immovable property up 
 to the first half of their value, repayable by sinking fund annuities." 
 
 (b) To acquire by assignment and transfer debts on mortgage or 
 with preferential rights, on the conditions indicated above, such debts 
 being made redeemable by annuities (see rules 6, 7, and 8 of the rules 
 of business). 
 
 (c) To effect the above operations by mearis of the issue of deben- 
 tures, the face value of which shall be equal to the amounts lent to 
 borrowers. 
 
 {d) To make advances by cash credits secured upon mortgage in the 
 same manner as ordinary loans (see rule 9 of the rules). 
 
 (e) To undertake gratuitously the collection of dues on public secur- 
 ities, treasury bonds, bank bills, drafts on Government or local funds, 
 the interest and dividends due by companies guaranteed or assisted 
 by the State, provided that the proceeds of such collections are to be 
 carried to accounts current or placed in deposit for investment in land 
 mortgage debentures or for payment of annuities already due. 
 
 Land-mortgage debentures may be issued at i, 4i, and 5 per cent. 
 
 The existence of prior mortgages shall not bar the acceptance of 
 mortgages by the institutions, provided that the value of the former 
 added to the amount of the proposed loan or to the amount to be paid 
 by reason of assignment or transfer of a loan, or to the amount to be 
 advanced on a cash credit, shall not exceed the half or three-fifths of 
 the value' of the property mortgaged.* 
 
 5. Loans are considered as first mortgages when they are granted for 
 the paj'ing off of prior debts, so that the mortgage given to the bank 
 becomes the first mortgage (see rule 5 of the riiles). 
 
 An institution ma}' even make a loan before the absolute transfer of 
 a prior right or mortgage by the owner of such claim, a sufficient sum 
 being retained by the institution to cover any possible loss by the 
 transaction. 
 
 6. Loans may be of two classes (sec. 4): 
 
 (a) Loans repayable by sinking fund , annuities which comprise 
 interest, a contribution for commission and the expenses of manage- 
 ment, the amount payable as taxation, and the sinking fund quota; 
 this last must be such as to pay off the loan in a period not less than 
 ten and not more than fifty years. 
 
 (5) Advances on cash credits secured by mortgage within the limits 
 and under the rules laid down in the rules of business. Such advances 
 may not exceed one-half of the value of the mortgaged propertj'. 
 
 Loans are to be made in land-mortgage debentures, cash credits 
 in cash. 
 
 The interest on loans shall be equal to that payable on the deben- 
 tures issued against such loan. 
 
 «It will be noted that all loans are of necessity to be repayable solely on the 
 sinking fund annuity system; no loan is legal under the law which is repayable in 
 lump at the end of a fixed term. 
 
 bit is obvious that there may be difficulties in paying oft prior creditors; the can- 
 celment or transfer of prior claims can only be effected on paying off such claims; on 
 the other hand the bank can not advance the amount needed for such payment until 
 it has obtained its mortgage which, again, can not be safely accepted except as a first 
 mortgage — that is, after the prior claims have been paid off. The difficulty is met 
 in this law by section 13, viz, by the system of double deeds, the one conditional, 
 the other final, as in the French "Credit Foncier." 
 
AGRICtrLTTJEAL BANK IN THE PHILIPPINES. 107 
 
 The interest on cash credits shall be variable and determined by the 
 institution. 
 
 The interest, annuities, and contributions due to the institutions shall 
 be paid in cash, as also that due by the institution to the holders of 
 debentures. 
 
 7. As commission and for the expenses of management due to the 
 lending institution, borrowers shall pay, together with the interest or 
 annuity, an annual contribution not greater than 0.45 per cent of the 
 capital sum lent. The borrowers must also bear all the costs of effect- 
 ing the transaction. 
 
 Borrowers must also pay to the institution a further contribution of 
 0.15 per cent, which, by roj'al decree, may be reduced to 0.10 percent 
 on accoTint of dues to the State for stamp duties and registration, and 
 for any State charges on the contract, including those on the issue and 
 circulation of debentures. 
 
 In the case of advances the payment of taxes is regulated by the 
 ordinary law. 
 
 8. The payment of the interest, annuities, contributions. State dues, 
 and installments of capital due to an institution shall not be obstructed 
 by any attachment. 
 
 The sums due on behalf of the above shall, de jure, bear interest 
 from the date of echeance. 
 
 In case of arrears, even of a single installment, the institution may 
 at once demand payment in full of all sums due it. 
 
 The debtor is at all times permitted to pay off' in advance the whole 
 or part of his debt. In such case, however, he must paj^ the contri- 
 butions mentioned in section 7. 
 
 These contributions are as follows: 
 
 On account of the institution a single payment of 0.45 per cent of 
 the amount paid in advance; on account of treasury dues the 0.15 per 
 cent shall, if only part of the loan is repaid, continue to be paid annu- 
 ally on the full sum originally lent, as though no amount had been paid 
 in advance; should, however, the whole amount be repaid, the contri- 
 bution shall be reduced to one-fourth of the aggregate annual pay- 
 ments which will otherwise have had to be made, and it shall be payable 
 in a lump sum, together with the principal. 
 
 Should the advance repayment be made in cash the debtor must, in 
 addition to the above contributions, pay the interest due between date 
 of payment and next drawing of debentures; but the institution may 
 repay to the debtor any profit obtained by the temporary investment 
 of the sum received from the debtor. 
 
 The contribution mentioned in paragraph 4, supra, is also due in all 
 cases in which, by reason of failure to carry out the contract or for any 
 other cause, the institution has the right to require the immediate 
 repayment of its debt. 
 
 It is permissible for the institution to refuse payments on account 
 of debts when such payments are less than the amount of one annuity. 
 
 Repayments in advance, whether in whole or in part, may be made 
 at their face value in debentures which bear interest at the same rate 
 as the loan under payment. 
 
 Whenever the borrower shall have repaid an amount equal to one- 
 fifth of the original debt, such debt not exceeding £20,000, he is 
 entitled to a proportionate reduction of the mortgage amount as 
 registered. When the debt exceeds i;20,000, the above reduction. 
 
108 AGBICXTLTUKAIj bank- in the PHILIPPINES. 
 
 plus one-tenth of the remainder, may be effected. The above reduc- 
 tion shall be made upon presentation to the registrar of mortgages of a 
 declaration by the directors of the institution, duly certified by a notary. 
 
 9. The mass of land mortgage debentures as issued shall be guar- 
 anteed b}' the mass of mortgages accepted, and the assets represented 
 by the loans shall be preferentially charged for the payment of the 
 interest and principal of the debentures, but such preferential charge 
 shall not give a debenture holder any right except as against the insti- 
 tution. * * * 
 
 The payment of debentures in circulation is effected by means of 
 half-yearly drawings by lot of so many debentures as correspond in 
 value to the aggregate of the contributions to the sinking fund due 
 by borrowers during the preceding half year, plus the amount of any 
 repayment of capital made in advance in cash during the same half 
 year. * * * 
 
 So far as regards the holders of debentures the sinking fund quotas 
 will be considered as collected, even though not collected, and to this 
 no exception is permitted. 
 
 All drawings shall be public. Debentures when drawn shall cease 
 to bear interest after the expiry of the current half year. 
 
 10. Debentures may be accepted in pledge as security for advances 
 by any credit establishment within the limits fixed bj' its articles. 
 They may be received at four-fifths of their market value by the insti- 
 tutions for real credit up to the amount of the fund set apart for such 
 advances. 
 
 The national bank may, in extension of the powers granted by the 
 law governing it, make advances on the deposit of land mortgage 
 debentures, and may discount bills bearing only two signatures, if to 
 such security is added a deposit or transfer of the interest coupons of 
 debentures, as provided by its articles in the case of State paper. 
 
 11. From the net profits derived from its real credit business an 
 institution must set aside not less than one-fourth in order to form a 
 reserve, until such reserve shall have attained the amount fixed by the 
 rules of business (section 28 supra). 
 
 The remaining profits shall be disposed of according to the articles 
 of such institution. * * * 
 
 13. If the institution decide to grant a loan, it shall enter into a 
 conditional contract with the borrower which shall have effect when, 
 after registration of the claim, the certificate of the registration dis- 
 closes no prior mortgage or charge. 
 
 When such is the case, the institution shall proceed to the execution 
 of the final contract, and shall issue to the borrower, against his 
 receipt, the corresponding value in debentures. 
 
 On the re-presentation of the copy of the final deed, the registrar 
 shall, on the margin of the previous entry, note the payment with the 
 issue of debentures. * * * 
 
 14. Mortgages registered in favor of an institution (for real credit) 
 shall be valid notwithstanding the failure (bankruptcy) of the mort- 
 gagor, when registration has been effected' not less than ten days 
 before the order in bankruptcy has been published, even though the 
 order places the date of stoppage of payment at some prior date. 
 
 15. The registration of mortgages accepted by or transferred to an 
 institution (for real credit) shall be renewed by registrars of mort- 
 gages, as a matter of course. 
 
AGBICXJLTUEAL BANK IN THE PHILIPPINES. 109 
 
 16. (The heirs and successors in any way of a borrower must notify 
 their succession to the bank; failing such notification the bank pre- 
 serves its rights against the original borrower.) 
 
 17. The funds of incapables, minors, married women, and, generally, 
 all those required by the law, b}' agreement, or by will to be invested 
 in mortgages, the purchase of immovables or otherwise, may be invested 
 in land-mortgage debentures. 
 
 18. The provisions of the penal law relating to the offenses of alter- 
 ation, fraud, fabrication, or falsification of State securities, shall apply 
 to land-mortgage debentures. 
 
 19. Land-mortgage debentures, the interest thereon, and cash credits 
 shall not be distrainable. 
 
 20. The books and registers of an institution (for real credit), kept 
 according to the articles thereof, and extracts from the same, shall 
 form complete proof (plena fede) both against its debtors and against 
 third parties. 
 
 Ml. For the recovery of its annuities an institution shall be per- 
 mitted to proceed against its debtors in arrears bj" the same methods 
 as those used by the State in the collection of direct taxes, so far as 
 regards movables. 
 
 22. (Omitted.) 
 
 23 and 21. (Provides certain modifications of the oi'dinary law in 
 proceedings for expropriation; the only one of general interest is (23) 
 (/) that the institution has in all cases of the sale of mortgaged prop- 
 erty, whether the sale is the result of its own proceedings or those of 
 third parties, the right to demand from the sale purchaser the full 
 amountof its claim, with all expenses within twenty days; Cf. the French 
 Credit Foncier rule. Should the sale purchaser fail to compljr with 
 this condition he is to be compelled thereto by eveiy lawful process, 
 including the resale of the propert}' at his risk and charges. This 
 provision is intended to evade the interminable dela3'S caused " by the 
 slowness of the ordinary law, the hair-splitting (solismi) of the plead- 
 ers, and the dilatoriness (Lentezze) of the judges" (Commentary of 
 Professor Rabbeno).) 
 
 25. The privileges of procedure, etc., granted bj' the present law to 
 favor business in real credit, shall be equally granted when the prop- 
 erty mortgaged belongs to districts, communes, or other public bodies. 
 
 26. The statements of real credit operations and of the progress of 
 an institution shall be made public according to the provisions of the 
 rules of business (section 28). 
 
 27. Institutions granting real credit are placed under the supervision 
 of the minister of agriculture, industry, and trade, who shall exercise 
 such supervision in the manner laid down by the rules (section 28). 
 
 28. A set of rules, to be approved by royal decree, shall provide for 
 the due carrying out of the present law. 
 
 It shall in particular provide for — 
 
 («) The form and face value of the land-mortgage debentures, which 
 shall in no case be less than £4 in value; 
 
 (b) The rules to be followed in the issue of debentures, in their with- 
 drawal, cancelment, and destruction, and in the issue of duplicates in 
 the case of debentures to order which have been lost; 
 
 (c) The quality and condition of properties accepted on mortgage, 
 the rules for ascertaining their value, the necessity and special con- 
 ditions for assuring mortgaged factories against fire; 
 
110 AGEICULTXJEAL BANK IN THE PHILIPPI«rES. 
 
 {d) The methods and periods in which borrowers must inform an 
 institution of any changes which may happen to mortgaged property, 
 whether in the waj" of decrease of value, disturbance of possession, 
 or injury to x'ights; 
 
 (<?) The rules to be followed in opening cash credits, and the limits 
 and chief conditions of advances; 
 
 (/■) The rules for the investment of the reserve fund; 
 
 (g) The limits and methods of the Government supervision. 
 
 RULES OF BUSINESS (24TH JULY, 1885) UNDER THE LAW OF 22d 
 FEBRUARY, 1885, ITALY. 
 
 1. Authorization. — Societies and institutions" desirous of permis- 
 sion to grant real credit must present an application to the minister of 
 agriculture, industry, and trade (with copies of the resolution of the 
 general meeting, articles, etc. ; the minister may also demand any other 
 documents necessary to satisfy him). 
 
 2. A royal decree authorizing the grant shall issue on the motion of 
 the minister after it has been ascertained that the requirements of the 
 law have been fulfilled. 
 
 The issue of land-mortgage debentures shall be authorized by a sep- 
 arate decree when the bank has proved its possession of mortgages 
 equal in value to half of its paid-up capital. 
 
 3. With the application for the leave to issue debentures must be 
 sent in a list of the mortgages held by the bank (giving all the chief 
 details of each mortgage). 
 
 4. The minister has the right to inspect the agreements in case of 
 all loans called in (denunciati), whether in possession of the bank or 
 any public official (e. g., a court). 
 
 6. Mortgage loans in cash up to the amount of half the capital may 
 be repayable hj annuity or in lump. If repayable by annuity the 
 provisions of section 7 of the law relating to taxes, stamp duties, etc., 
 applicable; they are otherwise governed by the general law. 
 
 6. Business. — Banks for real credit can only lend on immovable 
 property which furnishes an income accepted by the bank as certain 
 and lasting for the period of the loan. 
 
 Immovable property used for industrial purposes can only be accepted 
 at its actual value independent!}' of its special use. 
 
 7. Factories mortgaged for a loan must be insured against fire at the 
 expense of the borrower. 
 
 The loan deed must contain an assignment to the bank of the right 
 to receive direct the insurance amount. This assignment must be noti- 
 fied to the insurance office. 
 
 Banks may require that the insurance policy shall be made out in the 
 name of bank, and that the premia shall be payable by it. In such 
 case the premia shall be added to and paid with the annuity due by the 
 borrower. 
 
 Any sums payable by the insuring agency as an indemnit}'^ for dam- 
 age or destruction, and those pa3'able by reason of a forced acquisition 
 of the land for public purposes or of a servitude imposed thereon by 
 the law, shall be paid over to the bank and credited toward the debt 
 as an advance payment. 
 
 «The word " bank " will be used in this translation to mean any society or insti- 
 tution granting real credit. 
 
AGKICULTTJKAL BANK IN THE PHILIPPINES. Ill 
 
 Any indemnity paid by the insurance agency mny, with the consent 
 of the bank and on due security, be handed over to the debtor for the 
 purpose of repairing the loss or damage. 
 
 The above conditions apply to all other classes of insuiunce effected 
 on immovables. 
 
 8. Every change which brings with it a decrease in the value of the 
 estate, as also every act by third parties which disturbs the debtor's 
 possession or disputes his rights, shall be notified by the debtor to the 
 bank within one month of such change or dispute. 
 
 In such cases the bank may, if necessary, proceed to a fresh valua- 
 tion of the property at the debtor's expense, and may demand a fur- 
 ther mortgage of the payment of the loan as per section 1980 of the 
 Civil Code, and may also proceed against the debtor as per section 1234 
 of the said code. 
 
 9. (Mentions the general law governing cash credits and cheques, 
 viz: Chapters XI and X, respectively, of the Code of Commerce.) 
 
 10. Real credit banks authorized by this law must prohibit by their 
 articles the acquisition liy themselves of immovable property except 
 such as may be needful for the location of these offices, and such as 
 they necessarily acquire as security for loans already entered into. 
 
 Whenever a bank acquires immovable property as security' for a 
 loan, whether by assignment or by purchase at auction, it shall sell 
 the same within five years. 
 
 11. Issue of delcntnres. —Loans are made in debentures. Real credit 
 banks may only issue such debentures for a face value equal to that of 
 their loans granted under section 4, [a) and {h), of the law. 
 
 The banks may undertake the sale of the debentures on account of 
 the borrower, with or without the charge of commission. 
 
 12. The debentures may issue at 4, 4i, or 5 per cent interest in sepa- 
 rate series. 
 
 13. If debentures are contemporaneously issued at more than one 
 rate, a borrower may select the rate at which the debentures for his 
 loan shall issue. The interest payable by him shall equal the rate 
 payable on the debentures." 
 
 A debtor may demand a fresh loan at a lower rate in order to pay 
 
 oil his prior loan at a higher rate. The banks shall determine the 
 
 conditions of such conversion, 
 j^^ * * * 
 
 15 to IT. (Debentures shall be taken from a stub; shall be serially 
 numbered, dated, signed, and stamped; shall be of a pattern approved 
 by the minister of agriculture, etc., and shall each be £20 in value. 
 But they may be exchanged for coupons of £4 each, bearing the num- 
 ber, etc., of the original debenture, which shall be kept in deposit.) 
 
 18. Debentures maj' be to bearer or to order; the latter may be 
 furnished with interest coupons to bearer. The coupons must bear 
 the serial number of the debenture. A new set of coupons shall be 
 issued when the prior set has been exhausted. 
 
 19. Debentures to order may be transferred to other names, and 
 both those to order and those to bearer may be transformed under the 
 following rules into debentures of the other class. 
 
 ******* 
 
 ^Debentures issued at the lower rates of interest may be salable below par; hence, 
 a loan issued in such debentures may be no more profitable to the borrower than a 
 loan in debentures bearing a higher rate. 
 
112 AGRICULTURAL BANK IN THP PHILIPPINES. 
 
 36. Eepayment of debentures. — At the beginning of every half year 
 as many debentures shall be repaid at par as correspond to the amount 
 of the sinking fund due, even though not actually paid, by borrowers 
 during the previous half year plus (1) the amount paid in cash during 
 the half year as repayments in advance, including capital recovered 
 by the bank by proceedings in expropriation or coverea by properties 
 bought in by the bank; (2) the amount of any losses. 
 
 37. With this view the bank must within eight days of the close of 
 the half year prepare a statement in Form A showing for each mort- 
 gage loan (1) its original amount; (2) the year of the agreement; (3) 
 the year in which repayment would be complete; (4) the amount of a 
 half 3'ear's sinking fund dues; (5) the amount repaid in advance (dur- 
 ing the half year) in debentures, if any; (6) the amount repaid in 
 advance in cash, if any; (7) the losses incurred, if any. 
 
 A statement of this nature must be drawn up for each series of 
 debentures. 
 
 A copy of the above statement, dulj" signed, is to be sent to the 
 minister of agriculture, etc., but the several loans are to be indicated 
 not by the names of the debtors, but by their serial numbers in the 
 register or ledger. 
 
 ******* 
 
 40. Debentures are drawn by lot for repayment. (The rules are of 
 the ordinary nature; all numbers are kept in a sealed wheel, to which 
 are added, in presence of a government delegate, the numbers of those 
 issued in the half year; the government delegate must also be present 
 at the drawing, which is to be public.) 
 
 41. The debentures drawn will, on production, be paid in cash at 
 par in the following month, and will bear no interest subsequent to 
 that of the half year in which the drawing takes place. 
 
