Speaking at the Macra na Feirme agricultural conference in the Riverside Hotel, Macroom, on 24 October, European Commissioner for Agriculture and Rural Development, Phil Hogan, recognised the difficulties young farmers have in accessing finance and said he is trying to address this problem at a European level.

“It is not acceptable, in Ireland, to have financial institutions charging 170 basis points more than they should for short-term loans available to farmers. Macra na Feirme and CEJA have been ploughing a lone furrow for far too long in relation to this issue,” said Hogan.

“I have been engaging with the European Investment Bank (EIB) to see if we can get a bit of competition into the system because there is certainly no hope, in my view, of convincing our existing financial institutions that they are going to move to a more generous regime to help any farmer, not just young farmers.”

The Commission and the EIB have signed a special memorandum of understanding to develop financial instruments, he explained. The design will reflect the need for preferable conditions for young farmers, as well as price volatility in repayment schemes.

Fixed repayments

“We need low-interest loans over longer terms so that there is some fixed repayments available to people, so that when they start with their investment they know that over 15 or 20 years what their repayments are likely to be,” said Hogan.

“I also believe more can be done in national budgeting,” Hogan added. “Ireland can access money [from the EIB] by modifying its rural development plan which you can do once each year. The Department is aware of this scheme and I will put pressure on, with Macra’s help, to get reasonable rates of interest and longer-term loans for farmers. So far, about €550m has been given out to young farmers through this ‘channel’ in France and Italy, and I hope other countries will follow suit.”

Innovation

However, 22-year-old dairy farmer and Nuffield scholar, Kevin Moran, feels that banks need to show more innovation rather than lower interest loans for young farmers. Moran, the 2013 Teagasc FBD student of the year, started out at 19 with no land but is currently milking 100 cows. He got credit from the bank on his tenth attempt after securing a guarantor.

“I was leasing land off my uncle and had no stock,” said Moran.

“So, it was very difficult to get finance from banks because I had no security or collateral to offer them. Eventually, I convinced someone to act as guarantor for me by paying them a small bit, but it wasn’t easy.”

Moran says that when accessing credit the first route is the bank but there are other options, such as crowdfunding, available. He called on banks to be more innovative in their approach to young farmers.

Moran also suggested that Commissioner Hogan could ringfence a fund that would act as a guarantee for banks, which would reduce the collateral young farmers must provide.