Report on the Agricultural bank of Egypt to the secretary of war and to the Philippine commission
Kemmerer, Edwin Walter, 1875-1945 | United States. War Department | United States. Philippine Commission (1900-1916)
F3K3 A n — - < A" =^=r c J — — . o 0 S "^— — i 0^ — -L ■^— m 3D 0^ 5 = — — o 6^ = I — 8 m ~ 1 — i, 6 = = J> ? = 3 m — ■ IJ ^^^ 1 — —1 ss ■< Kernmerer Report on the Agricultural band of Egypt to the Secretary of war and the Philippine Commission THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES GIFT OF Clark J. Milliron REPORT ON THE AGRICULTURAL BANK OF EGYPT TO THE SECRETARY OF WAR AND TO THE PHILIPPINE COMMISSION BY E. W. KEMMERER SPECIAL COMMISSIONER TO EGYPT MANILA BUREAU OF PRINTING 1906 48138 REPORT ON THE AGRICULTURAL BANK OF EGYPT TO THE SECRETARY OF WAR AND TO THE PHILIPPINE COMMISSION BY E. W. KEMMERER SPECIAL COMMISSIONER TO EGYPT MANILA BUREAU OF PRINTING 1906 48138 CONTENTS Page. Preliminary 5 Indebtedness of the fellaheen 5 Land credit in Egypt 8 Government advances to agriculturists 8 The National Bank of Egypt 10 The Agricultural Bank of Egypt 11 The bank and the fellaheen 14 Number and size of loans 14 Reasons for borrowing 16 Are the fellaheen getting out of debt? 18 The bank and the stockholders 20 The bank established on a strictly commercial basis 20 The bank's financial condition 21 The bank's financial standing 22 Bad debts 22 Competition 25 The bank and the Government 25 The Government's guaranty 25 Miscellaneous 26 Factors in the bank's success 26 High personnel 27 The utilization of the services of Government employees 28 Egyptian land titles 29 Applicability of Egyptian plan to the Philippines 30 The Filipino farmer and the Egyptian fellah 30 Greater security of Egyptian crops 32 Land titles in Egypt and the Philippines 32 Conclusion 33 APPENDIX. Exhibit A. Revised statutes and concession of the Agricultural Bank of Egypt 35 Schedule I. Revised statutes 35 II. Concession of the Egyptian Government 46 B. Reports of the directors of the Agricultural Bank of Egypt 49 Schedule I. Report for the period June 1, 1902, to Decem- ber 31, 1903 49 II. Report for the period January 1, 1904, to December 31, 1904 53 III. Report for the period .January 1, 1905, to December 31, 1905 57 C. Extracts from the annual reports of the Earl of Cromer relative to the Agricultural Bank of Egypt and to the dis- tribution of Egyptian land 62 Schedule I. Extracts from the annual report of the Earl of Cromer for the year 1904 62 II. Extract from the annual report of the Earl of Cromer for the year 1905 65 3 83567r v_, REPORT ON THE AGRICULTURAL BANK OP EGYPT. Ithaca, 1ST. Y., June 1, 1906. Sirs : Pursuant to a resolution of the Philippine Commission under date of February 9, 1906, appointing me as Special Commissioner to Egypt, with instructions to make a study of the Agricultural Bank of Egypt, and to prepare a report on the same, to be submitted to the Sec- retary of War and to the Philippine Commission, I have the honor to make the following report, which should be considered as supplementary to my report to the Treasurer of the Philippine Islands under date of February 7, 1905, concerning the advisability of establishing a Govern- ment agricultural bank in the Philippines. INDEBTEDNESS OF THE FELLAHEEN. At the time of the establishment of England's so-called "single con- trol" in Egypt in 1883 the Egyptian fellaheen, as well as the Egyptian Government, were badly in debt. For years the fellaheen had been the victims of a most oppressive and unjust system of taxation. The burden of the taxes fell upon the poor peasants, while the wealthy landowners were either entirely exempt or escaped by the payment of merely nominal amounts. The tax collectors were as a rule unscrupulous men, who took every piaster * they could lay hands upon, regardless of law or of justice. Only a small part of the money collected ever reached the public treasury, and of that amount only a small proportion was expended wisely and for the benefit of the public. The situation is well described by Viscount Milner : - The fellah had for years past been driven to borrowing, and to borrowing on ruinous conditions, by the Government itself. The tax gatherer had paved the way for the usurer. It was not the amount of taxation, crushing as in many cases it was, which did the mischief. It was above all the irregular, cruel, and arbitary manner in which the taxes were collected. The fellah was seldom 1 The unit of value in Egypt is the Egyptian pound, the symbol for which is £E. The Egyptian pound is divided into 100 piasters, the symbol for which is PT, and the piaster is divided into 10 milliemes, the symbol for which is M. The Egyptian pound weighs 8.5 grammes of gold 0.875 fine, and is therefore worth £1 0s. 6|d. sterling, or almost exactly $5, United States currency. The piaster is accordingly the equivalent of 5 cents, American money, and the millieme the equivalent of one-half cent. The English sovereign, which is the principal gold coin circulating in Egypt, passes current at the rate of PT97i- 2 England in Egypt, 11th ed., p. 82. 