 ******* 
 
 49. Reserve fund. — The one-fourth of the net annual profits set 
 aside for the formation of a reserve shall be deducted from the profits 
 in the case of banks with a limited issue of debentures until the reserve 
 shall reach the amount of at least one-fifth of the paid-up capital. 
 
 In the case of other banks (where the issue of debentures is not 
 limited) the reserve must accumulate till, together with any guaranty 
 fund, it shall reach the sum of one-tenth of the value of debentures in 
 circulation, and shall be maintained at that proportion. The reserve 
 fund shall be invested in securities issued or guaranteed by the State 
 and in land-mortgage debentures issued by some other bank. 
 
 50. Government supe?'vision. — Banks which grant real credit are on 
 that side placed under the supe. vision of the minister of agriculture, 
 industry, and trade, who exercises it by means of delegates. 
 
 51. The delegates have the right of inspecting all of the books and 
 documents relating to the grant of real credit. 
 
 52. The banks are bound to dispatch to the minister the resolutions 
 of their directorate within eight days after each meeting. 
 
 The minister can, upon reason stated, declare within ten days of such 
 dispatch the cancelment of any resolutions which may be contrary to 
 law or to the rules, giving notice at once of such declaration. 
 
 63. The supervision shall be so exercised as to prevent the banks 
 from undertaking any operations other than those permitted by the 
 law. The supervising delegates are specially bound — 
 
AGEICULTUBAL BANK IN THE PHILIPPINES. 113 
 
 {a) To verify the existence of as many mortgage loans made in cash 
 as represent the half of the paid-up capital, as per section 1 of the 
 law and the present rules; 
 
 (5) To take care that the debentures are only issued on account of 
 mortgage loans and to a corresponding value; 
 
 (c) To verify the correctness of the entries in the statements referred 
 to in rules 37 and 48, and the value of the debentures to be drawn; 
 
 {d) To be present at the placing of debenture numbers in the wheel 
 and at their withdrawal, as per rule 40; 
 
 (fi) To ascertain the cancelment of all debentures drawn by lot, or 
 paid in by way of advance repayments, or withdrawn for an}"- other 
 reason ; 
 
 (/) To be present, as required by rule 43, at the destruction of all 
 canceled debentures; 
 
 {g) To ascertain at the end of each half year the value of cash loans 
 and of charged debentures, as per section 1 of the law and rule 48. 
 
 The minister may also delegate a public official, chosen at the request 
 of the minister by the prefect of the province (collector of the dis- 
 trict), to be present at the operations mentioned in {d) and (/"). 
 
 54. Land-credit banks must send to the minister of agriculture — 
 
 (1) A statement of their financial position at the end of every two 
 months; 
 
 (2) The annual balance sheet at the close of everj' year; 
 
 (3) A special statement of the loans in arrears and in dispute at the 
 close of ever^r j^ear. 
 
 ******* 
 
 56. A roj'al decree shall determine the annual contribution to be 
 paid by each such bank as costs of supervision. 
 
 LAW RELATING TO EEAL CREDIT (iTALY), JULY 17, 1890.* 
 
 (1 to 26) The bank is to have a capital of £4,000,000, of which half 
 or, if the existing banks do not enjoin it, three-tenths are to be paid 
 up before beginning work, the remainder by installments. 
 
 The privilege of the exclusive exercise of real credit under the special 
 laws is granted to it for fifteen years, the rights of existing banks which 
 grant real credit under the laws being saved. The sole duty of the 
 bank is to be the grant of real credit, loans being financed by the issue 
 of land-mortgage debentures. 
 
 " This is the newest Italian law; that of 1885 did not meet with full success, and 
 it was decided to attempt the grant of real credit throughout the Kingdom by a single 
 institution, founded by private capital, but with additional privileges, safeguards, 
 and supervision; but also with the proviso that if not successfully started, both as to 
 capital and the grant of loans, within three years, its special privileges should cease. 
 
 The leading idea was that the new bank should, if possible, absorb the existing 
 eight land banks and take, in Italy, the place of the great Credit Foncier in France. 
 For this purpose the law grants it the exclusive right, save that of the existing banks, 
 of exercising organized real credit under the special laws (1885 and the present one) 
 throughout the Kingdom for fifteen years, its operations in general following the 
 provisions of the law of 1885 (q. v. ). It is believed that the anticipations of the legis- 
 lature have not been realized. 
 
 At the same time the opportunity was taken of making new provisions for land 
 banks in general, supplementary of the existing law. (See Vol. I, p. S2. ) 
 
 The law relating to the new bank is not of sufficient interest for translation — a mere 
 abstract will therefore be given of that part. Some of the sections supplementing 
 the existing law will be translated in full. 
 
 30795—06 8 
 
114 AGEICULTtTKAL BANK IN THE PHILIPPINES. 
 
 The own capital of the bank is to be invested in mortgages granted 
 in cash under the rules of the law of 1885, and it shall thereuj)on issue 
 debentures; the total issue of the latter shall not exceed ten times the 
 paid-up capital. Capital not immediately laid out in loans shall be 
 invested only in State paper, land mortgage, and agricultural deben- 
 tures. (See law of 1887 and rules thereon for these last securities in 
 the chapter on " Credit Agricole " in this volume.) The guaranty and 
 reserve fund shall be wholly invested in mortgage loans made in cash 
 without any corresponding issue of debentures, in cash, or in the securi- 
 ties mentioned in the preceding sentence. 
 
 The annual net profits are to be divided as follows: Five per cent to 
 the reserve till the latter reaches one -fifth of the paid-up capital; a 
 dividend to the shareholders, not exceeding 6 per cent; 25 per cent of 
 the remainder to the State, another 25 per cent to the reserve until it 
 reaches the limit mentioned, and the remainder as shall be decided by 
 the general meeting. 
 
 The whole assets of every description guarantee the debentures, but 
 debenture holders can proceed only against the bank. 
 
 The existing land-credit banks may — but are not bound to — unite ' 
 with the new one, which will then assume the loans and debentures of 
 the other banks as its own. 
 
 GENERAL PROVISIONS. 
 
 27. The following provisions shall be applicable to the national bank 
 for real credit, and to the various real credit banks in Italy, which oper- 
 ate under the law of February 22, 1885: 
 
 28. (Kelates to precautions necessary when mortgages are assigned 
 to the bank; the transferer must signify that he has transferred all his 
 rights to the bank; notice of this must be sent to all other registered 
 creditors of the property, and duly published, and if within 40 days of 
 such publication no opposition is made to the transfer any subsequent 
 objection shall be absolutely barred.) 
 
 ******* 
 
 34. Where a debtor is in arrears with his half year's dues the bank 
 may, before proceeding to coercive process, demand to be placed in 
 possession of the property, the debtor or other person lawfully in 
 possession being summoned before the court having jurisdiction. The 
 order of the court thereon shall be final and without appeal. 
 
 During such possession the bank shall, notwithstanding any attach- 
 ment or hypothecation resulting from the claims of other creditors, 
 collect all the rents and produce of the property, and, after deducting 
 the expenses of management and the rates and taxes, shall apply them 
 in satisfaction of the arrears and costs then or thereafter due. 
 
 The bank shall draw up an annual account of the same. 
 
 Such possession shall cease should the bank or any other creditor 
 institute proceedings for the sale of the property by court attachment, 
 or when the arrears are satisfied. 
 
 ******* 
 
 36. When an estate mortgaged to a bank for a loan has been forcibly 
 sold, the purchaser may take the benefit of the bank's loan to the 
 former owner, provided that within 15 days from the date of confirma- 
 tion of the sale he shall pay the annuity due together with all costs. 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 115 
 
 and provided that the price at which the estate was sold was above two- 
 fifths of the amount of the debt still due to the bank, or that the pur- 
 chaser pays down such amount as shall reduce the debt secured by the 
 propert}'^ to three-fifths. The purchaser in such case undertakes the 
 obligations of the former borrower. 
 
 Should the purchaser not accept the above conditions the rules con- 
 tained in section 23 (f) of the law of 22d February, 1885, shall be 
 applicable. 
 
 37. The banks may issue debentures at Si per cent. A bank may 
 stipulate with a borrower that the tax ("di richezza mobile") charge- 
 able on the interest of the debentures issued against his loan shall b^ 
 payable by him. 
 
 This extra charge shall only be payable when the debentures are 
 issued at 3i, 4 or ii per cent. 
 
 38. The banks may always withdraw from circulation and repay their 
 debentures, whether drawn by lot or not, and issue in their place 
 debentures at a lower rate. Repayment shall in such cases always be 
 at par. 
 
 When such conversion includes all the debentures of a particular 
 series, all the debts against which such debentures were issued shall, 
 within two years, be granted a corresponding reduction of interest. If 
 only a part of such debentures are converted a proportionate reduc- 
 tion shall be granted to all the debts which correspond to all the 
 debentures of the said series. 
 
 40. In amplification of the right granted in the last paragraph of 
 section 8 of the law of 1885 borrowers shall have the right of obtain- 
 ing the liberation from the mortgage of one or more of the specific 
 items chargeable with the mortgage in proportion as repayment is 
 effected, provided that the remaining items properly secure the rights 
 of the bank for the remainder of the loan. 
 
 41. If within one year from the date of the present law the new 
 bank shall not have regularly begun the grant of real credit, the con- 
 ditions of the law relating to the new bank and the limitation of the 
 area of operations of the other banks shall be of no effect. 
 
EXHIBIT K. 
 
 XAW RELATING TO THE MORTGAGE BANK OF CANTON BERNE 
 
 ( SWITZERLAND ) . « 
 
 [Quoted from translation contained in the Report Regarding the Possibility of Introducing Land 
 and Agricultural Banks into the Madras Presidency. (Volume II, pages 38 to.40.).] 
 
 LAW RELATING TO THE MORTGAGE BANK OF CANTON BERNE (SWITZER- 
 LAND). 
 
 1. The foundation capital of the bank consists of contributions by 
 the State, which shall never fall below £280,000. 
 
 This capital shall be augmented — 
 
 (1) By repayments made on account of State paper; 
 
 (2) By contributions from the domain's office. 
 
 2. The business of the bank comprises — 
 
 (1) Loans on mortgage; 
 
 (2) Advances upon deposit of mortgage deeds, and the purchase of 
 good Swiss securities; 
 
 (3) The receipt of deposits at interest. 
 
 The grand council (of State) may extend the operations of the bank. 
 (The bank is also charged with other financial duties connected with 
 the administration of the State.) 
 
 3. Mortgage loans. — The bank will only lend on first mortgage of 
 immovable property within the Canton, and in general only up to two- 
 thirds of their value, as ascertained by survey. 
 
 (In special cases loans may be granted up to three-fourths of the 
 value. ) 
 
 The bank will, above all, devote special attention to small pro- 
 prietors and to small loans, and to cases where the borrowers intend 
 to apply the loans in cancelment of prior debts. 
 
 The maximum loan is fixed at £2,000. 
 
 4. The bank will grant loans (1) on the execution of mortgage deeds, 
 (2) upon the transfer to itself of mortgages already entered into. 
 
 5. (The candidate for a mortgage loan must furnish an exact state- 
 ment, with full details, of the borrower, the purchase value, extent, 
 class of cultivation, charges, etc., of the property, the insured value 
 of the buildings, the original price of the property, the survey value 
 of each item, and any charges or burdens (sections 2103, 2121, 2135 
 of the French civil code) on the property; in surveyed communes 
 survey numbers and areas are to be entered). 
 
 6. The candidate must send to the council of the commune in which 
 the property is situated the above statement, together with an applica- 
 tion to the bank showing the amount and proposed outlay of the loan 
 sought for. 
 
 See pages 85-87 of volume 1. This is a State bank, pure and simple. The Canton, 
 with a population of about 537,000, has a complete and independent government, 
 with all the paraphernalia and staff of a lar^e State, hence its ability to work a State 
 bank. The use made of and the responsibility thrown on the communes and the 
 registrar of mortgages are noticeable. 
 
 116 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 117 
 
 The council will complete the above statement by a certificate — 
 
 (1) That the candidate is in possession of full civil rights; should 
 this not be so, the name of his guardian must be entered; 
 
 (2) That the property has been truly described; should this not be 
 so, or if the council is aware of other burdens thereon, it must cor- 
 rect or complete the description; it must also add, when necessary, 
 whether the property is especially exposed to damage or loss of value 
 by reason of natural accidents; 
 
 (3) That the property is not burdened otherwise than by certain 
 family charges; any error or omission on this point must be corrected; 
 
 (4) That the candidate is believed in the commune to be the owner 
 of the property; 
 
 (5) That the survey value is exactly entered and that since the last 
 valuation for the land tax nothing has happened to materially dimin- 
 ish the value of the property. Should such diminution have occurred 
 the present actual value should be stated ; 
 
 (6) That the certificate of the council has been verbally transcribed 
 in the register kept for the purpose in the commune. 
 
 7. The commune is responsible to the bank for the consequences of 
 any fraud or neglig'ence by the communal council in the carrying out 
 of section 6. 
 
 8. If the property is situated in more than one commune the can- 
 didate must obtain a similar certificate from each such commune. 
 
 9. The candidate will transmit the above statement and certificate to 
 the registrar of mortgages, who will add thereto a further certificate 
 showing precisely — 
 
 (^') The title Of the candidate and the date of its confirmation. The 
 registrar must compare the details of the statement relating to the 
 property and of the communal council's certificate with the land regis- 
 ters, and note in his certificate any differences. If there are such as 
 to cause any doubt, he must address the communal council for the 
 clearance of such doubts. 
 
 (ii) Any outstanding mortgage charges or rights of third parties 
 chargeable on the estate, with the names of such creditors or parties, 
 and the nature, date, and amount of such charges. 
 
 The registrar is responsible for any fraud or negligence on his part 
 in carrying out the above provisions. 
 
 10. The candidate shall then transmit the various documents through 
 the registrar to the office of the bank, which shall submit them, with a 
 report, to the directors. 
 
 11. The registrar must draw out the mortgage deed (for the candi- 
 date) in proper legal form and send it to the bank. 
 
 12. The amount of the loan is paid to the borrower through the reg- 
 istrar of mortgages. That officer will immediately copy the mortgage 
 deed into the mortgage registers, and will take heed as to the libera- 
 tion of the property from all prior mortgage claims or rights, and as 
 to the carrying out of any conditions attached to the loan, after which 
 he will send the mortgage deed with all necessary certificates to the 
 bank. The registrar is responsible to the bank for all consequences 
 resulting from any delay in the transcription of the deed, for the due 
 liberation of the property from any prior rights or concurrent claim 
 which might affect the bank's mortgage, and, in general, for any devi- 
 ation from the conditions laid down. 
 
 13. Mortgage deeds in favor of the bank are not subject to the decen- 
 
118 AGEICTJLTtTEAL BANK IN THE PHILIPPINES. 
 
 nial renewal of registration required by the French civil code, and the 
 mortgage will retain the rank which it took at registration. 
 
 14. Mortgages and charges (in existence) maj' be assigned to (and 
 accepted by) the bank when they present the security required by the 
 present law and when the mortgagor agrees to pay the capital and 
 interest as therein laid down. A mortgagor may demand that his 
 mortgage shall, upon the expiry of the notice period entered in the 
 deed, assign the mortgage to the bank. 
 
 For an assignment of this nature it is only necessary that the mort- 
 gagor should address to the bank an application showing precisely the 
 nature of the mortgage, etc., proposed to be assigned, together with 
 the name of the creditor, the immovables pledged as security for the 
 loan, the amount of such loan, and the value of each item as entered 
 in the tax registers. The communal council must add to this applica- 
 tion a certificate as to the correctness of the entry regarding the sur- 
 vey valuation. Where buildings are insured against fire the secretary 
 of the prefect's oflBce must certify as to the correctness of the entry 
 relating to the assurance. 
 
 1.5. The fate of interest charged by the bank shall exceed by at least 
 0.25 per cent the rate payable by the bank upon deposits. 
 
 16. The bank shall charge on each loan a commission, payable once 
 for all, for the cost of inquiries relating to the loan. 
 
 17. Loans made by the bank are repayable with interest by the 
 annuity system,' each annuity (including interest) being not less than 
 6 per cent of the loan. The debtor may at anj' moment pay up the 
 whole or any part of the capital. 
 
 ■ Interest at the rate of 5 per cent will be charged <Sq arrears (i. e., 
 sums not paid within fourteen days of due date). 
 
 18. The bank can only require the (immediate) repayment of a loan 
 in full in the following cases: 
 
 (1) When the debtor has failed to pay one or more of his instalments 
 within three months from the date when notice of the first step in 
 proceedings against him has been dul}- notified to him; 
 
 (2) When the property has been alienated without its consent; 
 
 (3) When the bank has reason to suppose that the property has so 
 diminished in value that it no longer presents the security required 
 by section 3, and when the debtor has failed, within three months 
 after notice, to increase the security as required, or when such 
 increased security has not been certified to bj' a declaration of the 
 communal council; 
 
 (4) When the property is either wholl}' or partly the object of a sale 
 at law. 
 
 In cases (1), (2), and (4) the repayment must be made within three 
 months after notice; in case (3) the three months' time allowed for 
 improving the security shall serve also as the period of notice. 
 
 19. The communal council is responsible to the bank for loans 
 granted by the bank to the amount of the survey valuation of the 
 property situated in the commune, unless the commune has, under 
 section 6 (5), placed a lower value on the property, in which case the 
 responsibility of the commune extends only to such lower sum. 
 
 20. If the proceeds of a property or part thereof sold at law do not 
 attain the amount of the survey valuation as stated at the time of the 
 contract or the amount estimated by the communal council and the 
 bank thereby sustains loss, it may require the commune to pay up the 
 whole amount of th^debt, such debt being then assigned to the com- 
 
AGEICtTLTXJEAL BANK IN THE PHILIPPINES. 119 
 
 mune as creditor. In such cases a court notice may be served on the 
 commune before the sale is finally confirmed, so that it may, if pos- 
 sible, safeguard its interest by a higher bid. 
 
 The bank may also transfer its position as creditor to the commune, 
 and require from it the whole payment of its debt when it has not 
 been found possible to sell the whole or part of the property by 
 auction. 
 
 The commune can, however, never be required to pay up more than 
 one annuity in arrears and any annuities that may have fallen due since 
 the commencement of proceedings, in addition to the balance of the 
 principal still owed and the costs of the proceedings. The commune 
 has its remedy against the members of the communal council if there 
 has been fraud or negligence on their part. 
 
 21. The rights granted by the preceding sections are not enforce- 
 able against the commune if the loss sustained by the bank is due to 
 an accidental decrease in the value of the property under mortgage 
 or if it has been caused by a general fall in the price of immovable 
 property. 
 
 Nor can they be enforced against the commune if the latter or the 
 communal council has notified to the bank, with due proofs, any 
 decrease in the value of the property, and if the bank has thereupon 
 failed to send to the debtor, within one month, the notice contemplated 
 in section 18 (3) and the final notice to repay the debt, and has not 
 followed up such notices (by proceedings) after the expiry on three 
 months. 
 
 22-26. (Special provisions for certain districts; of no general 
 importance.) 
 
 27. The investments and advances contemplated by section 2 (2) 
 shall be exceptional and temporary and only when there are idle funds 
 which can not be employed under section 2 (1) (mortgages). 
 
