Farm Ireland

Saturday 20 January 2018

Banking worries traps farmers in costly credit

Caitriona Murphy

Caitriona Murphy

A fear of rejection is preventing farmers from converting high-cost merchant credit into more sustainable loans, banks have claimed.

However, farmers' reluctance to engage with banks could put their longer-term investment plans at risk, they warned.

Merchant credit is running 33pc higher than normal this year, with annual interest rates of 12-18pc.

But, overall, bank credit remains quite low.

Credit supplied by Dairygold to farmers has increased by 38pc compared to last year, with half of the increase (52pc) extended to dairy farmers and the remainder to tillage and beef farmers.

The average credit extended to Glanbia farmers is running at €40,000/hd, a rise of 35pc on 2012.

Speaking at a meeting of the Inter Agency Fodder Committee in Portlaoise on Thursday, banking representatives from AIB, Bank of Ireland and Ulster Bank said farmers were in danger of compromising their future investment potential by not tackling farm debts early enough.

Sean Farrell, of Bank of Ireland, said banks viewed farmers in a much more positive light than other sectors.

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"We are very positive about supporting cash flow on farms where the business is proven to be viable and sustainable," he insisted."

His sentiments were echoed by Anne Finnegan, of AIB, who said farming was one sector that the bank was not worried about. "But the difficulty we have is that farmers are simply not walking in the door."

AIB has recorded a 22pc increase in overdraft and working capital loan applications from farmers in 2013 to date, compared to the same period in 2012.

The amount of money being sought in those applications has increased by 32pc.

Ulster Bank's agricultural manager Ailish Byrne added that banks were keen to help farms affected by the weather and fodder crisis, as long as they were efficient and sustainable in the long term.

Despite the banks' positive attitude towards farmers, ICMSA beef chairman Michael Guinan maintained farmers were still scared.

"They've heard too many stories of bouncing cheques for being a few cents over their overdraft limit or they think they will be cut off at the knees if their accounts aren't up to scratch," he explained.

"We need more of a personal touch in the bank."

Irish Independent