Farmers can apply for EU loans rather than grants
Phil Hogan, the agriculture commissioner, said he estimated the Department of Agriculture could make about €200m available over the current funding period up to 2020.
The loans may be used for a variety of developments covering not just traditional agricultural projects and farmers, but also for agri-food, LEADER, forestry, and advisory enterprises.
There will be a conference in Dublin in June to provide details.
The money will come from each member state’s share of the European Agricultural Fund for Rural Development and the State’s contribution. It will be up to each state to decide if they will take part in the scheme, and what sum they will attribute to loans.
The European Investment Bank will offer a guarantee of up to 80% of the loan to banks administering them, and it is hoped that in this way, domestic banks will be willing to lend up to 5.7 times the sum. The private funding can also come from investors but the limit is determined by state aid concerns.
The EIB will charge a 1.5% interest rate for the risk coverage and it is hoped that domestic banks will provide lower than normal rates because the risk is covered.
It was unclear whether the state can charge interest on the portion of the loan it provides. The money as it is repaid will go back into the national envelope and can be used to help other projects.
The developments that will qualify for such loans will not be restricted to those already set out under rural development programmes.
While most countries have already submitted their programmes, the European Commission said that they are ready to accept adjustments, and that any projects considered for loans needs to be evaluated ex-ante by experts of the government or employed by them to ensure they meet certain standards.
The rational for loans rather than grants is that many developments are not sufficiently advanced or have the necessary backing to qualify for grants under rural development schemes.
But for projects to avail of loans, the EIB backing and loans from the EAFRD fund, should ensure that farmers do not have to put forward their own funds or provide collateral.
The credit crunch in many countries means banks are reticent to lend, but it is hoped the EIB backing, together with the funds from the national rural development fund, will release credit.
Member states will be able to choose how such money would be allocated and could create different headings — such as for young farmers or dairying enterprises.
The EIB will also give advice and hope, through having handled similar loans in some member states, will be able to provide “off the shelf” agreements that should reduce the time and complexity required to make such loans available.
The Netherlands is already working on using these loans and payments could begin within six months, experts believe. The loan structure was available in the pervious budget period but was taken up by just seven countries. The EIB and the commission hope that despite missing the starting date for the 2014 programming period, more governments will be interested.