 28. The bank will receive deposits, as funds may be needed, and will 
 pay interest thereon. The minimum deposit shall be £8. The bank 
 will undertake the payment (for the depositor) of the public taxes due 
 on such deposits. 
 
 29. Temporary deposits up to a sum of £8,000 may be received when 
 required for the needs of the bank. 
 
 30. The funds of minors and incapacitated persons (trust funds) may 
 be invested in the bank (section 268 of the Bernese civil code). 
 
 31. The funds of the State in general and the assets of the bank in 
 particular are pledged as security for obligations contracted by the 
 bank in accordance with the present law. 
 
 32. The bank is placed under the supreme supervision of the director 
 of finance and the executive council (of the State). 
 
 Its administration is intrusted to a board of fifteen members 
 appointed by Government. The executive council appoints the 
 president and vice-president from the members of the board, which 
 then nominates its secretary. 
 
 A committee of five members of the board attends to the details of 
 business. 
 
 -.r ***** * 
 
 38. The grand council (of the State) shall issue rules of business for 
 carrying out the present law, especially with reference to the formal- 
 ities and securities required in the granting of loans, the rules for the 
 administration of the bank, and the powers and duties of the several 
 bodies and functionaries. 
 
EXHIBIT L. 
 
 DRAFT BILL SUBMITTED BY MR. FREDERICK AUGUSTUS 
 
 NICHOLSON, 
 
 APPOINTED ON SPECIAL DUTT BY THE GOVERNOR OF MADRAS FOB THE 
 PURPOSE OF INQUIRY INTO THE POSSIBILITY OF INTRODUCING INTO 
 THE MADRAS PRESIDENCY AGRICULTURAL OR OTHER LAND BANKS. 
 
 Chapter I. — General. 
 
 2. For the purposes of this act " bank " means any company of seven 
 or more persons associated under this act for the collection of funds, 
 whether in cash or in kind, and whether subscribed, purchased, bor- 
 rowed, or deposited, which may be used in granting credit; it includes 
 credit societies formed as joint stock companies with a view to the 
 profit of their shareholders; cooperative banks, mutual loan societies, 
 funds, or nidhis of any description lending only to and for the benefit 
 of their own members; any other loan societies; deposit and credit 
 annexes to other classes of association; savings banks in which accu- 
 mulated funds are loaned out or otherwise invested; banks established 
 for the purpose of land improvement only; central banks formed for 
 the supply of capital to mofussil banks, for the equalization of their 
 funds, and for the issue to them of central-bank debentures, although 
 such banks may be established at the Presidency town, and although 
 they do not lend their funds or. issue their debentures direct to 
 individual borrowers. 
 
 "Company" means only companies registered under this act and no 
 others, unless it is expressly stated otherwise. 
 
 "Commissioner" means the authority intrusted with the registration 
 of companies under the act and with the supervision of rural credit, by 
 whatever designation he may be actually known. 
 
 The words "Limited by share" shall permit a liability on the part 
 of shareholders or members in case of liquidation to contribute such 
 proportionate additions to the share amounts as may be prescribed by 
 the memorandum or articles of association. It shall also include in 
 the case of cooperative mutual or savings banks a limitation of the 
 liability of nonborrowing members to amounts actually paid or in 
 arrears upon shares, should provision to that effect be made in the 
 articles. 
 
 "Land" includes all immovable property. 
 
 3. Kegistration may be effected either under the present law or under 
 the Companies act, but only banks registered under the present law 
 obtain the privileges granted therein. Registration may be effected 
 under the condition and with the privileges hereinafter following. No 
 companj' shall be registered under the present act unless a general 
 meeting of all shareholders or subscribers shall have been previously 
 held, at which meeting the promoters and directors shall present a 
 
 120 
 
AGKICULTXJRAL BANK IN THE PHILIPPINES. 121 
 
 written report, stating the objects of the company, a list of the pro- 
 moters, directors, ana shareholders, the prospects of the business, all 
 facts and statistics necessary to prove the reasonableness of such pros- 
 pects, together with a copy of the memorandum and articles of asso- 
 ciation. Should the meeting approve of the establishment of the com- 
 pany, the above documents shall be forwarded in duplicate to the 
 commissioner for the registration of the company. The commissioner 
 shall have the power to refuse registration if the above formalities 
 have not been complied with. 
 
 The original documents shall be returned after registration, the dupli- 
 cate copies being retained by the commissioner. 
 
 4. The provisions of the Indian Companies' act, so far as thej' are 
 not modified or canceled by the present law, apply to all banks regis- 
 tered under the present law. 
 
 All penalties prescribed by this act shall be leviable in like manner 
 as penalties under the Indian Companies' Act. 
 
 5. The primary object of each bank registered under this act shall 
 be the supply of capital to agriculture and rural industries by the pro- 
 motion of general thrift, to which end it shall furnish credit — 
 
 (1) for the redemption of prior debt; 
 
 (2) for the current needs of the rural classes; 
 
 (3) for the purchase and improvement of land; 
 
 (4) for direct agricultural and industrial developments. 
 
 But no loans shall be granted to mines or for mining purposes or 
 for the prospecting for mines, nor shall any investments be made in 
 such enterprises, nor in any enterprises of a speculative nature. 
 
 Credit operations may be (1) the grant of loans on first mortgage; 
 (2) the discount of bills; (3) the grant of loans on simple bond or note 
 either with or without sureties; (4) the grant of loans on pawn or pledge 
 or on bills of sale; (5) the opening of cash or book credits. Loans by 
 means of which all prior mortgages are redeemed are considered as first 
 mortgages. Banks may undertake the supply of goods needed by 
 agriculturists, such as cattle, implements, seeds, manures, food stuffs, 
 and the like, as also the purchase of rural produce. 
 
 6. Inability to hold land. — It shall not be lawful for the banks to 
 hold land beyond that required for business premises; the temporary 
 acquisition of land as the result of foreclosure, or otherwise on account 
 of a debt, is permitted, but all such land must be sold within three 
 3''ears from date of acquisition. No director, office bearer, officer or 
 servant of any bank shall be permitted to bid for any lands sold for 
 any dues of the bank. 
 
 7. Articles of association. — The articles of association must contain — 
 Definitions; 
 
 The name and place of office of the company; 
 
 The objects and area of its enterprise; 
 
 The nature of the liability of its members; 
 
 Rules for the rights and duties of members individually toward the 
 company, and of the company toward members individually; 
 
 Rules for the general meeting, ordinary and special; 
 
 Rules for the appointment, powers, conduct, and duties of directors; 
 
 Rules for a committee of supervision and audit; 
 
 Rules for a committee (as for valuation, discounts, etc.); 
 , Rules for the inspection of books and accounts by individual 
 members; 
 
125i AGBICULTURAL BANK IN THE PHILIPPINES. 
 
 Rules for the appointment of special or regular inspectors for the 
 examination of its aflFairs and accounts, or, if a union, of the affairs 
 and accounts of its component societies; 
 
 Rules for the giving of security by officeholders and staff; 
 
 Rules for the amount of its capital and number of shares; 
 
 Rules for the increase and alteration of capital; 
 
 Rules for calls upon shares; 
 
 Rules for the transfer, transmission, and forfeiture of shares; 
 
 Rules for founders' shares, if any; 
 
 Rules for the formation and permanent upkeep of a reserve, or 
 reserves; 
 
 Rules for the securing of proper accounts; 
 
 Rules for the appropriation of profits and the declaration of true 
 dividends; 
 
 Rules for preparing the balance sheet; 
 
 Rules for audit, whether of its own account, or, if a union, of the 
 accounts of its component societies; 
 
 Rules for the obtaining of funds, and therein for the issue and man- 
 agement of debentures, for the receipt, investment, and repayment of 
 deposits, ordinai-y or savings; for other borrowings; 
 
 Rules for the grant of credit, and therein for loans upon mortgage, 
 for loans on other security, for discounts, for cash credit, for dealings 
 by way of pawn, bills of sale, etc. ; 
 
 Rules for the valuation of securities tendered; 
 
 Rules for investments other than on loan; 
 
 Rules for operations other than the grant of credit; 
 
 Rules for the settlement of disputes between the company and its 
 members; 
 
 Rules for the periodical communication to members, creditors, and 
 debtors of their credit and debit balances; 
 
 Rules for such other matters as may be necessary. 
 
 Copies of the articles and of all amendments thereto shall be regis- 
 tered with the commissioner, who shall have power to examine their 
 legality and to refuse registration to such as are not warranted by law, 
 and shall also advise, but not authoritatively, upon such as may be 
 considered inadvisable or objectionable, but not illegal. No bank shall 
 commence business without the certificate of the commissioner that 
 its articles have been duly registered and that the other conditions of 
 the law have been duly complied with. Each society shall also draw 
 up rules of business prescribing the details of the methods and forms 
 of accounts, of the conduct of the office, of the inquiries relating to 
 the grant of loans, and of all other matters necessary for the safe and 
 businesslike conduct of the company in its various transactions. A 
 copy of such rules, as amended, shall be sent to the commissioner, 
 who shall advise upon the details to be observed. 
 
 Chapter II. — Joint stock hanks limAted hy shares, not heing cooperative, 
 mutual, or savings hanks. 
 
 8. In this chapter the word "bank" shall refer only to joint-stock 
 banks limited by shares, and registered under this act, and shall not refer 
 to banks of unlimited liability, or to banks limited by guaranty, or to 
 cooperative, mutual, or savings banks, or to land-improvement banks 
 under the special provisions enacted for their encouragement. 
 
 9. Share capital. — The capital of the bank must be fully subscribed, 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 123 
 
 and at least one-half must be paid up before banking operations begin; 
 one-fourth of all paid-up capital must be invested in government stock 
 or other securities appointed by government from time to time, until 
 such time as the reserve hereafter mentioned shall reach the amount of 
 one- fourth of the nominal capital: Provided^ however, That such invest- 
 ment shall not be necessary should the articles provide for an addi- 
 tional liability of the shareholders in the proportion of not less than 
 50 per cent of the par value of the shares in case of liquidation, as 
 provided in section 2 supra. 
 
 It shall be lawful for a bank to declare by special resolution that 
 any part of its uncalled capital shall not b6 capable of being called up, 
 except in the event or for the purpose of the bank being wound up, 
 such capital shall be called "reserve capital," and shall not be capable 
 of being charged as securitj' for the purpose of borrowing or of being 
 otherwise dealt with, except in case of or for the purpose of liquidation. 
 
 10. Minimum share capital. — No bank referred to in the present 
 chapter intending to issue debentures against such portion of its assets 
 as may be invested in land mortgages, shall possess a share capital of 
 less than Rs. 6,000, of which one-half shall be paid up during the 
 working of the bank. 
 
 11. Every loss of capital shall be forthwith reported to a general 
 meeting to be convoked for the purpose and to the commissioner. 
 Such loss of capital shall necessitate the winding up of the bank unless 
 the general meeting determines to replace the lost capital or to reduce 
 the capital of the bank as provided in sections 13 to 23 of the Indian 
 Companies Act, provided always that such reduction shall not reduce 
 the share capital below the legal minimum required by this act. It 
 shall be lawful to replace lost capital by a withholding of all divi- 
 dends till such loss shall have been made good. In case of any failure 
 to complj' with the requirements of this section the commissioner may 
 take steps for the winding up of the bank. The commissioner shall 
 have power to appoint inspectors to ascertain the fact of a loss of 
 capital, or whether such loss has been made good, or whether the bank 
 is in a sound working position. 
 
 12. No share shall be of lower denomination than Rs. 20, and no 
 shareholder may possess more than one- tenth of the share capital. 
 
 13. Dividends. — Dividends shall be paid out of actually accrued 
 profits only, provided that such dividends may be increased or wholly 
 paid out of any reserve specially formed ad hoc from the profits of 
 preceding years, and not being the general reserve. The pa3'ment of 
 dividends by directors otherwise than as above shall be deemed a 
 misdemeanor irrespective of any specific intention on the part of the 
 directors or whether followed or not by loss to the bank. Directors 
 shall be held personallj' liable for all such payments and shall further 
 be liable to simple imprisonment not exceeding six months or to fine 
 or to both upon conviction before a magistrate. 
 
 14. Profits. — Interest unpaid, although due or accrued on debts, 
 owing to the bank, shall not be included in the calculation of its profits 
 previous to a dividend. 
 
 The surplus profits, from which alone a dividend can be made, shall 
 be ascertained by charging in the account of profit and loss and deduct- 
 ing from the actual profits — 
 
 (1) All expenses paid or incurred, both ordinary and extraordinary, 
 attending the management of its affairs and transaction of its business; 
 
124 AGRICULTUEAL BANK IN THE PHILIPPINES. 
 
 (2) The interest paid or then due and accrued on debts owing by it; 
 
 (3) All losses sustained by it. In the computation of such losses, 
 all debts owing to it shall be included which shall have remained due, 
 without prosecution, and upon which no interest shall have been paid 
 for more than one year, or on which judgment shall have been recov- 
 ered that shall have remained for more than two years unsatisfied, and 
 on which no interest shall have been paid during that period. 
 
 15. Reserve fund. — There shall be annually deducted from the net 
 profits before the declaration of a dividend, such proportion thereof, 
 not being less than 20 per cent, as shall be determined by the directors, 
 for the formation of general reserve fund until such reserve fund shall 
 equal at least one-fourth of the total nominal capital of the bank. The 
 reserve fund shall not be divisible among shareholders or other, and 
 shall be inalienable, nor may it be in any way pledged or borrowed 
 upon. It shall be invested in government stock or such other securi- 
 ties as shall be from time to time appointed by government, and the 
 interest thereof shall be credited to the same fund. 
 
 The reserve fund is primarily a guaranty fund for the creditors of 
 the bank, but may be used to make good any losses not covered in any 
 year by profits, which, however, must be first applied in full to such 
 purpose. It may not be used to increase the dividends of any year. 
 The fund must be kept constantly full, all withdrawals being made 
 good without delay. 
 
 16. Other reserves. — The articles may provide for other necessary 
 reserve funds which may be used for the purposes indicated in the 
 articles; such are reserves used as special guaranty for debentures, 
 and for the punctual payment of interest thereon; for insuring bor- 
 rowers against loss by the failure of land improvements; for recoup- 
 ing any loss by depreciation of debentures or other securities; for 
 supplying deficiencies in fixed interest on shares or loans; for equal- 
 izing dividends, etc. 
 
 Reserves of the first three classes may be formed from special con- 
 tributions for the purpose demandable from borrowers from the bank; 
 in such case the contribution, with simple interest at 3 per cent per 
 annum may, if the articles so provide, be credited to the final instal- 
 ment of the borrower's debt. 
 
 Public reserve. — Government may require the formation of a public 
 reserve or guaranty fund, to which all banks under this act shall 
 annually contribute an amount not exceeding 0.25 per cent of their 
 capital. For the purpose of this section the word "capital" shall 
 mean all paid-up share capital, all deposits, and all sums borrowed for 
 the purposes of the bank, whether hy loan, by the issue of debentures, 
 or otherwise, but shall not include the general reserve. Contribu- 
 tions shall be made and the public reserve funds invested under rules 
 to be made by government from time to time, provided that such 
 funds shall not be invested otherwise than in government securities. 
 The interest accruing from time to time upon such securities shall be 
 added to the public reserve, and shall not be credited to the bank. 
 The fund thus accumulated shall be used solely to guarantee the 
 repayment of any sums lost by government by reason of any subven- 
 tion of guaranty, and of all deposits and debentures and of any inter- 
 est thereon, held by or due to the public in general, by whatsoever 
 bank such deposits shall be held or such debentures shall have been 
 
AGKICULTUKAL BANK IN THE PHILIPPINES. 125 
 
 issued, and shall only be drawn upon after the due liquidation of a 
 bank under order of a court. 
 
 State charges. — Government may require annually a contribution 
 from ever}' bank registered under this act of a sum not exceeding 0.25 
 per cent of its capital in lieu of all charges for registration of its mem- 
 orandum and articles of association, for supervision and inspection, for 
 treasury charges, and for an insurance fund for general purposes. 
 
 17. Deposits. — Deposits repayable at call or at less than three months' 
 notice may be received up to the amount of the share capital and not 
 more, unless with the special authorization of government. Fixed 
 term deposits for three months and upward may be received without 
 such limitation, provided always that the aggregate amount of deposits 
 of all kinds of debentures and of other liabilities shall not exceed the 
 recoverable amount at any time outstanding upon loans and due to the 
 bank, or ten times the amount of the uncalled share capital and reserve, 
 whichever is less. 
 
 Banks receiving deposits payable at call, or at less than three months' 
 notice, must hold not less than 10 per cent of the amount of such depos- 
 its in government promissory notes, or other securities expressly 
 approved by government and 5 per cent in currency notes or cash. 
 
 Subject to the provision of paragraph 2, deposits may be invested 
 in loans not exceeding three years in term. 
 
 The articles of association shall fix terms for the repayment of depos- 
 its, which shall invariably include a provision that, if necessary for the 
 safety of the bank, one month's notice or more may be requii-ed by the 
 directors for the repayment of deposits at call. 
 
 It shall be lawful for a bank to issue receipts against fixed-term 
 deposits, made out either "to order" or "to bearer;" such receipts 
 shall then be transferable under the rules hereinafter laid down for 
 debentures and shall be chargeable with similar stamp duty on trans- 
 fer. Registration under Act III of 1877 shall not be obligatory. 
 
 The commissioner shall watch over the observance of the provisions 
 of this section, and it shall be lawful for him either on his own motion 
 or on a verified statement made by not less than 10 members, deposi- 
 tors, or other creditors of the bank, to cause an examination to be 
 made of the affairs of the bank to insure obedience to contents of this 
 section. 
 
 It shall be lawful for depositors to be present, but without right of 
 discussion or vote, at all general meetings, and they may appoint or 
 may move the commissioner to a point for the purposes of the annual 
 audit, a coauditor, who shall have equal powers with the regular aud- 
 itor of examining the accounts and affairs of the bank. 
 
 18. Debentures. — Banks registered under present act shall be 
 entitled to issue land-mortgage debentures, provided that they have 
 been specially authorized by government to that effect. 
 
 19. The paid-up capital and reserve of banks issuing debentures 
 shall be entirely invested in government promissory notes or in other 
 securities guaranteed either as to principal or interest by government; 
 such securities shall be made out in the name of the commissioner. 
 The interest of such notes shall be paid over half-yearly to the directors 
 for the purposes of the bank. The amount of debentures to be issued 
 shall not exceed twenty times the amount of the paid-up capital 
 exclusive of the reserve. 
 
126 AGRICULTTJKAL BANK IN THE PHILIPPINES. 
 
 20. The security for land-mortgage debentures shall be (1) the mass 
 of mortgages held by or secured to the bank ; (2) its capital and 
 reserves. The mass of mortgages held by or secured to the bank shall 
 be considered as the special fund guaranteeing the debentures, and 
 in case of liquidation the debenture holders shall take precedence of 
 all creditors, except for state dues, upon and to the value of such 
 mortgages. 
 
 All debentures shall be issued in series and shall take equal rank, 
 ■whatever their date or series. ' 
 
 No bank issuing debentures in series secured as above shall be 
 entitled to issue debentures against any particular mortgage or prop- 
 erty; any such specific charge shall be considered null and void, and 
 the debentures shall take rank with all other debentures, subject, 
 however, to the proviso contained in section 27. 
 