5 6 sure of the amount which would be demanded of him. He was never sure of the moment when the demand would be made. That moment might, as likely as not, be the very one at which he was least able to pay. Called upon to find ready money while his crops were still in the ground, he was simply driven into the arms of the money lender. His choice lay between so many blows of the kurbash and the acceptance of the usurer's terms, however onerous. Under these circumstances money was borrowed at as much as 60 per cent per annum. Worse than that, it was obtained by the sale of the growing crops, which were estimated for the purpose of the advance at half or less than half their value. This state of things was bad enough, and it was pretty general; but the ruin of the cutivator was consummated in many instances by positive collusion with the usurer on the part of corrupt officials. The latter would demand the payment of taxes by the peasant, who was already in debt, at the very time when the interest on his debt was due. If he had any cash at all, the authorities were bound to get it. When the usurer came after them, nothing was left to the fellah but to surrender his land and cattle, or to renew his bond on still more ruinous terms. He was, in fact, entirely at the mercy of the lender. Sir Auckland Colvin says the exactions of usurers ranged from 25 to 200 per cent.1 Interest charges of 40 and 50 per cent were common. - The Earl of Cromer, in his report for the year 1895,3 cites the follow- ing instances as illustrative of the relations which generally existed between the money lenders and the ignorant cultivators : A small cultivator in Upper Egypt borrowed £10 from an European money lender. In order to obtain the money he was obliged to sign a bond for £15. He states that for three years he paid £5 at the end of each year. At the end of the third year he was asked to repay the capital sum of £15. This he first refused to do, alleging that account should be taken of the payments already made. As no written documents other than the original bond for £15 had passed, the annual payments could not be proved. The creditor then threatened legal proceedings. These would have been instituted at Cairo, some 400 miles distant from the residence of both the creditor and the debtor. Rather than go to the expense of a lawsuit, the debtor sold his house to the creditor for £61, the price being fixed by the latter, who then deducted £15 on account of the original debt, and £14 for the expenses of sale and transfer. The balance, namely, £32, was then handed over to the debtor. It will be seen, therefore, that besides being obliged to sell his ho\ise for a sum which was probably below its market value, the debtor paid no less than £34 in the shape of interest and legal expenses in return for a loan of £10 for a little more than three years. The following table shows the mortgage indebtedness of Egyptian landowners for the years 1894 and 1902, and affords an idea of the dis- tribution of land among different classes of proprietors. The figures for indebtedness do not include the great mass of debts not .secured by 1 The Making of Modern Egypt, 2d ed., p. 280. 2 Compare Phil. Agric. Bank Rep.; pp. 7, 28, 29, 31-43. 3 Reports by Her Majesty's Agent and Consul-General on the Finances, Admin- istration, and Condition of Egypt in 1895, p. 7. These annual reports are known by the title of "Egypt," followed by the number, and the year in which issued, being the year subsequent to that covered by the report; thus, the report above mentioned would be cited "Egypt" No. 1 (1890). land mortgages — as, for example, those secured by the pledging of growing crops or by other personal property. It is probable that the figures for 1902 are considerably more complete than those for 1N!)-1. Table I. — Distribution of agricultural land and indehtrdursx of the frUalireti* Classification of landowners. Owners of— 5 feddans and under" 5 to 10 feddans 10 to 20 feddans 20 to 30 feddans 30 to 50 feddans More than 50 feddans Total Number of land- owners of each class. 1894. 513, 080 75, 130 39, 620 13,140 8,980 11,430 661,380 1902. 875, 202 79, 336 38, 825 11,909 8,813 11,996 Area of land owned by each class of land- owners. 1894. Feddans. 933, 700 552, 700 560, 300 326, 100 347, 800 2, 000, 700 1902. Feddans. 1,171,338 556, 422 539, 008 292, 310 338, 922 2, 266, 388 Area of land mort- gaged.'' 1894. Feddans. 21,400 16, 000 20, 400 19,600 25, 900 292, 300 1, 026, 081 4,721,300 5,164,388 305,600 1902. Feddans. 71,854 43,110 48, 790 34, 714 53, 463 778, 569 1, 030, 500 Classification of landowners. Owners of — 5 feddans and under0 5 to 10 feddans 10 to 20 feddans 20 to 30 feddans 30 to 50 feddans More than 50 feddans Total Proportion of land mortgaged. 1894. Per cent. 2.29 2.90 3.64 6 7.44 14.60 8.38 1902. Per cent. 6.14 7.72 9.05 11.9 15.77 34. 35 19.95 Amount of mort- gaged debts.1' 1894. £E. 573, 300 392. 200 407, 700 307,200 409, 900 5, 233, 000 1902. £E. 2, 188, 007 1,209,230 1,402,588 1,024,025 1,228,620 14,287,321 ,323,300 ! 