Farm Ireland

Thursday 23 November 2017

Independent view: Let's hope the ICMSA's credit plan gets going

Declan O'Brien

Declan O'Brien

The ICMSA initiative that aims to deliver credit at competitive rates to farmers is entering a critical phase.

The farm body has prepared a strong proposal, which is due to be studied by the local banks and Dutch outfit Rabobank in the coming weeks.

It is also understood that an American bank, which is keen to expand its operations here, has also expressed interest in the idea.

Co-op support is the key to the initiative, which would see farmers issued with the loans and their co-ops facilitating repayments.

Under the conditions of the loans, the co-ops would be mandated to make deductions for repayments from milk cheques during the peak supply months.

At a basic level, the concept is both simple and tried and tested. For a bank without a national branch network in Ireland, the involvement of the co-ops gives the lender greater security and puts order to the repayment process.

Informed sources say they are hopeful, rather than confident, of the idea getting the green light.

However, there appears to be a unity of purpose building in support of the proposal between both the co-ops and the ICMSA.

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The availability of credit at competitive rates will be vital for any future expansion of the dairy industry.

Up to €2.8bn could be required by Irish dairy farmers between now and 2020 to ramp up milk output to the 50pc target set in the Food Harvest 2020 report.

The growth of the New Zealand dairy sector, alongside Netherlands' and Denmark's, has been fuelled, to a large degree, by cheap credit.

If farmers here had to pay 2pc more for funds than their counterparts on the Continent, it would prove a major burden.

The Irish banks have been unwilling, or unable, to provide loans to small businesses and Irish farmers despite the massive infusion of public money.

Indeed, when the head of the Irish Dairy Board admits to having difficulty sourcing credit from the Irish banks, it's little wonder that ordinary farmers are being put through the wringer.

The ICMSA has been consistent in its assertion that farmers would not pay excessive interest on loans because of the past recklessness of Irish bankers.

However, rather than simply complain, they have sought a way past the problem with this novel plan.

Hopefully this initiative gets off the ground. It's bad enough bailing out the banks; but bailing them out and then subsidising operations through high interest rates would be a step too far.

Indo Farming