 The par value of the debentures issued shall at no time exceed the 
 amount actually outstanding upon and secured by mortgages. 
 
 All debentures as issued shall be registered in such office and under 
 such rules as shall from to time be prescribed by the local government. 
 
 The government shall also make rules for the forms in which deben- 
 tures shall be issued, -for the entries to be made upon them, and for 
 securing them against falsification and against the fabrication of false 
 imitations. 
 
 21. Land-mortgage debentures shall be personal (to order) or to 
 bearer. Personal debentures shall be transferred solely by indorse- 
 ment to order, a receipt stamp of 1-anna being affixed and canceled 
 on each transfer. The iact and date of transfer ^d the name and 
 address of the transferee shall forthwith be communicated to the issu- 
 ing-bank on penalty of a fine of Rs. 6. 
 
 Debentures to bearer may be transferred without indorsement and 
 maj'' pass freely from hand to hand without registration or other for- 
 mality or stamp duty. 
 
 22. When a debenture is to be paid off its face value shall be paid 
 to the person presenting it. If, however, the debenture be personal, 
 it shall only be paid to the person whose name stands against it in the 
 bank's register, unless sufficient proof be offered of a valid transfer to 
 the presenter by the person so registered or of a lawful transmission 
 to him by succession. 
 
 * * * * * * * 
 
 23. Interest shall be paid at the bank on fixed dates and under 
 the rules contained in section 22 for the payment of the value of 
 debentures. 
 
 ******* 
 
 24. (Omitted.) 
 
 25. Land-mortgage debentures may bear value from Rs. 20 to Rs. 
 1,000, increasing up to Rs. 100 by any convenient sums, and above 
 Rs. 100 by integral sums of Rs. 50. Debentures of Rs. 20 to Rs. 100 
 may be subdivided into coupures; in such case each.coupure should 
 thereafter be treated as a separate debenture. A debenture registered 
 under Act III of 1877 may not be subdivided. 
 
 It shall be lawful for the local government to make such rules for 
 subdivisions as may seem needful, and for the facilitation of sub- 
 divison. 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 127 
 
 26. Land-mortgage debentures may be of any term from one year 
 to sixty years; they may be issued for a fixed term or for a maximum 
 term with periodical drawings for repayment. 
 
 Debentures, however, may be recalled and paid ofi' by the bank at 
 any time after six months' notice; such notice shall be issued to the 
 registered holder in the case of personal debentures and by advertise- 
 ment or other method in the case of debentures to bearer. 
 
 The bank may also at any time buy up its debentures in open market 
 or by private negotiation. Holders of debentures which have been 
 drawn or notified for repayment shall have no claim to interest after 
 the date of notification of the result of the drawings or after six 
 months from the date of the notification of recall in any case other 
 than that of recall by drawing. 
 
 The holder of a debenture has no claim to repayment and can not 
 make such claim before the recall of the debenture by the bank either 
 upon maturity or otherwise as in the preceding paragraph, or upon 
 its being drawn for I'e payment in the ordinary course of amortization. 
 
 Debentiires issued in series and subject to repayment in the course 
 of amortization shall ordinarily be paid off at fixed periods, the deben- 
 ture to be paid off' at each such period being determined by drawings. 
 The}' shall be repaid at par, together with any premia that may from 
 time to time be determined as payable. The local government shall 
 make rules for the methods and precautions to be adopted in making 
 the drawings. 
 
 27. A debenture holder unpaid upon maturity or upon the drawing 
 of his debenture shall, after demand duly made in writing and failing 
 satisfaction within three months after demand, have the power of plac- 
 ing the bank in liquidation or, at his option, of obtaining a charge upon 
 a particular property, security, or mortgage held by the bank and to be 
 named by him; in such case his charge shall take priority of the bank's 
 claim against the said property, security or mortgage, up to the amount 
 of his claim, until such claim be satisfied. 
 
 28. It shall be lawful to issue land-mortgage debentures below or 
 above their face value, but repayment shall always be at par: 
 
 Provided, however, That it shall be lawful to issue a series of such 
 debentures with the promise of repayment at par plus a premium, 
 such premium to be equal amount on each debenture. 
 
 It shall also be lawful to declare a premium on all the debentures to 
 be paid off at a particular drawing, provided that such declaration be 
 made before the drawing takes place. But it shall not be lawful to 
 issue debentures repayable with prizes only to particular debentures, 
 the numbers of which are to be determined by lot or chance. 
 
 29. (Omitted.) 
 
 30. Banks are also empowered to issue debentures against (1) simple 
 bonds with two or more sureties executed by ryots paying land rev- 
 enue to government and in possession of their land, (2) against bills of 
 sale as drawn against the entire present or future movables of a farm, 
 and (3) against bonds secured by a charge upon the plus value caused by 
 a land improvement. These three classes of bonds shall be called agri- 
 cultural debentures. 
 
 31. Agricultural debentures of the first class shall be secured by so 
 much of the portfolio of the bank as consists of simple bonds of the 
 class mentioned, by the capital and ordinary reserve, and by a reserve 
 
128 AGEICTJLTURAL BANK IIST THE PHILIPPINES. 
 
 specially contributed ad hoc. They shall not exceed the term of three 
 years, but shall be withdrawable by the bank at any time on three 
 months' notice. 
 
 32. Agricultural debentures of the second class may be issued in 
 representation of loans based upon simple bonds and upon the whole 
 produce and stock of a farm and its homestead as hereinafter (sec. 
 38) described. They shall not exceed in original the term of one year 
 with a permissible extension up to a total of three years by annual 
 prolongations, and shall be recallable by the bank at any time on three 
 months' notice. 
 
 33. Agricultural debentures of the third class shall be issued in 
 accordance with the provisions laid down for land-mortgage debentures 
 in sections 18 to 29 supra. 
 
 34. Agricultural debentures shall be governed mutatis mutandis by 
 the provisions of sections 18 to 29 relating to land-mortgage debentures 
 and subject to the provisions of sections 30 and 31. 
 
 35. Debentures of all classes the value of which remains unclaimed 
 or to which no valid claim has been set up within three years from the 
 date of its being drawn for repayment or from the date of the expiry 
 of notice of recall or of maturity shall be credited to the reserve of 
 the bank concerned after due notice has been published. No suit shall 
 lie against the bank for the value of any such debenture after the 
 expiry of the said three years, but the bank may, but shall not be 
 bound to, entertain claims to such sums at any time within the three 
 following j^ears, after which date no claims shall be considered. In 
 case any claim is allowed beyond the expiry of the first period of three 
 years it shall be optional with the bank to allow simple interest thereon. 
 
 Where the interest of an}^ debenture has not been claimed within 
 three years from the date of its falling due, it shall be similarly dealt 
 with, but no claim shall be entertained after the expiry of three years. 
 
 Rules shall be made by the local government regarding the publica- 
 tion of the notices referred to in this section. 
 
 36. The debenture system in all classes shall be under the supervi- 
 sion of the authorities to be hereafter designated for the supervision 
 of rural banks. Every debenture shall be covered to its full value by 
 the mass of loans against which it is issued; it shall be entered serially 
 by consecutive numbers in a special register or shall be extracted from 
 a numbered stub with corresponding counterfoil. None shall be valid 
 without the countersignature of the authority to be designated by the 
 local government for that purpose, nor shall such authority affix his 
 signature without satisfying himself that the debenture is duly covered 
 by the loan transactions outstanding. A duly verified return shall be 
 made by the bank not less often than once in three months, showing 
 {a) the number and aggregate existing value of all loans of each class, 
 (i) the number and value of all outstanding debentures of each class. 
 The accuracy of such returns shall be specially attested by the directors 
 and by the committee of supervision or audit, if such exists, and shall 
 be specially certified by the periodical auditors. It shall be lawful for 
 the commissioner at any time to verify such returns and for that pur- 
 pose to examine, or cause to be examined, the whole affairs of the bank. 
 But the local government is further empowered to make additional 
 rules consistent with the law, and which shall have the force of law, (1) to 
 insure that the aggregate par value of debentures issued shall not at 
 
AGRICULTUKAL BANK IN THE PHILIPPINES. 1 29 
 
 any time exceed the outstanding value of the mass of mortgages held 
 by or secured to a bank and to give due publicity to the necessary 
 statistics; (2) to provide for the issue, withdrawal, and cancellation of 
 debentures; (3) to prescribe a proper form of debenture for the col- 
 lection of stamp duty chargeable thereon; (4) to facilitate transfers; 
 (5) to facilitate and insure the punctual repayment of interest; (Jd) to 
 provide for the issue of duplicates in case of loss, destruction, or deface- 
 ment; (7J to control the mode of drawing, by lot or otherwise, ascer- 
 taining the debentures to be repaid; (8) to prescribe the notice to be 
 publishea before crediting the value of unclaimed debentures and 
 interest to the banks. 
 
 37. Loans. — No loans shall be granted to any one person or undivided 
 family beyond an amount or proportion of the share capital, in no case 
 exceeding one-tenth of such capital, to be laid down by the articles. 
 Nor shall the loans granted to directors and members of the committee 
 of supervision exceed in the aggregate such amount or proportion. 
 Loans upon land shall not exceed two-thirds of the estimated value 
 thereof, nor one-half if upon buildings. 
 
 Loans may be repayable either in lump or by installments: 
 
 Provided^ That the borrower shall always be entitled to repay his 
 loan in whole or in part at any time before the expiry of the terra on 
 due notice given, and on payment of a commission as may be stipulated 
 )jy the articles. 
 
 When payable by instalments, a loan shall ordinarily but not neces- 
 sarily be repaid by fixed annuities comprising interest and sinking 
 fund, according to tables to be drawn up for the purpose under the 
 authority and supervision of government. 
 
 Loans for land improvements only may be granted under the chapter 
 relating to land-improvement banks. Releases of mortgages shall be 
 subject to the provisions of section 39. 
 
 38. Loans may be issued, for agricultural purposes only, upon the 
 security of the whole present and future stock, furniture, and produce 
 of a farm, and with or without the addition of personal securities. 
 
 For such loans the bank shall acquire, by the issue of the loan, a 
 charge upon such property and produce, present or future, until the 
 satisfaction of the debt. It shall not be necessary for the purpose of 
 granting such loan to obtain delivery or pawn of the property, nor 
 need specific items of property be pledged for it. During the pend- 
 ency of the loan the pledger shall be regarded as the trustee and 
 manager for the bank of the property covered by the loan, and may 
 not appropriate such property to his sole use. But he maj^, with the 
 consent of the bank, sell the produce and alter the specific items of the 
 property, provided that he maintains his stock in proper order and 
 condition, duly cultivates his farm, and pays his installments accord- 
 ing to agreement. In case the pledger alienates his stock without the 
 consent of the bank and without replacing it, or suffers his farm to 
 seriously deteriorate, or abandons cultivation, or fails to pay his dues 
 according to his contract, his loan shall immediatel}'^ become due, and 
 it shall be lawful for the bank to proceed at once by distraint of the 
 property as upon a bill of sale; the pledger shall further be liable for 
 the penalties provided for breach of trust. 
 
 Every document evidencing such loan shall be duly registered under 
 Act III of 1877, and shall then take precedence over all other charges 
 
 30795—06 9 
 
130 AGRICULTUBAL BANK IN THE PHILIPPINES. 
 
 except (1) for Government taxes or dues; (3) for the rent due to a 
 landlord as described in section 3 of Madras Act VllI of 1865; (3) for 
 debts covered by decrees of court in actual existence at the time of the 
 grant of the loan; (1) for claims arising out of prior charges or claims 
 upon specific items of property, and entered in deeds duly registered, 
 and they shall be binding on all cosharers in the land or property con- 
 tained in the farm. The words "agricultural purposes" entered in 
 paragraph 1 shall be held to mean all purposes connected with the 
 current working, maintenance, and development of a farm, viz, the 
 purchase of seed, manure, implements, and cattle, the growth of crops, 
 whether ordinary or special, including any subsequent manufacture 
 that may be necessary, the planting of orchards, vineyards, and simi- 
 lar plantations, the breeding of cattle, and the making of due provision 
 for their maintenance, the payment of revenue to government, or 
 rent to a landlord as entered in section 3 of Madras Act VIII of 1865, 
 and such other purposes as may be authorized by the local govern- 
 ment. But such purposes shall not include the redemption of prior 
 debts, unless such debts do not exceed Es. 50, and were incurred for 
 agricultural purposes as above defined; nor shall they include the 
 maintenance of the borrower or his familj'. 
 
 The term of such loans shall not exceed originally one year, which 
 may be extended in the total to three years hj annual prolongations. 
 
 The debt bonds shall be subject to a stamp duty of one-half the 
 ordinary stamp duty. They shall be subject to the provisions of the 
 Registration Act III of 1877, but shall pay only one-half of the ordi- 
 nary charges. 
 
 39. Releases and receipts shall invariably be issued by the bank on 
 the complete payment of a loan, whether applied for by the debtor or 
 not. They shall be in a form to be prescribed by the commissioner, 
 printed, and taken from a stub with counterfoil, which is to be duh^ 
 entered up. They shall bear a lanna adhesive stamp, and shall be 
 subject to the provisions of the Registration Act 111 of 1877. When 
 the original debt bond or mortgage deed has been registered, the 
 release must invariably be registered. Registration fees shall be one- 
 quarter of the ordinary fees, and it shall be lawful to register such 
 release by mere entry, without transcription, on the margin of the 
 original registration entry in a column to be provided for the purpose, 
 the indexes being entered up as usual. 
 
 MANAGEMENT AND ADMINISTRATION. 
 
 40. Directors. — All directors shall retire at the first ordinary general 
 meeting held after the registration of the bank, but shall be reeligible 
 by the meeting. At every subsequent annual meeting one-fourth or 
 such number as shall be nearest to one-fourth of such directors shall 
 retire and shall not be reeligible at the following annual meeting. 
 Directors shall retire by rotation, the first complete rotation being 
 determined by agreement or by lot; in subsequent years those longest 
 in oflSce shall retire. A general meeting shall have power by special 
 resolution to cancel the appointment of any director on sufficient cause 
 being shown. 
 
 41. Every director shall hold a certain number of shares in the 
 company, which may not be alienated, pledged, or charged during his 
 term of office; he shall ipso facto vacate office in case of breach of the 
 
AGEICULTUKAL BANK IN THE PHILIPPINES. 131 
 
 above rule; concealment of such breach or failure to vacate upon 
 breach shall be punishable on conviction before a magistrate with a 
 line which may extend to Rs. 1,000. 
 
 The articles shall declare the number of shares, not being less than 
 1 per cent of the total capital of the company, to be held by a director, 
 and shall make rules to insure observance of the above condition. 
 
 42. Directors are responsible that no operations are undertaken 
 other than those contemplated by the memorandum of association. 
 Each director shall be individually liable for all damages caused to the 
 company by breach of this rule, unless he proves that the operation 
 was protested against by him and that he communicated the fact and his 
 protest to the general meeting held, if any, next after such operation. 
 
 43. The provisions of the English directors' liability act, 1890, shall 
 be extended to directors of companies registered under the present 
 law. Directors shall be similarly liable to depositors. They shall be 
 similarly liable to subscribers or depositors in case of untrue balance 
 sheets or other statements purporting to describe the position of the 
 bank. 
 
 44. Directors who pay dividends except out of profits actually earned 
 or from some reserve, other than the general reserve, specially formed 
 ad hoc from the profits of previous years, shall be personally liable to 
 repay the whole of such dividend to the company, saving their right 
 to obtain recovery of any such sums from the recipients of such divi- 
 dends, and shall be further liable as provided in section 12 supra. 
 
 45. Directors shall be bound to call a general meeting within one 
 month after the share capital has been diminished, as prescribed in sec- 
 tion 11 supra. 
 
 Directors who fail to observe the above rule will be liable for all 
 losses caused by subsequent operations, and shall be further liable, 
 whether subsequent losses or damage to the society or any person 
 occur or not, to a fine upon conviction by a magistrate. 
 
 46. Directors and the undivided members of their families shall be 
 ineligible for loans from the bank to which they are directors, except 
 with the express sanction of a general meeting or of the committee of 
 supervision if such exists. Nor can the aggregate of loans granted to 
 directors exceed, on the whole, one-tenth of the nominal capital of the 
 company. 
 
 47. No person shall be eligible as a director if he has been a fraudu- 
 lent bankrupt, or has been more than once insolvent, or if he has been 
 punished under any of the penal provisions of this act, or of the Com- 
 panies act, or of Chapters VI, VII, IX, XI, XII, XVII and dismissed 
 from government service for any misconduct amounting to fraud, 
 falsification of accounts, bribery, or any other offense involving a 
 serious defect in moral character. 
 
 The office of director shall be vacated — 
 
 If he, or any partner of his, or the firm of which he is a member, 
 holds any other office or place of profit under the company. 
 
 If he becomes bankrupt or insolvent; 
 
 If he is punished under any of the penal provisions of this or of the 
 Companies act; 
 
 If he is concerned in or participates in the profits of any contract 
 with the company. 
 
 Provided, however, That no director shall vacate his office by reason 
 of his being a member of any company which has entered into con- 
 
132 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 tracts with or done any work for the company of which he is director; 
 nevertheless he shall not vote in respect of such contract or work, and 
 if he does so vote, his vote not be counted. 
 
 Any director in office who shall become ineligible through any of 
 the above reasons shall be deemed ipso facto to have vacated office. 
 
 48. Committee of supervision. — Every bank shall form a committee 
 of supervision, which shall be appointed by the general meeting. Sec- 
 tions 40, 41, 42, 43 last paragraph, 44 to 47, shall apply mutatis mutandis 
 to members of the committee of supervision. They shall be entirely 
 independent of the directors, and no director can belong to the com- 
 mittee of supervision, nor can any member of the committee of super- 
 vision be a director, nor shall any father, son, brother, or undivided 
 member of a director's family be a member of the committee of super- 
 vision, and vice versa. 
 
 The articles shall fix the number of members for the committee, not 
 being less than three, and the mode of their appointment. 
 
 Their duties shall be detailed in the articles and must comprise — 
 
 (a) The supervision of the affairs of the bank and the operations of 
 directors so far as to satisfy themselves that business is being con- 
 ducted within the provisions of the law and the articles, but not so as 
 to interfere with the actual management and conduct of business. 
 
 (h) The examination periodicalljr, and not less than once in a quarter, 
 of the books of the bank, in order to verify its transactions and to 
 insure a proper mode of bookkeeping. 
 
 (c) The examination frequently, and without notice, and not less 
 than once in a quarter, of the funds, valuables, securities, and stock of 
 the bank, or deposited with them on pledge, caution, or for security, in 
 such waj' as to insure that they agree with the books and are actually 
 in hand. 
 
 {d) The examination of the loan accounts and documents so as to 
 insure that loans are being issued only in accordance with the law and 
 the articles, and especially that loans are not being unduly or irregu- 
 larly granted to directors and their dependents. 
 
 (e) The comparison of the deposit accounts with the pass books of 
 depositors whenever practicable. 
 
 (/') The testing of the ledger entries of loan repayments with the 
 receipt books given to borrowers whenever practicable. 
 
 {g) The comparison of a proportion of the valuation certificates 
 attached to debt bonds with the securities, whether land, buildings, 
 jewels, or other securities. 
 
 (A) The examination in company with the directors of the annual 
 balance sheet and the submission of their remarks upon it to the gen- 
 eral meeting. 
 