21,339,791 Proportion in which each class of land- owners shares in the total indebtedness. 1894. Per ct. 7.82 3.35 5.57 4.20 5.60 71.46 1902. Per ct. 10. 26 5.66 6. 58 4.80 5.80 66.90 100 100 » Figures for 1902 were prepared by Sir Elwin Palmer and are quoted by the Earl of Cromer in "Egypt" No. 1 (1895), p. 30. The figures for 1902 are based upon data given in the Statesman's Year Book 1904, p. 1236. ''Besides the debt here stated there is a certain amount unregistered, due notably by small proprietors. c A feddan is about 1.04 acres. The table, in so far as the figures can be depended upon as complete, seems to justify the following conclusions : (1) A very large and increasing proportion of Egyptian landowners is composed of peasant proprietors. In 1894, 78 per cent of the land- owners were proprietors of small estates of less than 5 feddans in area ; in 1902 the percentage had increased to over 85 and in 1904 to over 86. (2) The proportion of the total area represented by petty holdings of 5 feddans and under is small but slowly increasing. In 1892, 19.8 per cent of the total area was owned by proprietors of 5 feddans and less; in 1902 the percentage was 22.7, and in 1904 it was 23. 1 (3) The proportions of the land mortgaged in the different classes of holdings vary directly with the size of the holdings. During both years 1 "Egypt" No. 1 (1905), p. 30. 8 referred to in the table the percentage of land mortgaged in the holdings of 50 feddans or over was approximately six times as large as the per- centage in the holdings of 5 feddans and under. (4) During the period 1894—1902 there was a large increase in the amount of land under mortgage, and the increase was greater among the peasant proprietors than among the proprietors of large estates. It is among the peasant proprietors that the usurer carried on his business. Here he exacted his pound of flesh with the insatiable greed of a Shylock. He did not apparently succeed in doing business with a very large proportion of these peasant proprietors — at least not on the security of registered mortgages — but from those few with whom he did do business the consensus of opinion in Egypt is that he exacted terms which were both unreasonable and oppressive. LAND CREDIT IN EGYPT. The large landowner in Egypt is fairly well provided with facilities in the line of agricultural credit and has been for some time. In 1901 two land banks were doing business in Egypt. Between 1901 and 1906 the number increased to six. The share and debenture capital and sur- pluses of mortgage banks in Egypt increased from £7,263,000 in 1901 to £29,749,000 in 1905, their liabilities increased during the same period from £6,530,000 to £23,403,000, and their assets from £7,744,000 to £32,655,000.1 The loans of the. Credit Foncier figyptien alone amounted to £E14,781,167 during the period 1880-1902, representing 6,422 loans; by 1905 the total number of loans made by this institution since 1880 was 8,969, amounting to £E23,963,583.2 All these institutions, however, with the exception of the Agricultural Bank of Egypt, have limited their operations to large advances to the more wealthy landowners. For example, of the 8,969 loans made by the Credit Foncier figyptien from 1880 to 1905, 3,594 were loans above £E1,000, and 474 were loans above £E10,000, while the average size of all the loans was £E2,672.3 GOVERNMENT ADVANCES TO AGRICULTURISTS. In the year 1894 the Egyptian Government took the first step in the direction of providing agricultural credit facilities for the fellaheen by making advances of some 27,000 bushels of seed; in 1895 the amount was increased to nearly 44,000 bushels, and in 1896 it was increased to over 46,000 bushels. The seed advanced was, according to the Earl of Cromer, both better in quality and cheaper in price than that sold by the money lenders. The purchase money was made payable in three equal installments extending over the last quarter of the year. 1 "Egypt" No. 1 (1906), p. 32. 2 Credit Foncier Egyptien : Rapports du Conseil d' Administration et des Cen- seurs. Exercise 1905. 3 Credit Foncier Egyptien : Rapports, etc., p. 24. 9 In 1895 the Egyptian* Government decided as an experimental measure to devote £10,000 to advances to the fellaheen. The maximum loan to any individual was fixed at £10; in no case, however, was the loan to exceed £2 per feddan of the land mortgaged. It has been notified [said the Earl of Cromer at the time] that the Government has no intention of embarking upon banking operations on a large scale. They merely wish to make an experiment in a few selected districts. It will depend on the results of this experiment whether at some future time an endeavor is made to come to some arrangement with a private bank with a view to more extended operations. It is impossible to feel very sanguine of success. All that can for the present be said is that the experiment seems worthy of trial? Incredible as it may seem, the Egyptian Government at first