Phil Hogan criticises banks over rates for young farmers

Irish banks were severely criticised over the weekend by European Commissioner for Agriculture and Rural Development Phil Hogan.

Agriculture Minister Simon Coveney

“It is not acceptable in Ireland for financial institutions to charge 170 basis points more than they should, for short term loans to farmers,” he stated.

He was addressing the annual young farmers conference of Macra na Feirme last Saturday in Macroom.

He revealed a plan to bring greater competition into the banking facilities for expanding young farmers.

He hopes to conclude negotiations before the end of the year with the European Investment Bank — the EU’s bank — to ease access to finance for farmers and other rural businesses, through loans, guarantee funds, or equity investments. This will get competition into the farmer lending sector, said Mr Hogan.

European Commissioner for Agriculture and Rural Development Phil Hogan.

The funding will have to draw on Ireland’s existing Rural Development Programme 2014-2020 allocation of funding, as well as guarantee funding from the national exchequer and other sources.

Mr Hogan said, “I am engaged with EIB to get competition into the system. There’s no hope of convincing our existing Irish financial institutions to move quickly on this.” Access to credit is a particular problem for young farmers, because of their lack of collateral.

The Commissioner’s finding that Irish banks charge farmers 1.7% in interest rates more than they should, and his pledge to farmers to reduce this by introducing greater competition into the sector, could be very significant for banks, because agriculture represents a very large percentage of the loan book in all three Irish pillar banks that lend to agriculture.

The conference heard from one such farmer, Kevin Moran from Claremorris, Co Mayo, who has come from being landless to a 210-cow dairy farmer in about four years. He told the conference he was refused bank loans nine times.

Agriculture Minister Simon Coveney

Young farmers need lower interest rates and longer loan terms, said Mr Hogan, and they should know in advance what interest repayments they can expect 15 years ahead.

He said the Irish government will have to modify its EU-funded rural development programme, and the EU allows the programme to be modified once a year.

Mr Hogan revealed the EIB funding has allowed France and Italy draw down €550m to assist young farmers. He said he doesn’t mind who distributes EIB-funded loans and other financial instruments in Ireland, but he wants it available in every member state, in order to add competition in lending and get interest rates to reasonable levels.

Meanwhile, Agriculture Minister Simon Coveney announced at the annual young farmers conference of Macra on Friday how an EU dairy and pigmeat crisis fund of €13.7m will be distributed to Irish farmers.