 {i) Such other duties and operations as may appear necessary to the 
 company. 
 
 It shall further be competent for a general meeting, by ordinary reso- 
 lution, to require a report from the committee of supervision regard- 
 ing any matter relating to the interest of the bank. 
 
 The committee shall have power to summon extraordinary general 
 meetings whenever it may seem necessary, and shall summon the ordi- 
 nary meetings, should the directors fail to do so, within one month of 
 the fixed time or within three months after the close of the business 
 year if no time is fixed by the articles. 
 
 They shall, if required, assist at the regular annual or other audit, 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 133 
 
 and shall, in any case, add their remarks to the audit report submitted 
 with the balance sheet to the general meeting. 
 
 49. Inspections. — Shareholders holding not less than one-tenth of 
 the whole shares of the bank, or one-tenth of the number of members 
 or creditors, including depositors to whom, in the aggregate, an amount 
 not less than one-tenth of the nominal capital is due, may apply to the 
 commissioner for the appointment of the inspectors mentioned in sec- 
 tions 82 to 85 of Indian Companies act (1882). 
 
 The bank may also appoint inspectors as mentioned in section 86 of 
 the Indian Companies act (1882) by ordinary resolution. 
 
 Provision shall be made in the articles for the inspection of books 
 by members at any reasonable time or place, but not so that the ledger 
 accounts of members other than the inspecting members shall be 
 viewed. 
 
 50. General meeting. — The general meeting shall appoint and, when 
 necessary, i-evoke the appointment of all directoi's and of the commit- 
 tee of supervision. No shareholder in arrears with any call that may 
 hare been made upon the shares shall be entitled to vote at any gen- 
 eral meeting. 
 
 51. Audit. — The local government through the commissioner shall 
 make rules, which shall have the force of law, for the efficient audit 
 of every bank, and for taking all steps for the safety of the bank, its 
 members, and the public, which such audit may show to be necessary, 
 including the winding up of the bank. Auditors shall not be appointed 
 by directors, but by the general meeting, nor shall any director be 
 eligible as an auditor. The commissioner shall have power to appoint 
 an auditor where no proper auditor is appointed by the bank, or where 
 the auditor has been improperly appointed, or when he considers that 
 a coauditor is advisable, and such auditor shall have all the powers of 
 an auditor as ordinarily appointed. 
 
 The debenture holders, depositors, and other creditors of any bank 
 shall have the right of jointly appointing a special auditor to repre- 
 sent their interests at the periodical audit. Such auditor shall have 
 the same powers as the ordinary auditors appointed by the general 
 meeting. Any dispute as to the appointment or personality of such 
 auditor shall be referred to the commissioner, whose decision shall be 
 absolutely final, and shall not be open to appeal or to suit in court. 
 52 to 59. Provides regulations for liquidation. (Omitted.) 
 60. Privileges. — The following privileges shall be granted to banks 
 duly complying with the conditions of this act, viz: 
 
 (1) The privilege of distraint of the movables of debtors in arrears 
 with their dues, such dues to include sums paid by the bank as assess- 
 ment or rent on behalf of such debtors; 
 
 (2) The privilegB of depositing their strong boxes in the govern- 
 ment treasuries; 
 
 (3) The privilege of the "purge;" 
 
 (4) The privilege of the priority of the bank's claims in the case of 
 all loans for land improvement; 
 
 (5) The privileges, legal, fiscal, and other, entered in section 38 
 relating to loans for agricultural purposes; 
 
 (6) The privilege of the settlement of disputes at a minimum of 
 expense by the government authority having supervision over compa- 
 nies registered under this act; 
 
134 AGEICULTXJBAL BANK IN THE PHILIPPINES. 
 
 (7) The pri\dlege of obtaining, dejure, an award by arbitrators on 
 behalf of applicants to the bank for loans for the redemption of prior 
 debts; 
 
 (8) The privilege of exemption from the operation of the "home- 
 stead exemption" clause (o) in section 266 of the Civil Procedure 
 Code for all loans for bona fide land improvements. 
 
 The following privileges may be granted by express authorization 
 of government for each bank: (1) the issue of the special classes of 
 debenture mentioned in this act, sections 18 to 36, with the corre- 
 sponding privileges in the matter of stamp duties and registration 
 rules and charges; (2) the power to sell propert}' mortgaged to the 
 bank without the intervention of the court; (3) the privilege of sub- 
 ventions or guaranties from the state; (4) the power to take action 
 upon a registered document, not being a mortgage or relating to 
 immovable property as though a decree of court. 
 
 Privileges, whether those of the first or of the second paragraph of 
 this section, may be withdrawn at any time by government should such 
 withdrawal seem advisable. 
 
 61. Distraint. — Banks may, in case of arrears, distrain the movable 
 property of defaulters in the manner hereinafter laid down, viz: 
 
 Class 1. — In the case of arrears of Rs. 20 and under, the provisions' 
 of the Madras village courts act shall be applied. The authorized 
 agent of the bank shall present a written demand signed by the authori- 
 ties of the bank, together with his power-attorney, to the village 
 munsif , who shall then execute such demand as though a decree of 
 his court, and .shall prepare and sign a list of the property distrained. 
 All the provisions of sections 52 and 65 of the said act shall be applied 
 to distraints of this class. The costs of distraint and sale, chargeable 
 upon a scale to be laid down by the local government, shall be treated 
 as costs of execution and sale under the said sections. 
 
 Objections to the distraint, whether by the defaulter or by any third 
 party, shall be taken by the village munsif as a suit under the act, and 
 disposed of accordingly. 
 
 Class II. — In the case of arrears above Ks. 20, the distrainer may 
 proceed as in the Madras rent recovery act, sections 15, 19 to 31, 
 and 35. But the word "collector" in the said sections shall be read 
 throughout as " district munsif 's court having jurisdiction." 
 
 The provisos of section 52 of the village courts act shall apply to 
 distraints under this class, but the value of the property excepted 
 under clause (5) shall not exceed Rs. 50. The distraint shall be made 
 in presence of the village munsif, or, in his absence, of some other vil- 
 lage officer, or of two respectable witnesses who shall attest the list 
 of property distrained. 
 
 Property consisting of crops on the ground shall not be attached 
 unless ripe for harvest. Cattle and live stock shall not be removed 
 from the village until the time of sale, but shall be left in care of the 
 village munsif, who shall make provision for their custody, unless the 
 defaulter gives written security that he will produce them. The vil- 
 lage munsif, or other witnesses, shall attest such security. All prop- 
 erty distrained may be left with the defaulter on his giving proper 
 security for its production. 
 
 The distrainer shall send within forty-eight hours a written notice 
 of the distraint, an attested list of the property distrained, the name 
 
AGRICULTURAL BANK IN THE PHILIPPINES. 135 
 
 and village of the defaulter, the amount in arrear and the date of dis- 
 tress, to the court of the district munsif having jurisdiction. 
 
 A summary suit shall lie in the above court against any such dis- 
 traint for any material irregularity in the distraint or against the 
 distrainer's claim. But no suit shall lie for any irregularity of form 
 or procedure, unless it shall be proved that the defaulter has been 
 materially damaged or prejudiced. 
 
 It shall also be lawful for any third person having a bona fide claim 
 to the property distrained to file a summary suit before the district 
 munsif, who shall adjudicate upon it. 
 
 The procedure to be adopted in the court of the district munsif shall 
 be that laid down for the hearing of small causes, so far as such pro- 
 cedure is applicable; he may also postpone the sale of the property if 
 necessary. The order of the district munsif shall be final. 
 
 Provided always that the amount of arrears distrained for does not 
 exceed the sum for which the district munsif may tr^' suits as small 
 causes; claims regarding larger sums shall be heard as ordinary suits. 
 The district munsif may, and in the case of cattle, live stock, or per- 
 ishable goods, shall order the return of the property distrained to the 
 defaulter pending disposal of the suit, upon the defaulter giving satis- 
 factory security to the court, either for the amount distrained for with 
 costs of the distress or for the return of the property distrained; the 
 district munsif shall also make such order if the defaulter deposits in 
 court the amount of the distress and costs thereof. 
 
 If the defaulter does not appeal against the distraint, by filing a sum- 
 mary suit before the district munsif within fifteen days from the date 
 of distraint, or if a suit be filed and decided against him the distrainer 
 shall at the end of fifteen days fix up in some conspicuous place in the 
 village a notice specifying the property to be sold, and the time and 
 place for sale. He shall also cause a proclamation of the intended sale 
 to be made b}' beat of drum in the village. The sale date must be 
 fixed not less than seven days from the date of notice. 
 
 At the appointed time the distrainer shall put up the property to 
 sale by public auction outside of the bank's office or at the village in 
 which the property has been distrained; the sale may be in lots and 
 shall be knocked down to the highest bidder. 
 
 Sales shall, in villages where a weekly market is held, be univer- 
 sally fixed for such market days, and in all cases between the hours of 
 noon and 6 p. m. 
 
 If the arrears with interest and costs of distress and sale be satisfied 
 by the sale of a portion of the property, the distress shall be imme- 
 diately withdrawn as respects the remainder; any overplus shall be 
 paid to the defaulter. 
 
 The distraint notice sent to the district munsif by the distrainer 
 shall bear a court-fee label of eight annas. Court fees shall be levied 
 on summary suits before the district munsif as in small cause suits. 
 No court fees shall be levied on any proceedings taken by or before the 
 village munsif for sums of Rs. 20 and under. 
 
 Costs shall be allowed to distrainers on a scale to be determined by 
 the local government. 
 
 62. Under rules to be laid down by the local government, it shall 
 be lawful for banks to deposit their strong boxes in the local govern- 
 ment treasury when not required in use. 
 
136 AGRICULTURAL BANK IN THE PllILlPPINKS. 
 
 63. The jyMr^(?.— When a bank determines that a loan may be 
 granted, it shall be lawful for the bank before execution of the mort- 
 gage, to adopt, if necessary, means for the postponement to their 
 claim of any claims not already registered or declared. 
 
 In such case the bank shall publish a notice containing a statement 
 of the land or property to be mortgaged and the name of the proposed 
 mortgager, and calling upon all persons to put forward any claims to 
 the property or objections to the mortgage within six weeks. The 
 notice shall be published by affixing a copy at the chavadi or other 
 public place of the village or villages in which the property is situated 
 and in which the mortgager resides, and by tom-tom in the same vil- 
 lage or villages; a copy shall also be affixed on the bank's notice board, 
 and published in two consecutive issues of the District Gazette. 
 
 Claimants or objectors who appear in person or by representative 
 within six weeks of the publication of the first notice in the District 
 Gazette, or who file a suit X,o enforce any such claim or objection 
 within that period, shall be heard and their claims or objections con- 
 sidered; failing such appearance or filing of a suit, any or all objections 
 shall be considered as postponed to the bank's claim or shall be con- 
 sidered as invalid and of no efliect as regards such claims. But claims 
 so postponed shall be of full force and effect otherwise than as against 
 the bank's claim. 
 
 The postponement of the claims of third parties provided for by 
 this section does not apply to the case of any claims by heirs, mort- 
 gages, or charges whatsoever registered before the expiry of the said 
 six weeks calculated as in paragraph 3. The bank is bound to make 
 the necessary searches in the books of the registration department to 
 secure itself against claims duly registered before such date. 
 
 64. Land improvement loans. — Banks which grant loans under the 
 chapter regarding land-improvement banks, shall, as regards such 
 loans, enjoy the privileges entered in that chapter, including that of 
 priority of their claims over all anterior claims whatsoever. 
 
 66. Privileges allovmljle uvde7' section, 38 of this act. — These are (1) 
 a certain priority of claim; (2) reduction of stamp duties; (3) the 
 reduction of registration charges. 
 
 66. Disputes between a bank and any of its shareholders, debenture 
 holders, or other creditors, may, by consent of both parties, be 
 referred to the commissioner, notwithstanding any provisions in the 
 articles to the contrarj'. 
 
 In cases so referred the conmiissioner shall have the power of an 
 arbitrator under the Companies, act (1882); for the summoning of 
 witnesses and documents he shall have the power of a civil court, and 
 disobedience to such summons shall be an offense punishable under 
 section 174, Indian penal code. 
 
 The commissioner's award shall be final and conclusive and shall not 
 be appealable or restraigable by injunction of any court. It shall be 
 carried into effect by procedure under sections 525 and 526 of the code 
 of civil procedure, and the court receiving the award shall not be at 
 liberty to modify or cancel it. 
 
 The commissioner may, instead of making an award, state a case 
 for the opinion of the high court and shall pass an award in conso- 
 nance with such opinion. The commissioner may reject the reference 
 to him, and may order the parties to seek redress in a court. The 
 commissioner shall have power to refer for disposal or for inquiry 
 
AGRIOTJLTUBAIi BANK IN THE PHILIPPINES. 137 
 
 and report, any such references to any other pei'son or persons, 
 either selected by himself or designated by the rules of government, 
 or agreed upon by the parties, and such person or persons shall have 
 all the powers and duties of the commissioner, save only that of final 
 decision or rejection in cases referred only for inquiry and report. 
 
 The local government shall lay down rules for the mode of refer- 
 ence by banks or persons to the commissioner, and for the fees, if any, 
 to be levied by him. 
 
 67. Arbitration hi cases of prior debt. — When loans are sought for 
 the redemption of prior debts the bank may submit the claim of the 
 prior creditor to arbitration, as follows: 
 
 (1) Application may be made to the local village court to make an 
 award. Such coui't shall entertain such application as though a suit 
 under the village courts act, and shall call upon the creditor to ap- 
 pear upon a given day for the settlement of the award. Where the 
 claim of the creditor does not exceed Rs. 20 it shall be compulsory 
 upon the creditor to submit his claim to arbitration by the village 
 court upon application by the debtor or by the bank on his behalf, 
 and the court maj' proceed to dispose of the application in the absence 
 of the creditor upon proof of due service of notice. In the case of 
 claims exceeding Rs. 20 but not exceeding Rs. 200, the village court 
 shall have jurisdiction only upon the written consent of both parties, 
 and upon the conditions laid down in the village courts act, for the 
 trial of suits of above Rs. 20 in value. 
 
 Awards under this subsection shall be final and conclusive and shall 
 not be subject to appeal, nor shall a suit by either party lie thereon. 
 
 (2) Where the claim exceeds Rs. 20, application may be made to the 
 court of the district munsif who shall proceed under the code of 
 civil procedure. Where the claim does not exceed Rs. 50, it shall be 
 compulsory for the creditor to submit his claim to such arbitration 
 upon application- by the debtor or by the bank on his behalf, and the 
 court may proceed to the disposal of the application in the absence of 
 the creditor upon proof of due service of notice. 
 
 (3) It shall he lawful for the board of directors or for the committee 
 of supervision of the bank to act as arbitrators between the prior 
 creditor and the debtor without the intervention of a court, provided 
 that the consent of both parties in writing has been obtained. In 
 case of such arbitration, not less than three of such board or commit- 
 tee chosen by lot shall act, and their award shall be final and without 
 appeal nor shall any suit lie against such award in the case of claims 
 not exceeding Rs. 100. 
 
 (4) Where a number of banks may have grouped themselves into a 
 union, it shall be lawful for such union to form a court of arbitration 
 for the disposal of claims as between creditors and debtors in which 
 any bank which is a component member of the union may be inter- 
 ested. The members of such court shall consist of an indefinite num- 
 ber, not being less than seven appointed by the general meeting of the 
 union, and any claim submitted for decision shall be disposed of by a 
 court of not less than three or more than five members, who shall be 
 chosen by lot. Claims shall only be submitted to such court upon the 
 written consent of both parties, and may be of any amount. The 
 court shall be guided by the provisions of the code of civil procedui-e 
 in the matter of arbitration, and their awards shall have the effect of 
 and shall be dealt with as awards under that act. 
 
188 AGBICULTURAL BANK IN THE PHILIPPINES. 
 
 (5) It shall be lawful for the boards of control appointed under the 
 provisions of section 71 of this act to act as courts of arbitration; in 
 such case thej' shall be guided by the provisions of the above clause (4). 
 
 68. Debentures. — Companies registered under this act shall not issue 
 privileged debentures of the special classes mentioned in sections 18 
 to 36 without the special authorization of government. 
 
 Rules shall be made by the local government regarding applications 
 for such privilege, for the conditions as to capital, guaranty, area of 
 operation and the like, under which such privilege may be granted. 
 
 69. A bank specially authorized by government to that end may use 
 the power granted by section 69 of the transfer of property act to sell 
 property mortgaged to it, without the intervention of the court, and 
 shall not be subject to the limitation contained in paragraph 2 of that 
 section relative to the amount of interest due as a necessary prelimi- 
 nary to the exercise of the power, but shall be otherwise subject to the 
 provisions of that section and to the following, viz, {a) the original 
 mortgage debt must exceed the sum of Rs. 200; (o) in the case of 
 mortgage debts repayable by installments including interest and sink- 
 ing fund, one complete installment period must have elapsed since the 
 installment due became an arrear; the dues in arrear must exceed the 
 sum of Rs. 20, and more than half the principal money must be still 
 outstanding on the debt; (c) in the case of mortgage debts payable in 
 lump at the end of a term, interest must be due to the amount of at 
 least Rs. 20 and for the period of at least one year. 
 
 70. Suhventions. — Subventions or guarantees from the State may be 
 granted under such rules or conditions as may be from time to time 
 prescribed by the local government. 
 
 It shall be lawful for the State to grant subventions either by direct 
 loan or by purchase of the bank's debentures. 
 
 All subventions granted without interest or at favorable rates of 
 interest shall, whether principal or interest, constitute the tirst charge 
 upon the assets of a bank in case of liquidation, and shall be with- 
 drawable on one year's notice by either party; failing repayment of 
 the subvention, it shall be lawful for Government to obtain the liqui- 
 dation of the bank by application to a court. 
 
 Subventions granted at full rates of interest shall not obtain a 
 position of priority. 
 
 The guarantee granted by the State may extend either to the principal 
 of the liabilities of the bank or only to the interest due thereon; in the 
 latter case the guarantee shall terminate upon the liquidation of the 
 bank. Any sums paid by the State in pursuance of such latter guar- 
 antee shall form the first charge upon the assets of the bank, and shall 
 be paid from any subsequent profits of the bank before the declaration 
 of any dividend to shareholders or honoraria or other fees to directors. 
 Any loss to Government by reason of any subvention or guarantee 
 shall be a charge on the public reserve provided by section 16 supra. 
 
 It shall be lawful for Government to require that in return for such 
 subvention or guarantee, a proportion of the directors or of the com- 
 mittee of supervision, if any, shall be nominated by Government; such 
 proportion to be fixed by arrangement with the bank. 
 
 The power of granting minor subventions, each not exceeding Rs. 
 100, for the starting of banks, may be delegated to the commissioner, 
 through whom all recommendations for major subventions should pass. 
 
 71. It shall be lawful for a court to enforce the terms of any docu- 
 
AGEIOULTUEAL BANK IN THE PHILIPPINES. 139 
 
 ment for the recovery of advances made by a bank specially so privi- 
 leged, upon the mere production of the document, provided (1) that 
 the document shall not be of the nature of a mortgage or relate to 
 immovable property, (2) that it shall have been duly registered, (3) 
 that the money shall have been paid in the presence of the registering 
 officer, and payment certified upon the document by such officer. The 
 court shall treat such document as a decree of court, and shall issue 
 execution thereon for so much of the bond amount with interest and 
 costs as shall be entered in a petition which shall be duly verified by 
 the petitioner for execution, nor shall it be necessary, though permis- 
 sible, to give notice to the debtor or to permit him to show cause 
 against such execution. But it shall be lawful for the debtor to file a 
 suit to set asid* the petition and the order thereon, provided that such 
 suit shall be filed within one month from the date of execution or 
 attempted execution of such order. Such suit shall be heard as a reg- 
 ular or as a small cause suit according to the value of the claim. 
 
