Banks do not offer chattel mortgages to farmers as there is no legal framework in place for their use in Ireland, AIB’s head of agriculture Donal Whelton told the Irish Grassland Association conference in Cork last week.

A chattel mortgage is a form of financing from a lending institution. It allows farmers to borrow money using moveable assets, such as livestock, as security on a loan.

The borrower continues to own the assets and can use them in the day-to-day running of the farm. This is a common practice in countries like Australia and New Zealand, but is not something that is practiced in Ireland.

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“It’s a question that’s often asked, why don’t Irish banks offer chattel mortgages?” Whelton said.

Framework

“Well, it’s a very easy answer, currently there is no legal framework in this country that allows livestock to be taken as security.

“What we would need for that to change is for the relevant stakeholders such as the Department of Agriculture, farming organisations, ICBF, Teagasc and the banks to get together and put a framework in place that’s road tested,” Whelton said.

Chattel mortgages would benefit young farmers in particular, who have no land assets to offer as security. Putting a framework in place could break down some of the barriers to entry that exist for young people.

Frameworks like this are very possible and do exist in other sectors in Ireland, according to Whelton.

“It would be very similar to what’s going on at the moment with the carbon farming framework that the Department is currently developing to reward farmers for sequestration and biodiversity improvements,” he said.

Commenting on current debt levels in Irish agriculture, the AIB representative said that overall debt for on-farm investment is sitting at €2.8 billion, which is a 50% reduction on where debt levels were 15 years ago.

When compared with our competitors, the EU average is twice this level of debt per cow, he said.