A significant new credit line for Irish farmers was welcomed last week by EU commissioner for agriculture, Phil Hogan, who said the traditional lending institutions such as banks have done a poor job of understanding the nature of the sector.
He said farming is dynamic and exposed to outside factors such as weather and global markets, and traditional lenders have failed to see the enormous potential for growth and profitability in the sector.
Addressing a briefing on ‘Funding Strategies for the Food & Agri Sector’, Mr Hogan repeated his findings that interest rates for Irish businesses and investors are not competitive for the agri-food and farming sectors, when compared with other European countries, and that the lack of access to suitable and affordable finance is a major obstacle to accelerating economic growth.
He welcomed the announcement from the Strategic Banking Corporation of Ireland that First Citizen Finance has become the sixth lending partner to offer SBCI finance, with a new €50m fund for Irish agri-business SMEs seeking to buy or lease machinery.
Mr Hogan also welcomed the first tranche of funding for the recently-launched Glanbia Milkflex scheme, and promised that further European Bank-backed, low-cost funding is to be provided for the Irish agri-sector.
A high-powered gathering of more than 100 representatives from farming, agri-business, food and banking were present to hear the commissioner at a breakfast briefing in Limerick on Friday, organised by the the Strategic Banking Corporation of Ireland (SBCI) in association with BDO Corporate Finance.
Mr Hogan welcomed “other players in the sector taking the bull by the horns”, with such innovative schemes as the Milkflex providing competitively priced loans to Glanbia milk suppliers, with loan repayments which can vary according to movements in milk price,
This was 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, with a pioneering model which Mr Hogan hopes to see extended to other farmers and other regions of the country, with similar benefits for the sector.
He commended the “thinking-outside-the-box approach” to the completely new Milkflex type of loan product, offering a variable rate of 3.75% above the monthly Euribor cost of funds, where the collateral is the milk cheque, not the farm or family home, which will also allow new entrants to access finance, even when leasing land.
He said the markets will be watching these initiatives closely, and he hopes they may serve as a catalyst for a new wave of similar products across Europe.
He said, “My take-home message to you is simple.
“Investment, growth, and jobs are the top priorities of this commission, and improved access to competitive finance is the catalyst to making this a reality.”
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