found difficulty in inducing the fellaheen to take advantage of the loans offered. It was not until the actual gold coin was taken in bags from village to village, and offered to the fellaheen directly that their suspicions were quieted and they were induced to avail themselves of the assistance proffered by the Government.2 The experiment was successful. Loans were made in eleven different villages in Lower Egypt. No advances were made to cultivators possess- ing more than 20 acres, and the rate of interest charged was one-half per cent a month or G per cent per annum. Between February and July, 1800, persons owning in the aggregate 4,065 acres of land borrowed £E7,700. Of these 1,113 were cultivators of less than 5 acres. With the exception of £E20 the whole of the capital and interest was paid by the end of November.3 With reference to the experiment Mr. Chitty, the man who was in special charge of these operations, says : 3 The experience gained has convinced me of the great benefit that an agricul- tural bank would be to the smaller cultivators. The experiment made this year has not only been a great boon to the villages where the advances were made, but has had the effect of making the money lenders in the neighborhood reduce their rates of interest considerably, and has opened the eyes of the fellaheen to the possibility of money being procured at more moderate rates.4 1 "Egypt" No. 1 (1896), p. 9. The italics are mine. 2 See description of "Maroor," p. 10, note. 3 "Egypt" No.* 2 (1897), p. 5. 4 It is interesting to note in this connection that similar Government loans are at present being made in the Soudan, with like success. I quote the following from the Earl of Cromer's Report on the Soudan for 1905 (" Egypt " No. 1 ( 1900) , p. 134) : "Pending the establishment of a private agricultural bank in the Soudan, the Government advances small amounts of money to the cultivators at 7| per cent interest. The loans are for the most part repayable in three years. Up to the end of 1905, advances to the extent of £E20,000 had been made, of which £E 15,000 had been repaid. Governors of provinces are made responsible that these loans are actually expended on the purchase of cattle or agricultural implements, or on the construction of sakias. The money is not issued until they have satisfied themselves on this point." 10 THE CREDIT FONCIER EGYPTIEN REDUCES THE MINIMUM SIZE OF ITS ADVANCES. The next move in the direction of offering improved agricultural credit facilities to the fellaheen was made in 1897, when the Credit Foncier Egyptien was induced to lower the minimum size of its advances to £E100. When it is recalled that the great hulk of the advances desired by the fellaheen are inside of £E30, it will he seen that this action was really of little consequence, although considerable impor- tance was attributed to it by many at the time. From 1880 to 1905 the number of loans made by the Credit Foncier Egyptien in amounts less than £E100 was only 138, and the number in amounts of from £E100 to £E200 was but 1,204.1 THE NATIONAL BANK OF EGYPT. In June, 1898, the National Bank of Egypt was established. One of the main reasons which induced the Government to assent to the creation of this bank was its desire to facilitate the extension of agricultural credit facilities among the fellaheen.2 The Xational Bank of Egypt soon after its establishment began opera- tions on a small scale among the fellaheen of the Belbeis district in Lower Egypt,3 The debts of the Egyptian fellaheen are divisable into two distinct categories: (1) Those represented by small sums borrowed in the early part of the year and repayable in the fall after the sale of the cotton crop, and (2) loans of larger amounts running over a period of years. The bank's operations in the Belbeis district were to cover both classes of loans. Small advances in sums not over £E20, bearing interest at 9 per cent, were made in the spring, payable after the harvest- ing of the cotton crop in the fall, and larger advances in sums up to £E100, at the same rate of interest, repayable in five annual installments, were made to those wishing to pay off their old debts. Arrangements were made with the Government according to which the payments on the loans were collected by the tax collectors at the time of the collection of the land tax. By this arrangement the bank was saved the expense of hiring a large force of collectors. Of the 9 per cent interest collected 1-J per cent was to go to the local agents of the bank, and one-half of 1 per cent to the tax collectors. During the spring and early summer of 1899, 1,580 advances, amount- ing in all to £E4,780, repayable in the fall, were made by the bank. " The result," said Sir Elwin Palmer, the governor of the bank, "was thoroughly satisfactory; the whole of the money due in the year was collected by the Government tax collectors/' 3 The bank made other 1 Credit Foncier Egyptien: Rapports, etc., p. 24. 2 "Egypt" No. 1 (1900), pp. 4, 5. 3 "Egypt" No. 1 (1900). p. 5; Phil. Agric. Bank Rep., p. 45. 