The European Investment Bank (EIB), the EU bank, announced recently the launch of a loans package of nearly EUR 1 billion for agriculture and the bioeconomy. The sum will be matched by the implementing financial institutions, thereby mobilizing close to EUR 2 billion of long-term financing for companies 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.
In this package, a EUR 700 million programme loan 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 41. The scheme will enable young farmers to benefit from competitive financing terms such as longer tenors of up to 15 years and up to five-year grace periods in order to address their specific needs.
It is one of the largest agriculture financing initiatives backed by the EIB and will be complemented by two pilot loans: a EUR 75 million loan solely for young farmers and a EUR 200 million loan for agriculture and climate action.
This EIB initiative aims to scale-up investment for the agricultural sector, long underserved by the banking system due to its higher perceived risk.
This was confirmed again in the results of the recent fi-compass survey of around 7,600 farmers in 24 of the EU Member States presented at the conference. The survey showed that agricultural enterprises are less successful in their applications for finance than SMEs in other sectors and are more likely to see their loan applications directly rejected by banks. Young farmers, who often lack the collateral and experience, have even more difficulties accessing finance.
EIB Vice-President responsible for agriculture and bioeconomy, Andrew McDowell commented: “The agricultural sector is the backbone of the EU economy and has a key role to play not just in producing healthy food but also to battle climate change and preserve the environment. With this new initiative, the EIB is looking towards the future of the sector and addressing an important market gap, the lack of access to finance of farmers, especially the next generation of farmers.
“This programme loan will also support growth and competitiveness in the agriculture/bioeconomy sector, by preserving and creating employment in the rural and coastal regions.”
Agriculture and rural development Commissioner Phil Hogan added: “Access to finance is crucial and too often an obstacle for young people wanting to join the profession. With 11% of European farmers under the age of 40 years old, supporting young farmers in the sector is a priority for the European Commission and the post-2020 Common Agricultural Policy. I am pleased to see this new joint initiative up and running.”
Jannes Maes, President of CEJA, the European Council of Young Farmers, said: “Difficult access to credit has been recognised as one of the biggest barriers for young farmers across Europe. This joint initiative has the potential to give an EU-wide answer to that challenge. CEJA welcomes this new step and encourages Member States and financial institutions to ensure a quick implementation of the measures so that young farmers can fully benefit from these instruments.”
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investments in order to contribute towards EU policy goals. During the last five years (2014-2018), the EIB has provided EUR 32.8 billion of co-financing to the agriculture/bioeconomy sector (with 88.5% in EU countries).
fi-compass is a platform for advisory services on financial instruments under the European Structural and Investment Funds (ESIF), including the European Agricultural Fund for Rural Development (EAFRD). It is financed by the European Commission and managed and delivered by the European Investment Bank.