 72. Superoislon. — Banks shall be subject to the supervision of the 
 local government which shall be exercised by the commissioner for 
 rural credit. The local government shall designate the officer who shall 
 perform the duties of commissioner under this act. The office of the 
 commissioner shall be the office for the registration of companies 
 under this act, and not the office of the registrar of joint stock 
 companies. 
 
 The articles of association shall be sent to the commissioner as 
 required by the Companies act to the registrar; the commissioner 
 shall examine them, and, if approved, register and certify them as 
 legal. He shall have power to reject articles that may be contrary to 
 law and shall advise upon the propriety of articles when necessary or 
 whenever desired. 
 
 All changes in the articles shall similarlj^ be registered and dealt 
 with, together with copies of the resolutions sanctioning the changes. 
 
 The names and addresses of all officeholders other than the minis- 
 terial staff shall be communicated to the commissioner with the signa- 
 ture of such officeholders. 
 
 No bank shall commence business until receipt of the commissioner's 
 certificate. 
 
 All banks shall send in to the commissioner quarterly returns, show- 
 ing assets and liabilities, mortgage debts and debentures issued, and a 
 complete statement of operations, including the number, value, and 
 rates of interest of loans of each class, the amount of investments in 
 securities separated into classes, and cash uninvested, up to the end of 
 the quarter. 
 
 Every year a copy of the annual balance sheet, as passed by the gen- 
 eral meeting, together with the report of the auditor, and the remarks 
 of the committee of supervision, if any, and of any reply by the direc- 
 tors, shall be sent to the commissioner in a form to be prescribed by 
 him; also a statement of profit and loss; a detailed statement showing 
 the position of each loan and its present value as an asset on the last 
 day of the year under report; the aggregate amount outstanding on loan 
 and the aggregate amount of debentures outstanding; the amount of 
 the reserve and the investments in which all funds have been placed; 
 the number and amount of all mortgages and other loans in arrears of 
 interest for a period exceeding six months prior to the date of the state- 
 ment; the number and amount of mortgages foreclosed or sued upon 
 
140 AGBICTJLTXJRAL BANK IN THE PHILIPPINES, 
 
 during the past year; the number and value of immovable properties 
 held by the bank as the result of foreclosure or other legal process or 
 by purchase on account of debt. An abstract, to be prepared by the 
 commissioner, shall also be issued annually in the Fort St. George 
 Gazette and in the gazette of the district where the bank holds office. 
 
 The commissioner shall require the bank to keep proper accounts, 
 and satisfy himself that such accounts are kept. 
 
 The commissioner shall have power to require each bank to make 
 proper rules in its articles of association, for an efficient audit, and shall 
 satisfy himself that such rules are thoroughly observed. Should any 
 bank fail to make proper rules, the commissioner having due regard to 
 the circumstances, business and surroundings of the company, shall 
 make suitable rules which shall then be binding on the hank. In case 
 of willful neglect of rules the commissioner shall have power to make 
 a proper audit and to charge tbem with the necessary expenses. 
 
 Every bank shall be inspected by the commissioner or his delegates 
 at least once in every two years, and as much oftener as may be nec- 
 essary. On every such examination inquiry shall be made as to the 
 condition and resources of the bank, the mode of conducting and 
 managing its affairs, the action of its directors, the investment of its 
 funds, the safety and prudence of its management, the security 
 afforded to those who have dealings with it, and the due observance 
 of the provisions of the law and of its articles in the administration 
 of its affairs, and as to all such other matters as the commissioner may 
 prescribe. Special regard shall be had in such examination to the 
 state and safety of the capital, to the existence of suitable reserves, to 
 the genuineness of dividends, to the nature and stability of the 
 investments, to the security for depositors, debenture holders, and 
 other creditors, to the punctuality and completeness or otherwise of 
 the collection of dues upon loans, to the condition of the various 
 classes of loans as regards arrears, to the action found necessary 
 against property, especially in land, and to the properties acquired or 
 held bj' the bank by way of attachment or expropriation, to the actual 
 existence unencumbered of securities purporting to be in hand, to 
 the correctness of the balance sheet, to the verification of deposit or 
 pass books with the ledgers, and to the due valuation of the assets. 
 For such examination the bank is bound to place before the examiner 
 the whole of its books, records, and securities, and its directors, 
 office bearers, and members shall be bound to answer all questions 
 relevant to such examination. 
 
 Upon the application of any five members or creditors of a com- 
 pany, who shall present or forward an application duly verified as a 
 plaint setting forth facts with any necessary documents in support 
 thereof which in the opinion of the commissioner demand, warrant, 
 or render advisable an examination of the company's books, the com- 
 missioner shall depute an inspector for an examination of the books 
 and accounts. 
 
 Upon the duly verified application of one-tenth of the shareholders, 
 or of 100 if the bank has more than 1,000 shareholders, or of share- 
 holders holding one-tenth of the capital, or of depositors, debenture 
 holders, or creditors holding one-tenth of the deposits, debentures, or 
 other debts of the bank, the commissioner may order an investigation 
 of the affaii-s, management, business, condition, and soundness of the 
 investments of a bank. 
 
AGEICXJLTUEAL BANK IN THE PHILIPPINES. 141 
 
 Nothing in this section shall be held to prevent the commissionei' 
 from ordering at any time any inspection, whether of the books or 
 affairs of a bank, on his being satisfied that such inspection is advisa- 
 ble or in the interests of the bank or of its shareholders, depositors, 
 or creditors or of the public. 
 
 Inspectors appointed by the commissioners may be officers of gov- 
 ernment, professional auditors, or others, but shall not be office- 
 holders of the bank. They may, if necessary, be paid upon a scale 
 to be determined by the local government. 
 
 Inspectors shall in their examinations have all the powers mentioned 
 in section 84 of the Indian Companies' act, 1882. 
 
 The result of every examination shall be reported to the commis- 
 sioner; an abstract of the report shall be sent to each person who may 
 have instigated the examination, and a copy of the report, with the 
 commissioner's remarks thereon, to the bank; the report, with the 
 commissioner's remarks, shall be laid before the next general meeting, 
 and in case the report discloses material irregularities or risks to the 
 public or to members or creditors, a special general meeting shall be 
 summoned within one month for the consideration of the report and 
 for the adoption of all necessary remedies. 
 
 A copy of the proceedings of such meeting shall be sent to the com- 
 missioner within one week. Should the directors fail to summon such 
 meeting, or failing the application of remedies, the commissioner shall 
 have power to call a general meeting for the adoption of the neces- 
 sary steps, failing which he may, if necessary, apply to the court 
 under section 131 of the Indian Companies' act for the purpose of 
 winding up the bank. He may, if preferred, apply to the court to 
 appoint a receiver for the management of affairs temporarily, or to 
 remove the directors or other officeholders, should the general meet- 
 ing fail to do so in case of necessity. 
 
 Provided, That when the bank is a member of a union established 
 for the purpose and capable of providing efficient inspectors or audit- 
 ors, the commissioner shall ordinarily confine himself to forwarding 
 the application with his remarks to the directors of such union, who 
 shall take such steps as may be necessary, and shall forward a copy of 
 their inspector's report to the commissioner. Failing the necessary 
 steps by the union or by the bank upon the union inspector's report, 
 the commissioner may act as before provided; and he shall also take 
 the necessary steps when the report of the union inspector discloses the 
 need for winding up the bank, for the appointment of a receiver, or 
 for the removal of directors. 
 
 An authenticated copy of the report of an inspector shall be admissi- 
 ble in evidence, as provided in section 87 of the Indian Companies' 
 act. The commissioner shall also have power to file suits, either 
 through his inspector or otherwise, against directors or others who 
 may have caused wrongful loss or damage to the bank and its mem- 
 bers or creditors or to the public. He is also empowered to prosecute 
 in the magisterial courts for any offense disclosed by the reports or 
 that may otherwise come to his notice, or for any penalty incurred 
 under this or the Companies' act. For the purposes of this paragraph 
 the commissioner shall be entitled to the services of the public pleader 
 or prosecutor. 
 
 The commissioner shall have power to settle disputes as laid down 
 in this act. He shall also act as advisor of the several banks in their 
 
142 AGRICULTURAL BANK IN THE PHILIPPINES. 
 
 formation, registration, management, and union, and shall for that 
 purpose collect and publish in periodical bulletins information which 
 may be of use to banks, and shall prepare and issue for the guidance 
 and optional use of banks models of articles, accounts, documents, 
 annuity, and, if necessary, life tables. He may, in person or by dele- 
 gate, preside at the general meeting of any bank preliminary to its 
 formation, if so desired by the promoters, directors, or one-fourth of 
 the subscribing shareholders. 
 
 The commissioner shall prepare annual reports on the banks under 
 his supervision, giving all necessary information as to their working, 
 success, and failures, with suggestions for the development of their 
 operation, the amendment of the law or of the Government rules, and 
 on such other matters as may be necessary. The report shall be 
 divided into separate sections for the various classes of bank or com- 
 pany within the supervision. 
 
 It shall be lawful for government to make rules for the appoint- 
 ment and working of boards of control and supervision, to which all 
 or any of the powers of the commissioner may be delegated, save only 
 that the appointment, control, and supervision of the examiners or 
 inspectors shall rest with the commissioner alone and not with the 
 boards. The boards shall report to the commissioner all cases in which 
 they are of opinion that a special examination of the accounts or affairs 
 of a bank is necessary. The members of such boards may be paid 
 honoraria and traveling allowances, such expenditure being met from 
 the contribution, if any, payable under the last paragraph of section 
 16 of this act. 
 
 Nothing in this section shall be held to interfere with any special 
 methods of supervision hereinafter provided for the several classes of 
 bank or society. 
 
 Chapter III. — Cooperatvoe societies. 
 
 73. Description. — A cooperative society consists, for the purposes 
 of this act, of an association of seven or more persons united with a 
 variable capital and societariat for a common purpose, viz, the com- 
 mon economic benefit of the several members ana of the members 
 only; such benefits are especially — 
 
 (1) The furtherance of thrift and providence; 
 
 (2) The grant of credit to the members; 
 
 (3) The supply to members of raw material; 
 
 (1) The sale on behalf of members of agricultural produce or of 
 manufactured goods; 
 
 (5) The manufacture of goods or growth of produce cooperatively; 
 
 (6) The purchase of food stuffs, clothing and articles, animals or 
 stock required in agriculture or industry, and their retail sale to 
 members; 
 
 (7) The purchase of machinery and its use in common by members; 
 
 (8) The building of houses and purchase of lands for members; 
 
 (9) The carrying out or development by joint action of an improve- 
 ment, whether agricultural or industrial. 
 
 A cooperative society which receives deposits or which grants or 
 deals in credit is a cooperative bank. 
 
 74. Liability. — Liability in cooperative societies may be unlimited 
 by guaranty, limited by shares, or limited to a sum in excess of the 
 shares, but restricted by the articles of association to an additional por- 
 
AGRICTJLTUEAL BANK IN THE PHILIPPINES. 143 
 
 tion of or to a multiple of the share values. It shall be also lawful 
 for societies of the nature of building societies or nidhis, which require 
 the subscription of shares by periodical and regular instalments up to 
 the date of maturity and then repay the shares, to declare by their 
 articles that the liability of their nonborrowing members extends only 
 to the amount actually paid up or actually due at the date of the com- 
 mencement of liquidation, and that the liability of their borrowing 
 members shall be confined to the complete repayment of their loans 
 with interest. 
 
 75. The capital and number of shares of a cooperative society shall 
 be limited by the memorandum of association, and may be increased 
 as entered in section 12 of the Indian Companies' act. ' Such capital 
 shall be deemed to be the maximum capital of the society, but it shall 
 not be necessary for such maximum to be subscribed at the inception 
 of the society. 
 
 The subscribed capital of the society shall be variable, according as 
 members enter or withdraw from the society; there shall be no limit 
 either to increase or reduction, save only the registered maximum on 
 the one hand and the necessity for the association of seven members 
 on the other. 
 
 The provisions of the Indian Companies' act relative to the reduc- 
 tion of capital shall not apply to cooperative societies. 
 
 76. Shares. — The shares of cooperative societies shall not exceed 
 Rs. 200 in value; each member must hold at least one share, but 
 none shall possess in his own right shares to the value of more than 
 Es. 5,000. 
 
 Every share shall be personal only, and shall not be transferable 
 except under the rules of the society. But every share shall be with- 
 drawable at the will of the holder, subject to such rules as niay be 
 prescribed by the articles of the society. 
 
 The articles of association shall prescribe the value of each share, 
 the nuniber which may be held by any one member, the mode of sub- 
 scription, and the term within which payment shall be completed. 
 
 77. Memhers. — The articles of the society shall determine the quali- 
 fications for membership and the mode of admission, and shall provide 
 an appeal to the committee of supervision, if any, or to the general 
 meeting, in case the directors or committee of admission reject a can- 
 didate. No suit shall lie against any refusal to admit a candidate. 
 Every society shall maintain a register of members containing at its 
 head a printed copy, in the vernacular of the society, of the articles 
 of association and showing the name, address, occupation, number of 
 shares and amount paid up thereon, for each member. An abstract 
 of this register, showing the total number of members, the number 
 admitted and the number withdrawn, deceased, or expelled during the 
 quarter, the number under each occupation, the number of shares 
 taken up, their total face value, and the total paid up thereon, shall be 
 sent quarterly to the commissioner. 
 
 Each member shall, on admission, affix his dated and attested signa- 
 ture or make an attested mark in such register opposite his name. 
 Before signing, the articles shall be read and explained to him, and his 
 signature or mark shall be considered as binding him to adhesion to 
 the articles. 
 
 Each member shall have one vote, unless the articles otherwise 
 decide; but in no case shall a member possess more than five votes. 
 
144 AGKICULTUBAL BANK IN THE PHILIPPINES. 
 
 A member shall not be allowed to transfer his shares unless the rules 
 of the society so permit. The articles shall prescribe the rules under 
 which transfer may be accepted. 
 
 Members may withdraw at will from a society. 
 
 78. The articles shall determine the notice required and the period, 
 such as the end of the business year, or otherwise, at which with- 
 drawals will be accepted. Withdrawing members shall be entitled to 
 the return of their subscriptions, together with any divisible profits 
 which may have accrued thereon and remain unpaid to them up to 
 twelve months preceding the date of withdrawal. The articles snail 
 decide whether such withdrawing member is entitled to any, and, if 
 so, what share of the profits of the twelve months preceding with- 
 drawal. A withdrawing member is not entitled to demand the return 
 of his subscription till funds are available, but the society is bound to 
 repay him as soon as possible after the close of the year in which he 
 withdraws. If no demand is made, the amount shall lapse to the 
 society upon the expirj' of the period of limitation prescribed by the 
 general law. He shall not be entitled to any portion of the reserve, 
 which shall remain with the society, or to any share in the other prop- 
 erty of the society. 
 
 Withdrawals shall be noted in the register of members over against 
 the entry of the withdrawing member's name, and his dated and 
 attested signature or mark shall, whenever possible, be taken in a 
 column to be provided for the purpose; such signature or mark shall 
 be taken as evidence of the member's actual withdrawal and of its 
 date, but shall not operate as an acquaintance for the value of his 
 shares unless it is expressly so stated, and unless a 1-anna adhesive 
 stamp be aiExed for sums above Rs. 20. 
 
 79. The signatures or marks of members joining or withdrawing 
 must be attested by two members, one of whom must not be a director. 
 
 80. The articles shall provide rules for the expulsion of members in 
 case of misconduct, crime, or other sufficient cause. A minute of the 
 reasons for such expulsion shall be maintained b}' the society in a 
 register to be kept for the purpose. 
 
 81. It shall be lawful for decree holders to obtain an order of the 
 court to attach any shares of a member or deposits whether of a member 
 or of a nonmember, in a cooperative society, subject, however, to 
 the exemption contained in section 85 (13) infra. On receipt of the 
 order, the society shall, subject to the above exemption, pay into 
 court such amount as the member would receive on ordinary with- 
 drawal, or the amount of his deposits, but shall, for such payment, be 
 allowed the delay which would have been permissible in the case 
 of ordinary withdrawal. 
 
 82. Decease shall be considered as a withdrawal, and the withdrawal 
 value of the deceased member's shares shall be paid to the heirs of the 
 deceased, unless such heir is admitted as a member in his place. 
 
 83. The liability of any member, who may have withdrawn or been 
 expelled from a society, shall continue in full force for all engage- 
 ments of the society entered into prior to such withdrawal or expul- 
 sion, for twelve months subsequent to such withdrawal or expulsion, 
 and he shall be considered as a contributory in case the society enters 
 into liquidation at any date within such twelve months, subject to the 
 provisions of section 61 of the Indian (companies' Act. But the estate 
 
AGBICULTTJKAL BANK IN THE PHILIPPINES. 145 
 
 of a deceased member shall not be liable to contribute to the assets of 
 a society in liquidation, whether he shall have died before or after the 
 commencement of liquidation. 
 
 84. The provisions of Chapter II of this act shall apply to coopera- 
 tive banks, except sections 8, 9, 10, 11, 45 and 60, and except in so far 
 as the provisions of the present chapter conflict with the provisions 
 of Chapter II. 
 
 85. rrivileges. — Certain privileges shall or may be granted to a 
 cooperative society. The following privileges shall be granted de jure 
 to all cooperative banks: 
 
 (1) Exemption of the memorandum and articles of association from 
 stamp duties and frpm fees on registration with the commissioner. 
 
 (2) Exemption from stamp duty on the transfer of shares. 
 
 (3) (ffl) Reduced stamp duties, viz, on mortgage deeds and bills of 
 sale below Rs. 100 in value, between a societ}'^ and its members, one- 
 half the ordinary rates, provided that during the subsistence of any 
 such document or of documents aggregating Rs. 100 on the same prop- 
 erty or on the whole property belonging to one owner, the privileged 
 rate of duty shall not be allowed on any further mortgage deeds unless 
 such subsequent deeds have been executed in redemption of cancella- 
 tion of the prior deed or deeds; {h) on simple bonds below Rs. 100 
 one-half of the ordinary stamp duty. 
 
 (4) A privileged rate of registration charges, viz, on registrable 
 documents mentioned in clause (3), a charge of half the ordinary rates. 
 In the case of such documents it shall not be necessary to transcribe 
 them in full; it shall suffice to enter the names and addresses of the 
 parties, the property charged, if any, the amount of the loan, and its 
 term, the date of the document, and the names of the witnesses. 
 
 Releases of all mortgage deeds of whatever value between a society 
 and its members shall invariably be issued by the society and are sub- 
 ject to the provisions and are granted the privileges of section 39 supra. 
 
 The privileges granted in clause (3) «, h, and the reduction of regis- 
 tration charges granted by clause (4) shall ordinarily have effect only 
 for the first five years after a society has been registered; but such 
 period of privilege may be extended indefinitely by the local govern- 
 ment if necessary. 
 