11 loans in the Belbeis district to borrowers of the second class. These loans, 870 in number, aggregating £E26,720, and repayable in five annual installments, were made to persons already in debt, "who were thus enabled to effect a commutation of their debts on favorable terms." x In 1899 the bank consented to extend its operations to three more dis- tricts. In 1900 the field of operations was extended to ten districts and later to the whole of Lower Egypt. Of the 9,500 advances made in 1900, aggregating £E137,781, 6,213, amounting to £E36,21<>, were small loans repayable within one year, and the remaining 3,287, amounting to £E101,565, were for larger amounts repayable in five annual installments. The amount that fell due in 1900 was £E28,122, due from no less than 5,035 borrowers. "It is with very special pleasure," said the Earl of Cromer, "that I am able to record that the whole of this sum was recovered." ~ By February, 1902, the bank's outstanding loans to the fellaheen num- bered 15,269, of which 3,326 were for small sums repayable within the year and 11,913 for longer sums repayable in five annual installments. The amounts of these loans aggregated £E102,000. "These figures clearly show," said the Earl of Cromer, "that the main object of the scheme has been attained — assistance has been given to small proprie- tors." 3 THE AGRICULTURAL BANK OF EGYPT. By the year 1902 the agricultural credit operations of the National Bank of Egypt had grown to such proportions as to absorb an undue amount of the bank's capital, and to have become unwieldy for an institution doing a general banking business. The class of operations, moreover, involved in making these agricultural loans "fell more properly within the functions of a land bank than within those of an ordinary bank." 4 Accordingly an agricultural bank, under the name of the Agri- cultural Bank of Egypt, was established on June 1, 1902, with an author- ized capital of £2,500,000, of which £1,250,000 had already been paid up. All agricultural loans of the National Bank of Egypt were transferred to the new institution. The Preliminary Act of Association declared the object of the bank to be "to make advances to small farmers." 5 Two classes of small loans were authorized 6 in accordance with the plan previously followed by the National Bank of Egypt. The first class, known as "A" loans, was to 1 "Egypt" No. 1 (1900), p. 5; Phil. Agric. Bank Rep., p. 45. 2 "Egypt" No. 1 (1901), p. 7; Phil. Agric. Bank Rep., p. 48. 3 "Egypt" No. 1 (1902), p. 8; Phil. Agric. Bank Rep., p. 50. 4 "Egypt" No. 1 (1903), p. 10; Phil. Agric. Bank Rep., p. 50. 5 Phil. Agric. Bank. Rep., p. 54. 6 For full details concerning the bank's organization and plan of operations see the bank's revised statutes submitted as Exhibit A of this report, pp. 35-46. 12 consist in loans varying in size from £1| to £20 and not exceeding as a rule twice the annual land tax which the landowner should pay to the Government. The loans were to be payable with interest in one sum the following crop season, but if made only two or three months before that season were not to be repayable until the following year. The maximum period for which these loans were to be granted was fixed at fifteen months. The second class of loans, known as "B" loans, varied in amount from £10 to £300/ and were not to exceed as a rule ten times the tax which the landowner should pay to the Government. These loans were made repayable in annuities covering principal and interest. They were to be secured by first mortgages on land worth at least double the amount of the advance, and to run for a period not exceeding twenty and one-half years. The maximum period was originally fixed at five years, but was subsequently extended to ten and one-half years and later to twenty and one-half years.2 The rate of interest was fixed at 9 per cent per annum.3 Collections of both principal and interest were to be made, as before, by the village sarrafs, or tax collectors, at the time of the collection of the land tax. It was provided that the sarrafs should receive one-half of 1 per cent on all sums collected. Article IV of the bank's revised staututes declares that the bank will pay the ministry of finance the expenses of the staff specially employed in the service of the loans. The duration of the bank was fixed at fifty years. The National Bank of Egypt became one of the largest stockholders of the Agricultural Bank at the time of the latter's establishment, and the work of transacting the financial operations of the Agricultural Bank of Egypt was entrusted to it. The Government's concession to the Agricultural Bank declared that — It shall be administered by a board composed of the governor of the National Bank of Egypt, as president, and of five members, two of whom shall be chosen from amongst the members of the board of directors of the National Bank of Egypt, and controlled by the commissaries of the Government of said bank.4 The most important provision of the Government's concession to the bank related to its guaranty of dividends on the stocks of the bank. That 1 The maximum size of "B" loans was later raised to £500. 