‘Loan scheme shows banks are out of touch’
The uptake of the Agriculture Cash-flow Support Loan Scheme shows that Irish financial institutions are out of sync with the needs of farmers, according to Senator Michelle Mulherin.
The Agriculture Cash-flow Support Loan Scheme, which was developed by the Department of Agriculture in co-operation with the Strategic Banking Corporation of Ireland (SBCI), made €150m available to farmers at interest rates of 2.95%.
The ‘pillar-banks’, AIB and Bank of Ireland, as well as Ulster Bank, distribute and look after administration for the scheme, which was designed to provide farmers with a low-cost, flexible source of working capital.
Senator Mulherin, Fine Gael Senator for Mayo, was critical of the banks noting: “The massive uptake of this scheme is no doubt due to the exorbitant lending rates on term-loans and overdrafts normally being applied by our financial institutions to businesses here. This is completely out of sync with their counterparts in other European countries.
These institutions are themselves benefiting from historically low interest rates when borrowing from the ECB (European Central Bank) / EIB (European Investment Bank). Banks are charging overdraft interest rates running between 9% and 12%, while their standard variable rates for borrowing average 6% to 6.5%.
Mulherin urged the banks to cut interest for agricultural loans, saying: “These lending institutions should be reducing their interest rates and providing more flexible terms to farmers and to businesses in general.
“The nature of farming income, which is most often not received weekly or monthly, means that they need assistance to cover their running costs and invest in their businesses as they await payments,” she explained.
€60.2m has been drawn down by farmers to date from the loan scheme. The average loan size is €32,000, with more than half the loans being advanced for terms of four years or more.
“Agriculture is the heartbeat of the rural economy and the sector must not be allowed to fall into decline. The next generation of farmers must be supported and Ireland positioned as the highest-quality food-producing nation in the world, based on innovation and sustainability.” Mulherin concluded.