The European Commission and the European Investment Bank (EIB) have launched a €1 billion loans package for agriculture and the bioeconomy with specific targets to support younger farmers, alongside new fi-compass advisory products. The sum will be matched by the implementing financial institutions, thereby mobilising close to €2 billion of long-term financing for small and medium-sized enterprises in the sector. The announcement was made at the fi-compass conference “Addressing price volatility and financing needs of young farmers and agriculture” which took place in Brussels on 29 April 2019.
This new loan programme is part of a joint ‘Young Farmers initiative’ that aims to bring together existing European Agricultural Fund for Rural Development (EAFRD) support and the financial means and expertise of the EIB.
Thanks to this package, loans for agricultural small and medium enterprises will be managed by local banks and leasing companies active across the EU and will include a minimum 10% window for farmers under 40. The programme will address many of the current shortcomings that farmers face providing, among others, better terms for the loans to the farmers,
- Lower interest rates;
- Longer periods of up to 5 years to start repaying the loan;
- Longer periods to pay back the whole loan (up to 15 years);
- Added flexibility, depending on the conditions, to respond to price volatility in the agricultural sector to ensure that farmers remain able to pay loans back in difficult periods (for instance, through a ‘holiday/grace’ period allowing farmers to temporary suspend their repayments).
In addition to the loan package, it is proposed that EAFRD grants for young farmers and start-ups will be used as interest rate subsidies and for technical assistance. Moreover, it is expected that fi-compass advisory support and expertise would be available to managing authorities to support the implementation of loan programmes for agriculture and the bioeconomy.
A recent fi-compass survey of around 7,600 farmers in 24 of the EU countries revealed that in 2017, 27% of the loan applications submitted to banks by EU young farmers were rejected, compared to only 9% for other farms. The study also showed that farms apply for bank finance much less often than SMEs in other sectors. This observation, which is a problem for generational renewal in the agricultural sector, motivated the European Commission to adopt this credit support programme.
Two pilot loan programmes are about to be implemented in France through this scheme. These initiatives are respectively targeted at young farmers (€75 million) and climate change mitigation (€200 million). If the initiatives prove to be a success, it will be replicated in other EU countries. According to Agriculture and rural development Commissioner Phil Hogan, banks will be able to offer this type of product within two months.
Further information is available in the following fi-compass publications which were released at the conference:
- Survey on financial needs and access to finance of EU agricultural enterprises;
- Joint initiative for improving access to funding for European Union Young Farmers; and
- Using financial instruments to reduce the impact of price volatility in agriculture.
Video recordings of all the conference presentations and panel session discussions will be available soon on the fi-compass website.