2 The maximum period for the repayment of loans made by the Credit Foncier figyptien is fifty years. Similarly long periods are the rule among the land banks of Europe and Australia. See Phil. Agric. Bank. Rep., pp. 89, 106, 151, 152, 153, 154. 3 In May, 1905, the Egyptian Government sanctioned an increase in the share capital, on condition that from the beginning of the year succeeding that at the end of which the loans outstanding should have reached £E7,000,000 the maximum rate of interest charged to the fellaheen should be reduced to 8 per cent for both old and new loans. This figure was reached earlv in 1906. The rate of interest will accordingly be reduced to 8 per cent beginning with next year. See report of the directors for the year 1905, Exhibit B, p. 60. 4 See Exhibit A, p. 46. 13 part of the Government's concessions which deals with the guaranty is of sufficient importance to quote in full : It is as follows : ' The receipts shall comprise — (a) The interest actually received every year. (b) The amount of the loans due or installments due for the preceding years and actually received in the course of the year, subject to what is stipulated in the last paragraph of Article II. From the receipts above mentioned there must be deducted — ■ (a) All the expenses of the company. (b) The amount of all loans due or installments due on these loans, and not received in the course of the year. The difference will constitute the net profits. Out of these net profits there shall be taken successively and in the following order — ( 1 ) The interest on the bonds. (2) Five per cent of the interest actually received every year for the reserve fund. The sums carried to the reserve fund shall be invested in securities approved of by the Government. The interest arising from these investments shall be added to the resources of the reserve fund. From the remaining profits there shall, first of all, be taken the interest to be paid to the preferred shares, if any; and then 5 per cenjt of the said profits for the National Bank of Egypt, by way of agreed remuneration for transacting the financial operations of the Agricultural Bank of Egypt, and the necessary sum to pay 5 per cent interest to the holders of ordinary shares upon the amount paid up thereon. The balance shall be distributed as follows: Fifty per cent to the ordinary shares. Fifty per cent to the deferred shares. Article II. Whenever, for any year during the fifty years of the duration of the company, the interest received in the year and the sums received upon the loans due or installments due and not received for the preceding years do not reach the neces- sary sum — (1) To cover all the expenses of the year and the amount of the loans or of the installments due and not actually received in the year; (2) To leave a net profit representing 3 per cent of the capital invested in loans to the fellahs — ■ The additional sum for the above purposes shall be taken out of the reserve fund, and in the event of the said fund being insufficient -the Government will pay to the company, by way of subvention, at latest on the 15th February in each year, the balance of the sum necessary for the above purposes. In this latter case the loans or installments due and not received in the year which are collected in the following years shall be paid over to the Government, up to the amount of the subvention paid by it to the company. Now that we have sketched the reasons leading to the establishment of the Agricultural Bank of Egypt, and briefly explained its organization and plan of operations, it will be well to inquire into the question of results. How has it worked? Has it been a benefit to the fellah and 1 See Exhibit A, p. 43. 14 released him to any extent from the clutches of the usurer, or has it pauperized him and led him to plunge still more deeply into debt? Has it proven to be a profitable enterprise and yielded a fair return to the stockholders, or have bad debts been so numerous or the expenses of administration so great as to have made the enterprise a financial failure? Has it been a boon to the Government by rendering the fel- laheen more contented and prosperous, or has it brought reproach upon the Government by its unreasonable exactions and by the extensive fore- closing of mortgages? Has it interfered with the efficient performance of the regular duties of tax collectors? Has it been a drain upon Gov- ernment revenues by reason of demands for the payment of the Govern- ment's interest guaranty? These are questions that require honest an- swers before one can pass an intelligent opinion as to the success of this enterprise. We will consider them under the following general heads : (1) The bank and the fellaheen; (2) the bank and the stockholders; (3) the bank and the Government. At this point attention should be drawn to two facts which ought to be kept continually in mind in qualification