FARMERS have welcomed the news that AIB – the country's second biggest bank – has launched a new €500m loan fund for the farming sector.
The move should help assuage concerns about a shortage of agricultural lending in the wake of ACC bank's exit from the Irish market.
The loan fund will provide finance for working capital, asset purchases and other farm investments. It is also available for farmers who want to refinance existing loans from banks that are exiting the Irish market, like ACC and Danske. AIB was able to borrow from the European Investment Bank to establish the fund, meaning it got the money at a discounted rate. It is not yet clear how much of this discount will be passed on to farmers in terms of lower interest rates on loans.
Concerns over a shortage in lending to farmers peaked after ACC announced last year that it had decided to leave Ireland. The Irish subsidiary of Dutch banking giant Rabobank said it would close all its branches and business centres to the public, though would continue maintaining existing farming loans.
The timing is now right for a new agri fund, AIB director Bernard Byrne said, because farmers are expanding production in anticipation of the forthcoming removal of milk quotas.
"The removal of milk quotas in 2015 presents the dairy sector with a long-awaited opportunity to expand," said Mr Byrne. "The investment decisions being made now by farmers are crucial and will have a long-term impact on their future."
Dairy farmers' group the ICMSA welcomed the news, but urged caution. The post-quota era will bring both challenges and opportunities, said ICMSA president John Comer.