SBCI lends almost €2.5m a month to ag sector

Since it’s launch in October 2014, over a quarter of all lending by the Strategic Banking Corporation of Ireland (SBCI) has gone to the agriculture and agrifood sectors.

Speaking in the Dail yesterday, acting Minister for Agriculture Simon Coveney said the SBCI has made 4,619 loans amounting to €172m drawn down by small and medium enterprises in Ireland.

He added that 26% of SBCI’s lending has gone to agriculture and agrifood.

It is understood this includes farmers and farm contractors and equates to €44.7m over 18 months, or €2.48m a month.

The acting Minister said he would welcome more alternative funding streams that result in fresh financial products for farmers similar to that achieved by the creation of the €100 million Glanbia milkflex fund in March, which is backed by the Ireland Strategic Investment Fund, Rabobank and Finance Ireland.

“I would like to see that kind of thinking, resulting in new financial products, coming from other banks to make sure that opportunity, in terms of the flexibility and design of farming and farming income linked to repayment profiles, is available to dairy farmers in other parts of the country, but also in other agricultural sectors,” the Minister said in the Dail yesterday.

Financial instruments are also being considered for inclusion in the Rural Development Programme.”

Last week the SBCI announced further progress on its €50m fund for small to medium-sized enterprises seeking to buy or lease farm machinery.

The fund will cater for the buying or leasing of tractors, combine harvesters and balers, among other farm machinery.

More Competition Needed From Pillar Banks

On April 30 the ICMSA discussed with the SBCI its objective to become a significant source of finance and loans in the farm and agri-food sector.

ICMSA Farm Business Chairperson, Lorcan McCabe, said it is absolutely essential that there is more competition for the pillar banks in Ireland.

He said the SBCI has the potential to develop more financing options for Irish farmers and he welcomed the progress to date it had made.

“For too long, farmers have been starved of choice for bank loans and have paid excessive interest and other charges to banks,” he said.

“Thankfully, it would now appear that there are now more options available to farmers and the very first thing that will attract farmers is the question of interest rates.

Irish farm finance and loans are being offered at rates often in excess of 2% higher than the rates available to our continental mainland counterparts.

“Anything that begins to lower our rates to something equivalent to our EU counterparts is to be hugely welcomed,” McCabe said.

Background To SBCI’s Formation

Unlike many European countries, Ireland did not have a state development bank to sustain funding to businesses throughout the financial crisis.

During Ireland’s exit from the EU/IMF programme in late 2013, the Taoiseach and German Chancellor Merkel agreed that the German promotional bank, KFW, would help finance the Irish small and medium enterprise sector.

This led to the creation of the SBCI, ensuring that Irish businesses have access to long-term funding.

The Department of Finance and the National Treasury Management Agency worked throughout 2014 to create the necessary mechanisms to establish the SBCI.

Building on the initial funding offer from the KFW, the project team added funding from the European Investment Bank and the Ireland Strategic Investment Fund.

Legislation enabling the establishment of the SBCI was passed by the Oireachtas in July 2014 and it was formally launched by the Minister for Finance, Michael Noonan, TD on 31st October 2014.