of the discussion which follows concerning the bank's success. These facts are (1) the Agricul- tural Bank or Egypt as a distinct institution has only been in operation since June 1, 1902, a period of four years, and (2) these four years have been years of unprecedented prosperity for Egypt. In view of these considerations, the Earl of Cromer himself, who is responsible for the inception of the bank, and who takes a just pride in the bank's success, said to the writer, as recently as March 23 of the present year, that he did not believe the bank was yet entirely out of the experimental stage. THE BANK AND THE FELLAHEEN. The Agricultural Bank of Egypt was in its inception an institution established for the purpose of continuing the work previously carried on by the National Bank of Egypt in the line of rendering financial aid to the Egyptian fellaheen. It was established by Government initiative with the object of assisting the fellaheen to free themselves from the clutches of the usurer and to profitably cultivate their farms. By its results in this direction its success must primarily be judged. NUMBER AND SIZE OF LOANS. The extent to which the bank has reached the fellaheen will be seen from the following table showing the number and size of the bank's outstanding loans on certain dates : 1 1 "The total number of male Egyptians over 10 years of age engaged in agri- culture on June 1, 1897, the date of the last census returns, was 2,049,258." (Statesman's Year Book, 1904, p. 1229.) 15 Loans of the Agricultural Bank of Egypt outstanding on certain dates. Date. "A" loans. "B" loans. Number of loans. Amounts. Number of loans. Of £E1 and under. Of over £E1 to £E5. Of over £E5 to £E20. Total number. Total amount. Aver- age amount Of over £E20 to . £E50. Of over £E50 to £E100. Dec. 31, 1903 » Dec. 31, 1904 b.__ .. Dec 31 1905'-' 759 1,060 5,963 6,776 6,434 9, 662 13,156 17, 498 21, 829 £E. 104,684 149, 032 194, 671 £E. 7.96 8.52 8.92 53, 481 96, 234 7,928 13, 207 Date. "B" loans. All loans. Number of loans. Amounts. Num- ber. Amounts. Of over £E100 to £E150. Of over £E150 to £E500. Total num- ber. Total amount. Aver- age amount. Total amount. Aver- age amount. Dec. 31, 1902 d £E. £E. 46, 572 78, 911 134,207 185, 530 £E. 1,208,200 2, 195, 841 3, 936, 242 5, 765, 672 7, 033, 486 £E. 25.94 27.82 29. 33 31.08 Dec. 31, 1903 Dec. 31, 1904 2, 359 3,934 1,987 3,334 65, 755 116, 709 163, 701 2,091,157 3, 787, 209 5,571,001 31.80 32. 45 34.03 Dec. 31, 1905. Mar 31 1906 e * Report of the directors, submitted February 23, 1904. See Exhibit B, Schedule I. >> Report of the directors, submitted February 20, 1905. See Exhibit B, Schedule II. « Report of the directors, submitted February 28, 1906. See Exhibit B, Schedule III. The report for 1905 does not give the figures showing the number of loans of different sizes out- standing December 31, as was the custom in previous reports, but gives instead the figures for the loans put out during the year. They were as follows: "a" loans. Loans under £E1 1,861 Loans above £E1 to £E5 19,217 Loans above £E5 to £E20 26,863 Total "A" loans - 47,941 "b" loans. Loans from £E10 to £E50 45,267 Loans above £E50 to £E100 7, 478 Loans above £E100 to £E150 2, 596 Loans above £E150 to £E500 3, 081 Total "B" loans 58,422 Total loans during 1905 106,303 The average size of the "A" loans made during the year was £E8.40and the average size of the "B" loans was £E42.10. <» "Egypt" No. 1 (1903), p. 16. Detailed figures are not available for this date. The first report of the directors covers the period June 1, 1902, the date of the bank's establishment, to December 31, 1903. Concerning the bank's operations for the vear 1902 the Earl of Cromer says (same, p. 16): "During 1902, 34.532 loans, repay- able in fifteen months, and amounting in the aggregate to £E202,942, were made. Of these, 19,785 were for sums less than £E5; 7,807 were for sums between £E5 and £E10; 6,940 were for sums between £E10 and £E20. "The number of loans repayable in five annual installments was 20,341, representing in the aggregate a sum of £E748,878. Of these, 8,513 were for sums below £E20. Most of the others were for sums less than £E100. The maximum amount of any one loan was £E300. e Figure for total loans outstanding March 31, 1906 .furnished by bank's manager. 16 The table seems to justify the following conclusions : (1) The Agricultural Bank has had a phenomenal growth since its organization as an independent institution, and considering its short history, is reaching a surprisingly large number of the Egyptian fellaheen. Its outstanding loans have increased during the period December 31, 1902, to March 31, 1906, from £E1,208,200 to £E7,033,486, an increase of 482 per cent in three years and a quarter ; and the number of its loans having increased during the period December 31, 1902, to December 31. 