Farmers pay more than businesses when taking out loans according to IFA President Eddie Downey.
In a statement released by the IFA, he cautioned that as farming relies on exports so heavily, "high borrowing costs undermine the competitiveness of our food production."
“The latest figures from the Central Bank show conditions for SMEs (Small and Medium Enterprises), including farm businesses, are tougher in Ireland than almost anywhere elsewhere in the Euro area, both in terms of cost and availability of finance. The withdrawal of a number of commercial banks following the credit collapse has led to a significant increase in market concentration, and erosion of competition, which has in turn contributed to more difficult lending conditions.
“The cost of new borrowing for Irish SMEs of 5.7% is significantly higher than for equivalent businesses in the eurozone, with the Euro area average at 3.3%. On borrowings of €100,000 this amounts to an extra repayment cost of over €2,000 per year," explained Mr Downey.
This is a worsening to the most recent figures of 5.5 percent for Irish SMEs compared to 3.6 percent in the other 15 member states. The official rate for the eurozone was lowered to 0.05 percent in 2014, a record low, but it remains high here due to the strain defaulted and distressed loans have placed on lenders.
IFA Farm Business Chairman Tom Doyle points to Central Statistics Office (CSO) figures indicating that agriculture has been the "driving force" behind an export-lead recovery, saying, “Agriculture has the highest percentage of performing loans in the SME sector. Policy responses, such as SME lending targets for the pillar banks and the establishment of the Credit Review Office, have been put in place to provide an adequate flow of credit to Irish SMEs. While these initiatives have been important, they have proved insufficient, as Ireland still maintains one of the highest levels of credit constraint for SMEs of any eurozone economy.
Mr Doyle also called for the Government to demand lower interest rates for agricultural loans to reflect the lower costs of borrowing from banks.