Banks accused of cashing in on crisis
Farmers 'screwed to the wall' as credit dries up, say farm groups
Tuesday November 10 2009
Serious cash flow problems are developing at farm level and the situation is likely to get worse as the winter progresses, the main farm organisations have warned.
Both the IFA and ICMSA claim that a growing number of farmers are having their credit arrangements with banks withdrawn or their loans are being restructured over longer terms and at far higher interest rates.
But bank officials insist that they "remain open for business" and that they are continuing to deal sympathetically with farmer clients. They insist that lending criteria for customers with good track records and who have a proven ability to repay debts remain unchanged.
However, farm bodies point out that farmers who are experiencing financial difficulties are finding it increasingly difficult to get credit.
Tralee-based farm consultant Eddie McQuinn said he had come across several cases where banks had refused to roll over lending facilities to customers once the Single Farm Payment (SFP) had been used to clear off outstanding debts.
He claimed that some of these farmers would have to dispose of assets in order to fund their farm businesses into next summer.
ICMSA president Jackie Cahill claimed that the credit situation for farmers was now becoming "dire".
He accused the banks of exploiting peoples' difficulties and said that some farmers were being "screwed to the wall".
Mr Cahill pointed out that interest on loans was the second highest cost on farms last year and accounted for 23pc of total spend.
"Feed is still the main cost but farmers spent more on interest last year than on fertiliser, with contractor costs a poor fourth," the ICMSA leader said.
He said farmers who had renegotiated their loans with banks were now facing far higher interest bills when they can ill afford to carry them.
James Kane, of the IFA farm business committee, claimed that farmers restructuring loans could see their interest charges jump by as much as 4pc.
He said overdraft rates from the main banks range from 7.55pc to 9.45pc but that some clients were paying a lot more, especially those whose credit rating was not intact.
"I know one guy paying 13.5pc and the lad can't afford it," Mr Kane said.
"An awful lot of people are heading for trouble. The SFP will help lads in the short term but there are so many holes for it that they will be going back to the banks again," he added.
But a senior Bank of Ireland official rejected the suggestion that farmers were being overcharged for money.
While she accepted that interest rates had increased "a small bit", she said the level of increase was not excessive.
She added that farmers seeking money had to have a plan in place for their farm and needed to be able to show that they could repay their borrowings.
Michael Dowling, head of agriculture strategy with AIB, accepted that there was a perception that credit was tight but he reiterated that the bank was still providing credit for farmer customers.
Mr Dowling insisted that the bank was willing to restructure loans where farmers had significant cash flow problems.
"Arrangements can be made but this can't be done unless farmers come and talk to us," Mr Dowling said.
- Declan O'Brien
Irish Independent
