Speaking at AIB’s “Agriculture at a Crossroads” event in Corrin Mart on Monday, Minister for Agriculture Michael Creed confirmed the Government intends to launch another low-cost loan scheme for farmers in the second half of this year.

Last year, the Government leveraged €25m to create a €150m loan fund that guaranteed the banks against first losses and helped subsidise the interest rate, bringing it down to 2.95%. The scheme was successful and ended up being oversubscribed and fully exhausted within weeks.

However, this year’s scheme has yet to open despite the Minister announcing at the Budget that he had allocated €25m to leverage another fund for farmers this year. Last week, he said it was due to open in the second half of 2018, which has raised some concern among farmers as the main requirement for cashflow funds is in the first half of the year.

“The challenge this year is do we go for a bigger pool of money but at a slightly higher interest rate and extend it to more people,” he said to the 300 farmers in attendance.

However, he drew comparisons with the recent €300m loan scheme that is now being rolled out to the SME sector where €25m of state funds were used to create the larger fund at an interest rate of 4% over a term of three years.

He said: “This shows that by varying the terms and conditions you can increase the size of the pot.”

While the aim of last year’s scheme was to support farmers experiencing short-term financial pressure due to price and income volatility, farmers were mainly attracted to the scheme by the low interest rate and no requirement to provide security.

Competitive rates

The hope was that the reduced interest rate would help create competitive and lower average lending rates of the commercial banks. At the time, the IFA said that “it will be a poor day for IFA if it’s not used and we can never go back talking about cheaper credit if not used….”

A recent ESRI report showed that Irish farmers pay double the interest rate of European counterparts. For loans less than €250,000, it found the interest rate in Ireland was 5.2% compared to the eurozone average of 2.52%.

Meanwhile, overall borrowing on Irish farms is at its lowest level in 8 years – 30% lower than peaks hit in 2009.