1905, from 46,572 to 185,530, an increase of 298 per cent in three years.1 (2) The great bulk of the bank's business, whether judged by the number of borrowers or by the amount borrowed, consists of "B" loans — that is, loans varying in size from £E10 to £E500, and running for periods not exceeding twenty and a half years. (3) The number of "B" loans is increasing at a much more rapid rate than the number of "A" loans, the increase in the "A" loans during the three years ending December 31, 1905, being 66 per cent, and the increase in "B" loans being 149 per cent. (4) The average size of the loans of both classes is steadly increasing, the average size of the "A" loans having increased during the three years from £E7.96 to £E8.92, and the average size of the "B" loans from £E31.80 to £E34.03. REASONS FOR BORROWING. The figures just cited show that large numbers of the Egyptian fel- laheen have been taking advantage of the opportunities for land credit offered by the bank. It is important to know something of the objects for which loans have been obtained. Have the funds borrowed been used wisely for the paying off of onerous debts, for improving the farms, purchasing farm materials and implements, cultivating the soil, harvest- ing the crops, etc., or have they been employed unwisely for personal luxuries ? Unfortunately no statistics are available showing the purposes for which funds have been borrowed and the uses to which they have been put. Beplies received to inquiries made on this subject in Egypt, of xThe bank's rapid growth in its early days is accountable in no small degree to an institution known as the "Maroor." The Maroor is described as follows by one of the bank's ofhcials: "When the bank was first instituted it was neces- sary to familiarize the fellaheen with its object and scope. Owing to the fact that the vast majority of the class from which the bank's clients are drawn can neither read nor write, ordinary methods of advertisement were of no use. It was therefore necessary to use others, and the best was found to be what has come to be called for short "Maroor." That is, the agent, taking a clerk with him, visits personally each village in his district. He calls at the omdeh's house [the omdeh is the headman of the village, see page 29] and asks him to call a meeting of the landed proprietors of the village, and when they have gathered together, the agent through his clerk expounds the bank and its works." 17 officials of the bank and other persons familiar with its working, would seem to justify the following conclusions : (1) Money is generally borrowed for a combination of purposes, the sums obtained frequently being used in part for the purchase of see<l, or for the cultivation of the soil, the harvesting and marketing of the crops, or other running expenses in connection with the working of the farm, in part for the paying of old debts, in part for the purchasing of more land, and in part to pay ordinary household expenses during the period of the cultivation and harvesting of the crops, and before the proceeds thereon are realized. The proceeds of comparatively few loans appear to be expended solely on one object. (2) The two most important single objects for which money borrowed from the bank is expended appear to be (a) the purchase of land and (b) the paying off of old debts bearing excessive rates of interest. (a) One very important reason which leads the fellah to borrow money for the purchase of land is found in his desire to provide for the welfare of his children. According to the system of inheritance prevailing in Egypt the estate of the parent is divided among all the children, the boys receiving equal shares, and the girls each receiving one-half of a boy's share. This system naturally results in the breaking up of the land into a great many small holdings. Agriculture is the only form of economic activity with which the average fellah is familiar. His homestead has for him a very high sentimental value. His religion prohibits him from putting money out at interest. "Land is the Egyp- tian's stocking." As a result of these conditions, if the fellah is to give his children as good a start in life as he himself had, his only course is frequently the purchase of more land. The recent prosperity of Egypt and the opening of large new tracts of land by reason of improvements in the system of irrigation have given further impetus to land purchases, and, in consequence, the desire to purchase land has been a very important motive among the fellaheen for the borrowing of money from the Agri- cultural Bank. (b) In the early days of the agricultural loan operations of the Gov- eminent and of the National Bank of Egypt, the great bulk of the advances made were for the purpose of enabling the fellaheen to pay off debts bearing usurious rates of interest. This motive is probably still the principal one for which the fellaheen seek loans, although it is naturally one of decreasing importance; for debts bearing exorbitant rates of interest are rapidly being paid off and the usurer is being forced into the background. There is no question but that usury has greatly declined in Egypt since the establishment of the Agricultural Bank. 