 (5) The privilege of distraint as entered in section 61 supra. 
 
 (6) The privilege of placing their strong Ijoxes in the government 
 treasuries. 
 
 (7) The privilege of the " purge," as entered in section 63 supra. 
 
 (8) The privilege of priority of claims for certain loans, as entered in 
 section 64 supra. 
 
 (9) The privilege of section 38. 
 
 (10) The privilege of settlement of disputes by the commissioner, as 
 in section 66 supra. 
 
 (11) The privilege of obtaining de jure an award by arbitrators on 
 behalf of applicants to the bank for loans for the redemption of prior 
 debts. 
 
 (12) When any trustee, officebearer, or person intrusted with the 
 money or accounts of a cooperative bank dies or becomes bankrupt, 
 insolvent, assigns his property to his creditors, or is subject to legal 
 process of attachment against his property, he having at the time 
 funds or property of the bank in his hands, the claims of the bank 
 
 30795- 
 
146 AGEIGULTTJEAL BANK IN THE PHILIPPINES. 
 
 shall have priority over all other claims to the amount of such funds 
 or value of such property and shall be a first charge upon the whole 
 assets of such person, and the executors, assignees or court shall, on 
 proof of the bank's claim, paj' over such amount or make over such 
 property within one month of proof of the claim. 
 
 (13) Shares in a cooperative society of more than six months' stand- 
 ing from the commencement of subscription, and deposits of more 
 than twelve months' standing from commencement of the deposit, 
 whether such deposits be those of a member or of a nonmember, shall 
 be exempt up to the amount of Rs. 100 in the aggregate from attach- 
 ment of any description whether by a court, by government for its 
 dues, by a landlord for his rent, or by any other creditor or claimant; 
 where the value of such shares or the amount of such deposits, or the 
 amount of both together, shall exceed Rs. 100, the exemption shall 
 hold good up to the total of Rs. 100. 
 
 Prorided, however. That such exemption shall not extend to the 
 claims of the society itself for amounts for any cause due to it by the 
 member or depositor. 
 
 • (14) It shall be lawful for any member of a society above the age 
 of 16 years to nominate the person or persons to whom, in case of his 
 decease, his shares to the value of not more than Rs. 600, or if his 
 nominee is not admitted by the society the withdrawal value thereof, 
 not exceeding the same amount, shall be transmitted. Such nomina- 
 tion shall be treated and operate as a will, but probate of such nomi- 
 nation shall not be required. But such nomination shall be invalid if 
 made in favor of a director or other office bearer, officer, or servant 
 of the society or of any relation, servant or dependent of such persons, 
 unless such director, office bearer, officer, or servant is related to the 
 nominating member, either as husband, wife, child, parent, brother or 
 sister, nephew or niece of the nominator. 
 
 Such nomination must be made to the directors in writing by the 
 member, and, when the directors are satisfied of the genuineness of 
 the application, shall be entered in a nomination register to be kept 
 for the purpose; the entry must be signed or marked by the nominat- 
 ing member, and attested by two members independent of the nomi- 
 nating member and having no interest in the nomination. The written 
 application shall be permanently preserved by the society among its 
 records. The entry in the register shall bear a 1-anna adhesive label. 
 The nomination may be revoked or modified at any time with similar 
 formalities, but shall not be subject to modification or cancellation hy 
 an 3' regular will or codicil to a will. On the decease of the nominat- 
 ing member, the society shall deal with the case as though one of 
 transfer inter vivos, and may admit the nominee accordingly; should 
 they object to the nominee as a member, they shall pay him the with- 
 drawal value under the conditions applicable to the withdrawals of 
 members. Such paj'ments shall be valid and binding, and no suit 
 shall lie against the society for any such transfer or payment made 
 bona fide and in pui'suance of a genuine and bona fide nomination, 
 duly registered and attested as above, but only against the transferee, 
 or the receiver of the money. The society shall make such payment 
 and shall be similarly protected up to the amount of Rs. 500 even 
 though the nominating member possess shares of a greater withdrawal 
 value. 
 
AGKICULTURAD BANK IN THE PHILIPPINES. 147 
 
 (15) In case of decease without such nomination and witliout will, 
 it shall be lawful for the society in the case where the withdrawal 
 value of the shares does not exceed Rs. 500, to receive claims from 
 heirs only for the transfer of the shares or for the withdrawal value, 
 and within three months from such decease they shall, unless they 
 have been notified of a petition having been filed in court to determine 
 the question of succession, decide upon the merits of the several claims 
 and shall transfer the shares or pay their withdrawal value to such 
 claimant or claimants as may appear to be the lawful heir or heirs. 
 Before making such transfer or payment thej' shall give notice thereof 
 in writing and by beat of drum in the village in which the deceased 
 member ordinarily resided; one month after such notice they may 
 proceed to the transfer or payment, which shall be valid and binding, 
 and no suit shall lie against the society or the directors for any such 
 transfer or payment made bona fide, only against the transferee or 
 receiver of the money. This provision shall hold good up to the 
 amount of Rs. 500 even in cases where the withdrawal value exceeds 
 Rs. 500. 
 
 (16) The provisions of the above three paragraphs. 13, 14, and 15, 
 shall hold good in the case of depositors in a cooperative society up to 
 the same amounts. 
 
 (17) All correspondence with the commissioner or with government 
 may be sent post free, under rules to be made for the purpose by the 
 local government. 
 
 (18) The privilege of exemption from the operation of the " home- 
 stead-exemption" clause {o) in section 266 of the Civil Procedure Code 
 for all loans made for bona fide land improvement. 
 
 All or any of the above privileges may be withdrawn or modified 
 by the local government at anj^ time for anj- reasons that may appear 
 sufficient. 
 
 86. The following privileges may be granted to a cooperative bank 
 upon the express authorization of the local government, viz: 
 
 (1) The issue of special classes of debentures mentioned in sections 
 18 to 36 of this act with the corresponding privileges in the matter of 
 stamp duties and registration rules and charges. 
 
 (2) The power to sell property mortgaged to the bank without the 
 intervention of the court as laid down in section 68 supra. 
 
 (3) The privilege of subventions or guaranties from the state. 
 
 (1) The power to take action upon a registered document, not being 
 mortgage or relating to immovable propertj', as though a decree of 
 court. 
 
 (5) The privilege of exemption from the operation of the " home- 
 stead-exemption " clause (o) in section 266 of the Civil Procedure Code, 
 for debts due to the bank. 
 
 The above privileges may be withdrawn at any time by the local 
 government. 
 
 87. Any of the privileges contained in sections 86 and 86 may, with 
 the sanction of government, be granted to any cooperative society, 
 and may be withdrawn from such society. 
 
 Chapter IV. — Comprising sectians. 
 
 88 to 107, inclusive, are omitted. These sections make detailed pro- 
 visions for the organization and administration of savings banks. 
 
148 AGRICULTXTBAL BANK IN THE PHILIPPINES. 
 
 Chapter V. — Agricultural associations. 
 
 107. Description and objects. — Any seven or more persons maj' 
 unite in an agricultural association. Such association snail have for 
 its sole objects the advancement of agriculture and of the agriculturist^ 
 and may undertake or promote an}' of the following objects, viz: 
 
 (1) The purchase of ail stock and other requisites for agriculture and 
 the retailing thereof solely to members of the association ; 
 
 (2) The collection of produce from the members of the association, 
 and the sale thereof for the benefit of such members: 
 
 (3) Agricultural credit; 
 
 (4) Agricultural assurance; 
 
 (5) The establishment of benefit or friendly funds; 
 
 (6) The provision of stud cattle; 
 
 (7) The employment of veterinaiy experts; 
 
 (8) The study and development of agriculture, including the estab- 
 lishment of reading rooms, lectures, museums, experimental fields, and 
 the like; 
 
 (9) The development of agricultural education; 
 
 (10) The study and representation of matters affecting the agricul- 
 tural industry and its development; 
 
 (11) Arbitration between agriculturists; 
 
 (12) The carrying out of projects of irrigation, drainage, plantation, 
 or other agricultural developments by associated action. 
 
 108. Scope. — All agricultural associations shall be cooperative and 
 mutual; no business operations shall be undertaken except for the ben- 
 efit of members, and all profits, after providing for the necessary 
 reserves, shall be divided among the membei's according to their shares. 
 But the benefits from objects included in section 107, clauses (6), (7), 
 (8), (9), (10), and (11), may be extended to nonmembers. 
 
 The provisions relating to cooperative societies may be adopted by 
 association ufider this chapter, and shall be so adopted by associations 
 dealing with the objects mentioned in section 107, (1), (2), (3), (4), (5), 
 and (12). 
 
 109. The articles shall declare the specific objects of the association, 
 and shall provide for all such matters entered in sections 7, 77, 78, and 
 80 of this act as are appropriate to this form of society, and for such 
 matters as are special to it. 
 
 110. Withdrawal from the association shall be permitted at anj' time, 
 but the liability of the withdrawing member shall continue for all debts 
 due by him to the association, and he shall continue liable for the 
 space of one year for all debts due by the society incurred before his 
 withdrawal. 
 
 111. An association under this chapter, if not dealing directly in 
 credit, may acquire immovable property in its corporate capacity with- 
 out limit as to area or term of occupation. 
 
 112. An association shall retain a preferential lien over all stock pro- 
 vided on credit under section 107, clause (1), for members, until com- 
 plete satisfaction of its claim, nor shall any member sell, dispose of, or 
 in any way charge such stock to the detriment of the association or with- 
 out its permission. The provisions of section 38 of this act shall 
 apply mutatis mutandis to goods supplied on credit under section 107, 
 clause (1). 
 
 113. Credit. — No association shall deal in credit direct, unless it 
 shall have adopted the provisions of Chapter III. But any association 
 
AGKICTJLTUEAIj bank in the PHILIPPINES. 149 
 
 maypromote the grant of credit by establishing a credit branch or 
 annex. The members of such branch must be members of the associa- 
 tion and, further, must be expressly elected or otherwise admitted as 
 members of the credit branch. The branch shall take the form of a 
 cooperative bank, and shall be subject to the provisions of Chapter III; 
 its assets and liabilities, shares, business, accounts, and balance sheet 
 shall be distinct from those of association. 
 
 The above provisions apply to associations establishing benefit or 
 friendly funds and assurance branches. 
 
 114. Privileges. — Associations not falling under Chapter III shall 
 or may be granted certain privileges, viz, those contained in section 
 85, (1), (5), (6), (10), (12), (17). They may also be granted subventions 
 by the state, whether in the form of loans or of grants for first work- 
 ing expenses, premiums, grants in aid of exhibitions, museums, libra- 
 ries, schools, experiments or experimental plots, the provision of stud 
 cattle, and the like. 
 
 They shall be considered as persons eligible for loans under the 
 land improvement loans act and agriculturists loans act. 
 
 115. Supervision. — Associations shall be subject to the provisions of 
 section 72 so far as such may be applicable. 
 
 Chapter VI. — Land-improvement hanl's. 
 
 116. Objects. — The sole object of land-improvement banks shall be 
 the grant of credit for the permanent improvement and amelioration of 
 landed property, through — 
 
 (1) The bringing of waste lands into cultivation; 
 
 (2) The irrigation of drj' lands, whether the banks, channels, wells, 
 and the like, including the leA^eling of land for the purpose; 
 
 (3) The draining of lands and their embanking against floods; 
 
 (4) The aJBForesting of lands, including therein provision for hedging 
 and inclosure; 
 
 (5) The plantation of orchards of fruit trees expected to last at least 
 twenty j'ears; 
 
 (6) The erection of perma,nent buildings for the housing of the owner 
 or occupier of the land, or of his laborers, or of his stock; 
 
 (7) The provision of roads or tramways for the development of the 
 estate. 
 
 117. Such banks may be either joint stock or cooperative and shall 
 be regulated by the provisions of Chapters II and III, respectively, 
 subject to the provisions of the following sections. 
 
 118. Loans. — Loans may be granted up to 75 per cent of the exist- 
 ing value of the land to be improved. During the progress of the 
 improvement, the borrower may demand a further loan or loans up to 
 75 per cent of the estimated value of the amount spent upon the 
 improvement. 
 
 Loans may also be granted at the outset up to two-thirds of the 
 estimated value of the land, including the intended improvement, but 
 in such case shall be advanced onl}'^ by installments at the discretion of 
 the bank, and after due inspection and valuation of the progress of 
 the work. 
 
 Provided, That if the improvements be roads, tramways, or build- 
 ings, such loan shall not exceed one-half the value of the land and of 
 such roads, tramways, or buildings. 
 
150 AGRICULTXJBAL BANK IN THE PHILIPPINES. 
 
 119. Repayment of loans shall be solely through equal annuities 
 including both principal and interest, but" it shall be lawful for the 
 borrower to repay at any time the whole or any part of the loan not 
 being less than 10 per cent of the outstanding balance, in which case 
 he shall be liable to pay a commission not exceeding 1 per cent on the 
 whole balance. 
 
 The bank can not demand repayment of the loan otherwise than by 
 the stipulated annuities, except in the following cases, viz: 
 
 If the borrower or his successor in interest does not conform to the 
 terms of his contract after notice by the bank; 
 
 If the land or the improvement is allowed by the owner or possessor 
 materially to deteriorate, so as to lessen the security of the bank; 
 
 If the land is Sold for debt or for arrears of revenue or rent; 
 
 If the borrower becomes bankrupt. In any of such cases the bank may 
 proceed to sell the land forthwith without the intervention of a court, 
 subject to the provisions of 69, supra. 
 
 120. All loans granted solely for land improvements under the pro- 
 visions of this chapter and bona fide spent thereupon shall form charges 
 upon the land itself and shall follow the land notwithstanding any 
 changes of possession or ownership. Section 42 of Madras Act II of 
 1864 shall not apply to such charges. Such loans so spent shall, more- 
 over, when registered, form first charges on the land and its crops, 
 notwithstanding any prior charges whatsoever, whether registered or 
 unregistered, save only (1) dues for revenue; (2) dues for rent owed to 
 a landholder, as defined in the first clause of section 1, Madras Act VIII 
 of 1865; (3) dues paj'able to government for prior loans under the land 
 improvement loans act and agriculturists loans act; (4) dues paj'able 
 to the same or any other bank for loans for similar improvements to 
 the same land. They shall be absolutely binding on all cosharers, 
 heirs, or successors to the land, any contract to the contrary notwith- 
 standing. 
 
 121. During the pendency of the bank's charge upon the land the 
 owner or possessor of the land shall be bound to maintain the improve- 
 ment in full working order, and he shall at least once in a year certify 
 to the bank that the land and improvement are in complete order, and 
 the bank may inspect such land and improvement. Failure to main- 
 tain the land or improvement in good order shall entail the immediate 
 recovery of the loan, should the bank so desire. 
 
EXHIBIT M. 
 
 ABSTRACTS OF THE AGBICTJLTTIBAL BANKING LAWS OF THE 
 VARIOUS AUSTRALIAN STATES AND OF NEW ZEALAND. 
 
 [Prepared by G. Fox, M. L. A . , and published in the Queensland Agricultural Journal for August, 1903] . 
 
 Schedule I. — Alstract of the South Australian agricultural hank act. 
 
 STATE ADVANCES TO FARMEES — SOUTH AUSTRALIA. 
 
 Acts. — " The State advances act of 1895 " and amendment acts of 
 1897 and 1901. 
 
 Funds. — How raised. — By the sale of mortgage bonds by the state 
 bank, guaranteed, by the government. Hoto operated. — By a state 
 bank, managed hy a board consisting of five trustees and a general 
 inspector appointed by the governor. 
 
 Advances. — To whom wade. — («) To farmers and other producers, 
 apd in aid of industries proclaimed as "rural industries," {b) to local 
 authorities. Farmers and other producers include farmers, graziers, 
 and persons engaged in agricultural and pastoral pursuits. Rural 
 industries includes the freezing of meat for export, the manufacture 
 of wine, dairy produce, or any other industry which may be pro- 
 claimed a "rural industry." For what purpose. — (a) To farmers and 
 other producers as defined; (5) to local authorities, for the purpose of 
 purchasing or otherwise acquiring bridges, wharves, roads, or other 
 permanent improvements, and for the redemption or conversion of 
 existing loans. For what term. — For seven j-ears upward to forty- 
 two years. For what amount. — To farmers and other producers, and 
 in aid of industries, (a) On freehold: To the extent of three-fifths of 
 the unimproved value of the land and the permanent improvements 
 thereon, plus one-third of the value of any cultivation, such as a vine- 
 yard or orchard; the last assessment of the unimproved value of the 
 land by the commissioner for taxes not to be exceeded in the valuation 
 for the advance; {b) On Crown leasehold: To the extent of a sum not 
 exceeding half of the selling value of such lease, including the interest 
 of the holder in any permanent improvements on the land. No 
 advance to one company or person to exceed £5,000. To local authori- 
 ties: The advance shall not exceed the cost of anj^ works to be con- 
 structed or acquired, or the amount of the loan to be redeemed or 
 converted, or such sum as an annual rate of 6d. in the pound on the 
 assessed annual value of the rateable property of such local authority. 
 Security required. — By farmers and other producers: A mortgage 
 over the land and bill of sale over the buildings, etc. By local author- 
 ities: The security of their rates. How paid. — By bonds or other- 
 wise, at the option of the bank. Hov:^ repaid. — In half-yearly install- 
 ments of principal and interest on the 1st April and 1st October each 
 year, either in cash or by bank's bonds. Each advance carrying 
 interest not exceeding 5 per cent per annum. 
 
 151 
 
152 AGBICULTURAIi BANK IN THE PHILIPPINES. 
 
 Schedule 11. — Abstract of the Western Australian agricultural 
 
 hank act. 
 
 Western Australia. 
 
 Acts. — "TAe agricultural hanh act of 1891t." and the amendment 
 act of 1896. 
 
 FuNDS.-^Z^OM raised. — By sale of government bonds bearing inter- 
 est at 5 per cent per annum, payable naif -yearly. How operated. — By 
 the agricultural bank, under a manager appointed by the governor. 
 
 Advances. — To whom made. — To farmers or other cultivators of 
 the soil. For what purpose. — For making improvements on unim- 
 proved holdings, or adding to improvements already made. Improve- 
 ments includes clearing, cultivating, ringbarking, fencing, draining, 
 wells, reservoirs, buildings, or other improvements, which in the opin- 
 ion of the bank manager increase the agricultural or pastoral capabil- 
 ities of the land. For what te>'m. — Thirty years. For what amount. — 
 Not exceeding three-fourths of the fair value of the improvements 
 proposed to be made. No one person to obtain an advance or advances 
 exceeding £800. Interest at the rate of 6 per cent per annum to be 
 paid thereon in half-yearly payments. Security required. — Deed or 
 instrument of mortgage over freehold, or special occupation lease, 
 conditional purchase, and homestead farms. Advances to be made on 
 first mortgage only, but security in addition to the land to be advanced 
 upon may be accepted. How paid. — In cash, either in one sum or in 
 installments, as the improvements proceed. How repaid. — In half- 
 yearly installments equal to one-fiftieth part of the advance, such 
 repayments to commence five years after the date of the advance. 
 
 Schedule III. — Abstract of the New South Wales agricultural hank 
 
 act. 
 
 NEW SOUTH WALES. 
 
 Acts. — The advance to settlers' act of 1899.'''' 
 
