‘There remains an ongoing market failure within the Irish banking system’

There remains an ongoing market failure within the Irish banking system, the Irish Farmers’ Association’s (IFA’s) Farm Business Chairman, Martin Stapleton, recently said.

This market failure is evident alongside a lack of competition and a legacy of historical banking losses, he added.

Stapleton was speaking following the release of recent data from the Strategic Banking Corporation of Ireland (SBCI) on lending to SMEs (small and medium-sized enterprises) and farm enterprises.

This data shows the demand among farmers for competitively priced loans, Stapleton said.

The latest figures show that a significant proportion of SBCI-backed loans have been drawn down by farmers, representing the highest demand among all of the different SME sectors, according to the IFA.

Interest rates

Irish farmers are currently subject to high interest rates which places them at a competitive disadvantage with their EU counterparts, the IFA’s Farm Business Chairman said.

The SBCI is playing a very important role in providing greater competition and more flexible lending products to farming and other SME sectors.

“It is important that the number of lending options for farmers continues to increase, and I welcome the SBCI’s intention to announce new lending partners,” he added.

The IFA pushed very hard for the delivery of lower-cost working capital for farmers in 2016, highlighting the very high interest rates being charged for formal and informal short-term finance, he continued.

“The government’s response was very positive, with the introduction of the SBCI’s agri-cashflow loan in last October’s budget.

This fund has been very successful, with high demand among farmers, who have put their short-term funding in a lower cost and more formal structure.

“As part of its pre-budget 2018 campaign, the IFA has highlighted that the agriculture sector is facing continuing competitiveness challenges arising from the weakness of sterling as a direct fallout from the UK Brexit decision.

“We have proposed that this October’s budget should support new loan products for farming through the SBCI, to fund both ongoing working capital requirements and for on-farm investment.

“This would provide a means for the government to directly and positively support investment by Irish farmers in their enterprises,” Stapleton concluded.

In its mid-year review, the SBCI outlined that it supports loans totalling €855 million to over 21,000 Irish SMEs – which employ over 106,000 people.

The Agriculture Cashflow Support Loan Scheme accounted for €118 million by the end of June 2017; the scheme supported over 3,500 agri-business SMEs employing over 5,000 people.