Traditional lending institutions such as banks have been accused of doing a poor job in understanding the nature of the agri-food sector.
European agriculture commissioner Phil Hogan, who levelled the criticism, said that they have also failed to see the enormous potential for growth and profitability in the sector.
“As a result, other players in the sector are taking the bull by the horns. the sector is dynamic, but is exposed to outside factors such as weather and global markets,” he said.
Mr Hogan, speaking at an “Access to Finance” seminar in Limerick, said there is a significant competitiveness deficit in Ireland, mirrored in many EU member states.
“This is not isolated to the agri-food sector, indeed it is reflective of general trends in the Irish economy.
“The upshot is that Irish companies, including those with detailed business plans for expansion, have had to scale back their ambition. This means investment opportunities and new jobs being lost,” Mr Hogan said.
Mr Hogan also recalled that in March he had launched the innovative Glanbia MilkFlex Fund, a lending instrument.
“It will offer flexible, competitively priced loans to Glanbia milk suppliers with loan repayments which can vary according to movements in milk price.
“This is the first fund of its kind to offer Irish farmers access to finance through non-traditional lending structures, helping to protect farm incomes from the impact of dairy market volatility.
“MilkFlex is a completely new type of loan product, with a multi-partner, thinking-outside-the-box approach.
“The key financial innovation is that the collateral is the milk cheque, not the farm or family home, allowing new entrants to access finance even when leasing land,” he said.
Mr Hogan said Rabobank, the Ireland Strategic Investment Fund, Finance Ireland and Glanbia plan to invest in the fund. Finance Ireland will also originate the loans and manage it.
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