As reported last week, four credit unions in Co Galway have launched a joint farming loan offer under the Cultivate brand, with up to €50,000 available to farmers over a maximum of seven years at a variable rate of 6.75% APR. The loans can be used to fund livestock, farmyard development, machinery and cashflow.

“It’s only the beginning,” Mick Culkeen, chief executive of St Jarlath’s Credit Union in Tuam said at the launch. “I hope we will offer a broader suite of services to the farming community,” Culkeen told the Irish Farmers Journal that a current account for farmers, financial advice and succession planning were among the services credit unions could offer farmers in the future.

“It’s like what old banking used to be,” he added. “You’re getting a guarantee of personal attention as well as significant skills, knowledge and goodwill.”

While it has always technically been possible for a farmer to get a loan from the local credit union, these institutions have more traditionally been seen as loans with higher interest rates, used for short-term small family loans to finance a car or college fees. Before they could launch Cultivate, Galway’s four rural credit unions spent one year surveying local farmers to understand their finance needs, training staff on farm business and getting their product approved by the Central Bank. This joining of forces was instrumental in getting the project through, and this ground work is now accessible to other credit unions interested in the model through their nationwide development association.

Available capital

Credit unions had €2.4bn in available capital at the end of 2015 and, while they have increased lending, finding new outlets to give out loans and return a profit is essential to their sustainability.

“Growing the loan book continues to be a priority,” the Irish League of Credit Unions said in a statement just last month.

The untapped farmers’ market seems a logical next step, especially after pillar banks closed many rural branches and lost the local connections boasted by credit unions. These local lenders, however, may lack the big-picture knowledge of the agricultural sector built by the banks’ economists. In any case, the Galway experiment is showing potential.