 Funds. — Hoio raised. — By sale b}' the treasurer of government 
 stock, bearing interest at the rate of 3i per cent per annum. How 
 operated. — By a board of three members appointed by the governor, 
 such board being attached to the department of the secretary for 
 lands. 
 
 Advances. — To whom made. — Holders of freehold land or Crown 
 lease, including mortgagors. For' what purpose. — For the relief of 
 settlers financially embarrassed owing to the recent droughts. For 
 what term. — Ten years. For what amount. — No advance shall exceed 
 £200. Security required. — Mortgage, charge, or other security to be 
 prescribed by regulation. Advances on mortgaged property only to 
 be made with the consent of the mortgagee. How paid. — In cash. 
 How repaid. — The act leaves it to the board to decide. 
 
AGEICULTXIBAIi BANK IN THE PHILIPPINES. 153 
 
 Schedule IV. — Abstract of the Victorian agricultural hanl: act. 
 
 VICTORIA. 
 
 Acts. — " 7%e savings hank act of 1890.^'' Amendment of 1896. 
 Divisions 3 and 4. 
 
 Funds. — How raised. — By sale of bonds by the commissioners of 
 the savings bank, guaranteed by the government, and bearing inter- 
 est at the rate of 3i per cent per annum, payable half-yearly. How 
 operated. — By the commissioners of the savings bank. 
 
 Advances. — To whom made. — Fanners, graziers, market gardeners, 
 or persons emploj^ed in agricultural, horticultural, or pastoral pur- 
 suits. For what purpose. — To assist in paying off liabilities already 
 existing on the land to be secured. To pay off money owing to the . 
 Crown in respect of such land. To make improvements or to develop 
 the resources of the land by carrying on agricultural, horticultural, 
 viticultural, or pastoral pursuits on such land. For what amount. — 
 On freehold: To the extent of two-thirds of the actual value of the 
 land at the time of the advance. On Crown leasehold: Two-thirds the 
 actual value of the land, less the amount of rent p'aj'able before a 
 grant can be obtained for the land, together with an additional advance 
 not exceeding 15s. per acre on each acre having an improved value of 
 over £2. Vineyards, hop grounds, orchards, and fruit-growing plan- 
 tations may receive an increased "special" advance be3'ond the two- 
 thirds value of the land up to £30 per acre. No advance shall be made 
 for a smaller sum that £50 or larger than £2,000. Applications for 
 advances under £500, to have priority. Security required. — Deed or 
 instrument of mortgage. Only first mortgage to be accepted for ad- 
 vance. How paid. — By bonds or in cash. How repaid. — By sixty- 
 three half-yearly payments of principal and interest. Interest at the 
 rate of 4^ per cent per annum, and total repayment must be at a less 
 rate than 6 per cent per annum. 
 
 Schedule V. — Abstract of the Queensland agricultural iank act. 
 
 QUEENSLAND. 
 
 Acts. — '"''The agricultural hank act of 1901." 
 
 Funds. — Hoiv raised. — By issue of debentures or by an appropria- 
 tion by Parliament up to £250,000 in the whole. Such debentures, 
 secured upon the consolidated revenue, shall bear interest payable 
 half-yearly at a rate not exceeding 4 per cent per annum. Hov) 
 operated. — By three trustees and a manager appointed by the governor. 
 
 Advances. — To whom made. — The owners oi occupiers of freehold 
 or Crown leasehold. For vihat jmrpose. — Making prescribed improve- 
 ments, viz., clearing, etc. (see Regulations). For %ohat term. — 
 Twenty-five years. For what amount. — 13s. in £1 of the estimated 
 value of the proposed improvements. No person to receive advances 
 totaling more than £800. Security required. — First mortgage. How 
 paid. — By cash, either in one sum on completion of improvements or 
 in installments as the improvements proceed. How repaid.- During 
 first five years only interest at the rate of 5 per cent per annum is 
 payable, the advance then being redeemed in twenty years by half- 
 yearly payments of £1 Os. 3d. per £100. 
 
154 AGEICULTURAL BANK IN THE PHILIPPINES. 
 
 Schedule VI. — Abstract of the New Zealand agricultural hank act. 
 
 m 
 
 NEW ZEALAND. 
 
 Acts. — "7%e Government advances to settler's act of 189^,'''' and 
 amendment acts of 1895, 1896, 1898, and 1901. 
 
 Funds. — How raised. — By issue of debentures or scrip or inscribed 
 government stock, or otherwise, such bonds being guaranteed by the 
 government, and carrying interest at the rate of 4 per cent per annum. 
 Authorized limit of loans, £4,000,000. How operated. — By a general 
 board, consisting of the colonial treasurer, or in his absence the min- 
 ister for lands or other minister, the superintendent, public trustee, 
 commissioner of taxes (ex officio), and one person outside the civil 
 service, assisted by district boards of three government officers or 
 other lit persons appointed by the governor. 
 
 Advances. — To whom. made. — To (») freeholders of urban, suburban, 
 and country lands; (5) Crown leaseholders of country lands. For what 
 purpose. — \a) On country lands: For such relief to settlers financially 
 burdened as is consistent with 'the public safety. (5) On urban and sub- 
 urban lands: For the erection of buildings on unimproved lands and on 
 improved lands. For what amount. — Under the installment system: 
 {a) On freehold: To the extent of three-fifths of the value of the 
 security; (5) On leasehold: To the extent of half the value of the les- 
 see's interest in the lease. Under fixed loan system: Not exceeding 
 half value of security. No advance or advances to one individual to 
 exceed £3,000. For what terms. — (a) Under installment system: Thirty- 
 six and a half years; (5) Under fixed loan system: Not exceeding 
 ten years. Security required. — Mortgage over the land. Only first 
 mortgage to be accepted. How paid. — Presumably in cash. TLe act 
 is silent on this point. How repaid. — Under installment system: In 
 seventy-three half-yearly installments of principal and interest at the 
 rate of at least 6 per cent per annum of the sum advanced. Under 
 fixed loan system: At end of term. Interest at the rate of 5 per cent 
 per annum payable half-vearlv. 
 
EXHIBIT N. 
 
 COMMENTS AND RECOMMENDATION OF MB. CHARLES A. CONANT 
 WITH REFERENCE TO THE ESTABLISHMENT OF MORTGAGE 
 BANKS IN THE PHILIPPINE ISLANDS. 
 
 [From a Special Report on Coinage and Banking in tlie Philippine Islands made to the Secretary 
 of War by Charles A. Conant. November 25, 1901.] 
 
 NEED FOR MOETGAGE BANKS. 
 
 One of the most influential means of promoting prosperitj' in the 
 agricultural districts of the Philippine Itslands would be a system of 
 loans at moderate rates to agriculturists. The desire for some system 
 of such loans was strongly expressed in many towns and provinces on 
 the tour of the commission for the creation of civil government, and 
 such system is vigorously urged by the commission in their annual 
 report. The methods of agriculture now employed in the islands are 
 antiquated and fail to yield the best results attainable by the culture of 
 the soil. Even such slender resources for their development as the 
 people possessed prior to the insurrection of 1896 have been impaired 
 by the disorders of the succeeding five years, down to the restoration 
 of civil government in the spring of the present year. The means of 
 education in better methods are being offered, to some extent, by the 
 system of agricultural colleges which is provided for in the scheme of 
 education prepared by the efficient commissioner of education of the 
 islands. The instruction given in such improved methods can not well 
 be availed of, however, unless cultivators have the means of acquiring 
 good seed, draft animals, and modern tools. Only by some system of 
 agricultural loans can these means be placed in the hands of the people, 
 and the stimulus given to the agriculture of the islands which will pro- 
 duce the results which their rich resources are capable of yielding. 
 
 Governor Taft is especially solicitous that some provision be made 
 for loans for the benefit of agriculture, and at his request I conferred 
 with Senor Jose Ruiz Luzuriaga, recently governor of Occidental 
 Negtos and now a member of the Philippine Commission, in regard to 
 existing conditions and their remedy. Senor Luzuriaga has been him- 
 self engaged in large business enterprises and he has had much oppor- 
 tunitj'^ for observing agricultural development in his native island, 
 which is one of the largest sources of sugar production in the Philip- 
 pines. He states — and his testimony is borne out by testimony given 
 to the Schurman Commission and from other sources — that interest 
 rates for agricultural loans are now excessively high. Small money 
 lenders charge interest running as high as 25 per cent per annum, and 
 in some cases approaching, with commissions and charges, the almost 
 incredible limit of 40 per cent. A large corporation which does busi- 
 ness in Negros nominally charges 25 per cent, but in effect collects from 
 30 to 40 per cent upon the value of the amount loaned, by requiring 
 
 155 
 
156 AGEICULTURAIi BANK IN THE PHILIPPINES. 
 
 that the crop of the borrower shall be delivered at the price fixed by 
 the company, that purchases of supplies shall be made from its stores, 
 and that other operations connected with the marketing of the crop 
 shall be conducted under its charge and at it§ profit. It is obvious that 
 under favorable conditions a rich field lies open here for the loan of 
 American capital at rates which will greatly relieve the present condi- 
 tion of borrowers in the Philippines and yetaflord profits far in excess 
 of those which are usually earned in enterprises at home. 
 
 One of the reasons for high rates for money in Negros and other 
 parts of the Philippines is the risk involved in the loans. The titles 
 to lands are not always perfectly clear, and there is always the risk 
 incident to a loan which is to be repaid from the profits of agriculture 
 that there will be a failure of the annual crop. Notwithstanding these 
 drawbacks to the lending of money at low rates the security offered 
 by the sugar plantations of Negros, when the land is pledged, seems 
 to be adequate to justify loans of a moderate amount at considerably 
 lower rates than those now paid. The chief difficulty in cases of 
 default would be found in the marketing of lands, but this difficulty 
 would disappear to a large degree if the lands could be worked under 
 modern conditions of culture — with improved machinery and without 
 the crushing burden of the charges made for the use of the capital. 
 While the actual management of a sugar plantation would not fall 
 within the proper functions of a bank, an enterprising American bank 
 would probably find little difficulty in persuading American capitalists 
 to undertake the management under conditions which would insure 
 large profits and relieve the bank fi'om serious risk. 
 
 For the creation of mortgage banks in the Philippine Islands it is 
 not absolutelj' necessary that the authority of Congress should be 
 invoked. Mortgage banking is a matter of local law in most of the 
 States of the American Union, and there is alread}' considerable law 
 on the subject in the Philippine Islands, inherited from the Spanish 
 Government. The general power to legislate on the subject would 
 remain with the Philippine Commission, if Congress should approve 
 and continue their existing powers, with an amendment of the provi- 
 sion of the last army appropriation bill prphibiting the granting of 
 franchises. For these reasons it is not considered essential that Con- 
 gress should legislate in detail regarding the charters of mortgage 
 banks in the Philippines. A knowledge of local conditions might 
 enable the local government to regulate the details of such franchises 
 with better results than if they were prescribed at a distance of 10,000 
 miles. It seems to be desirable, however, that Congress should take 
 cognizance of the subject and prescribe certain general rules govern- 
 ing the creation of such banks, both as a guide to the local government 
 in the grant of franchises and as an assurance to the investing public 
 that such franchises will be granted only under sound conditions. 
 Whatever the competence and knowledge of the local government, a 
 legislative act by the lawmaking power of the United States will 
 afford a more definite assurance of permanency of policy to the invest- 
 ing community at home and abroad. For this reason it is recom- 
 mended that some sections be attached to the bill- regulating banking 
 in the islands, if such a bill is passed, providing the conditions upon 
 which mortgage banks may be established. 
 
AGEICtTLTUKAL BANK IN THE PHILIPPINES. 157 
 
 EESTRICTIONS UPON MORTGAGE BANKS. 
 
 The limitations which should be imposed upon banks engaged in 
 the mortgage business are the fundamental ones, which distinguish such 
 forms of banking from commercial banking. Banks engaged in accept- 
 ing deposits payable on demand, and especially those engaged in the 
 issue of circulating notes, which are also payable in lawful money on 
 demand, can not safelj^ embark any portion of their deposits in securi- 
 ties which can not "be quickly converted into cash at need. A bank 
 devoted wholly to mortgage business, on the other hand, may derive 
 its resources, if it is properly conducted, from deposits for long terms 
 or from the sale of bonds payable at fixed dates. The method adopted 
 b}' the leading mortgage banks of Europe, to which the Philippine 
 Commission have made reference in their annual report, is to sell bonds 
 from time to time in comparatively small blocks maturing in a general 
 way and on the average at about the time when given amounts of their 
 mortgage loans mature. The proceeds of the loans constitute the 
 resources from which the bonds may be redeemed. In practice, new 
 issues of bonds are usually eagerly taken hj investors and the proceeds 
 applied to the continuance of old loans and the granting of new ones, 
 but the condition of solvency required for such banks is the same as 
 that for commercial and note-issuing banks — that they shall have at 
 command the resources for meeting their obligations when they 
 mature. The difference between them consists in the fact that the 
 obligations of commercial banks may mature at any moment without 
 notice, while those of mortgage banks mature only at fixed dates, 
 against which- full preparation can be made. 
 
 If Congress authorize mortgage banks in the Philippine Islands, 
 it is recommended that such banks be governed by the following 
 restrictions: 
 
 1. That no such bank shall be authorized with a less capital than 
 1250,000. 
 
 2. That such a bank shall not loan more than 10 per cent of its 
 aggregate resources to any one person, firm, or corporation. 
 
 3. That such a bank shall not loan upon any real estate more than 
 one-third the market value of such property as determined under regu- 
 lations to be framed by the government of the Philippine Islands. 
 
 4. That such a bank shall not loan more than one-third of its aggre- 
 gate resources upon the security of building lots or buildings in cities 
 or large towns. 
 
 6. That such banks shall be subject to such visitation, inspection, and 
 regulation as may be imposed by the government of the Philippine 
 Islands. 
 
 These restrictions are for the most part such as justify themselves 
 without extended argument. A small mortgage bank is exposed to 
 the risk of failure by a few losses, which could be readily covered 
 from profits and surplus by a larger institution. A small bank, more- 
 over, would probably make most of its loans in a single locality, and 
 its fortune would be bound up with those of a few industries, perhaps 
 a single industry, in that locality. A large bank on the other hand 
 would be able to extend its operations by means of branches into 
 various parts of the Philippine Islands, and losses in a given locality 
 would be compensated to some extent by profits and the safety of 
 investments in other localities. 
 
158 AGEICULTTJEAL BANK IN THE PHILIPPINES. 
 
 The provision that a mortgage bank should not loan more than 10- 
 per cent of its resources to any one person or corporation is designed 
 to prevent the same evil as the requirement that the bank shall have 
 an adequate capital — the locking up of the whole or a large part of the 
 resources of the bank in a few risks. This provision is rendered still 
 more conservative by the third limitation suggested — that loans shall 
 be limited to one-third of the ascertained market value of the prop- 
 erty which forms the security. In order to prevent improper inflation 
 of value by the parties in interest, the rules governing the determina- 
 tion of market value are placed under the control of the government 
 of the islands, and maj', in their discretion, provide for the participa- 
 tion of some public officer in such valuation. 
 
 The limitation of loans in cities and large towns is designed to give 
 the benefits of the pi'oposed system chiefly to the agricultural sections. 
 It also has the merit of guarding against the speculation which some- 
 times occurs in city lots and give to them for a time a market value 
 which is subsequentlj' lost. Limitations of this sort are prudent, 
 even where speculations can not occur to the extent which is likelv to 
 prevail in an undeveloped country. The Credit Foncier, the leading 
 mortgage bank of France, has been subjected to more or less criticism 
 for entering upon a form of speculative loans with builders, by which 
 money was advanced for new buildings which were not obviously 
 required by rental conditions, simply for the purpose of finding an 
 outlet for its resources. If such operations could be carried on in such 
 a long settled and conservative countrj- as France, where values change 
 but little over long terms of years, it is obvious that the danger would 
 be much greater in an undeveloped countr}^ where the expectations of 
 early development in particular places might be disappointed by events. 
 
 MORTGAGE LOANS BY COMMERCIAL BANKS. 
 
 The familiar reasons which prevent commercial banks from engag- 
 ing in mortgage loans have already been set forth. These i^easons are 
 subject to some qualification, however, in the case of banks of large 
 capital, long standing and abundant resources. Such banks may, 
 without risking the liquid character of the assets held against demand 
 liabilities, set aside a certain portion of their capital or surplus for 
 permanent investments. Many of them actually do this by the pur- 
 chase of bonds and shares in industrial enterprises. Within narrow 
 limits it is possible for such bank to go further and invest in mortgage 
 loans, provided that the remaining and liquid assets of the bank are 
 amply sufficient to meet all of its demand liabilities and to afford a 
 reserve against the failure of any part of these assets. The fact that 
 a certain percentage of capital can be safely set aside for mortgage 
 loans is recognized, as stated by the commission, by the statutes of 
 the Austro-Hungarian Bank, and of the Imperial Bank of Russia, each 
 of which issues the entire credit paper currency of the country where 
 it is established. 
 
 It is recommended, therefore, that banks having a capital of not 
 less than 11,000,000 be authorized to devote one-fourth of this capital, 
 in their discretion, to mortgage loans. This power need not be con- 
 ferred absolutely, however, even upon a bank of this size, but may be left 
 subject to the approval of the government of the Philippine Islands. 
 This condition would necessarily involve compliance with any special 
 
AGEICULTXJRAL BANK IN THE PHILIPPINES. 159 
 
 safeguards or limitations which such government might see fit to 
 impose. A bank of large capital should be subjected to the same 
 limications in the use of that part of its capital devoted to such loans 
 as those imposed upon banks devoted exclusivel}' to mortgage business. 
 The reasons for giving the power of making mortgage loans to })anks 
 not exclusive]_y devoted to this class of business is found in the neces- 
 sity of providing for this type of loans at the earliest possible date. 
 While large profits would undoubtedly be derived from the operations 
 of a mortgage bank in the Philippine Islands, it is possible that capi- 
 tal might be more promptly attracted by the opportunities open to a 
 commercial bank or to a trust company or finance company engaging 
 in various classes of business at the same time. In such a case, the 
 benefit of a lower rate for mortgage loans would continue to be denied 
 to the agriculturists of the islands if such banks were forbidden to 
 make such loans. It seems to be desirable that Congress should impose 
 such restrictions as are here recommended upon any future mortgage 
 loans by corporations, even if such loans are only a part of their gen- 
 eral business. 'The provision suggested, if made applicable to any 
 bank authorized to do business in the Philippine Islands, would limit 
 mortgage loans by corporations to those having capital of $1,000,000 
 and to those complj'ing full}^ with the restrictions above recommended, 
 but would not prevent the grant of the power of mortgage loans to 
 trust companies or other institutions not directly regulated by author- 
 ity of Congress or by the Comptroller of the Currency of the United 
 States under the national-banking law. Such restrictions are properly 
 made applicable by law to all corporations, because their ofiicials dis- 
 pose of the capital of others; but none of these restrictions affects in 
 imj manner the right of private persons to loan their own capital on 
 any terms and with or without security as thej^ may see fit. Strong 
 inducement to outside capital to enter the islands for the purpose of 
 mortgage loans is as vital to the agriculturist as the increase of com- 
 mercial banking facilities and of paper currency are to the merchant 
 and general trader, and provisions which will accomplish this end will 
 do much to promote the contentment of the people and consolidate 
 American influence in the Phihppines. 
 
 O