At the recent ICOS National Conference, EU Agri Commissioner Phil Hogan gave an update on progress on the developments of the Agricultural Loan Scheme being developed with the European Investment Bank.

It has been stated that this fund could bring in the region of €200 million of low cost loans Irish Agriculture at both farmer and co-operative level.

Commissioner Hogan said the fund was very much needed in the context of increased volatility, and that the industry would need the certainty of a scheme like the EIB fund to make investments that would drive growth.

Here the ICOS Dairy Digest will attempt to take a look at the current state of play with the development of the Scheme:

Where did the idea come from?

A memorandum of understanding was signed between the EIB and DG AGRI in July 2014. Commissioner Hogan wants to leverage the bank for the benefit of farmers and industry. This is the biggest private bank in the world, owned by the 28 EU Member States and it has a key role to play.

According to the Commissioner a ‘coalition of the willing’ at Irish and EU level now needs to fully throw its weight behind the proposal, applying pressure on the EIB to deliver for the agri-food sector – Europe’s biggest employer.

Is it only for dairy investments?

No, similar models can be developed for the pigmeat industry, forestry (so important to Ireland from a carbon abatement perspective) fruit and veg, and other sectors.

What is the thinking behind the loans?

With this Scheme farmers and industry will soon be able to make use of volatility-proofed loans.  The opportunity and importance to make progress on such a tool has been one of the themes of the engagement with the European Investment Bank.

Commissioner Hogan admits that we are still a distance off from the operation of the Scheme, and that the EIB needs to do its own assessments diligently.

What are Commissioner Hogan’s ideas for the working of the Scheme?

At the ICOS National Conference, Commissioner Hogan outlined some of his ideas on how the scheme might work from a dairy perspective.

No 1- loan terms of up to 15 years

No 2 – very low interest rates

No 3 –monthly milk cheque as security

No 4- loan repayments that can flex up and down to reflect milk price movements

From a specific dairy perspective what other benefits are there from Scheme?

Commissioner Hogan pointed out that the dairy sector is viewed positively by banks as the default rates are pretty low. 

The dairy industry rightly pointed out that producers with no land, who wish to use leased land to start up or expand, lack collateral for use as security.  The Commissioner outlined his belief that his approach would enable new entrants to use land held by retirees, or held by others who do not wish to pledge their land as security or do not wish to sell the land.

Commissioner Hogan said that he saw the ‘need to provide these tools to drive vital generational renewal.’

What are the next steps to deliver this Scheme?

For the Scheme to progress, movement needs to occur at European level with the EIB needing to come forward with a clear mechanism to deliver and administer the loans and move clearly beyond the memorandum of understanding that is in place with DG Agri in Brussels.

In Ireland, we need the government here to move to put in place the legislative change to create the financial instrument in the current rural development plan, so as to have the Scheme ready to roll once it gets the green light from Brussels rather than only reacting afterwards.

The Commissioner sees the Scheme as a central plank of his term of office and at the ICOS National Conference he himself said that; “I want to make it clear to you that this issue of access to finance remains an absolute priority for me, as it has been from day one of my mandate. My ambition, and my approach to achieving this ambition, has not changed.”

By Conor Mulvihill

European Affairs Executive