Mr. Nick Ashmore:

I will try to work my way through the points raised. In respect of Senator Lombard's question about duration, we talked about duration earlier. This was really determined by the demand and the use of the funding. The loans are available from one to six years. The duration is determined by what farmers applied for and what they were using the loans for. If those loans were for things like lower-cost stocking finance or working capital, they tended to be of shorter duration because it is about trying to apply the right loan solution to the right use. If it was refinancing a tractor that had been purchased or a piece of equipment, it tended to be of longer duration because it is to finance the purchase of a larger asset. What one sees with the size of the loans is that those loans of longer duration tend to be larger loans as well. We do not have a predetermined expectation of what that mix would be so we wanted to allow for those situations. It concerned the juxtaposition between the banks' normal lending criteria and the normal way they apply loans to farmers. I think there might be a mismatch of expectations given that the scheme was explained in simple terms. With loans of up to six years, farmers are naturally going to apply for the longer term in certain cases. We do not have that split of farmers who applied for longer-term loans and got shorter-term loans and farmers who just applied for shorter-term loans. One feature of the market is that borrowers remain wary of banks. We are still seeing the SME community as a whole, including farmers, pay down debt at a very rapid rate. There is still wariness regarding being in debt to the banks for longer periods. We think there may be a fair proportion of farmers who would only have applied for shorter-term loans because they do not want to be looking over their shoulders for the next six years. They would rather go in, get what they need and get out again. The farmers who tried to get something but did not get what they wanted are more likely to come forward and ask about their situation. We very much recognise that. There are lessons we will learn from this exercise that we will try to apply going forward. As I said, this is the first time we have done a loan scheme of this nature. Many lessons have been learned.

On Senator Lombard's point about it being a unique scheme and being able to use it in different ways, the EU uses these schemes all the time all over Europe and has done so for a long time because many other European countries' banking markets are built on guarantee programmes. Portugal is a massive user in this space. Italy has something like 2% or 3% of GDP in guarantees to SMEs. It is not being used in the Irish model because the banking system grew up here in a different way. It was much more of a relationship-based model and was not built on mutual guarantee schemes in the way that the Italian or French banking systems were. European schemes are often structured this way and go straight through those systems into those markets very efficiently. They do not work the same way here and this is the first time we have been able to get one to really work. It is a great precedent to set. It is a good market to be able to demonstrate to the banks and other lenders in the future that this is how we can do this and it can work really well. Other supports at a European level that can be deployed in this way are available. The European Commission is moving and applying pressure to move away from grants towards the use of these types of financial instruments. In many cases, it can provide a simpler solution. Maybe it is a single application for a long-term low-cost easy loan to fund a piece of capital expenditure rather than a grant application plus a loan application because it is a 50:50 piece. We see other options and ways of doing things in this context that may be more useful or easier to use down the line.

In respect of the point about terms and conditions and whether we can review those, those loans are unsecured. If we find in a situation where a bank has required security that it does not qualify for our scheme, we will withdraw the guarantee. The onus is on the banks to make sure they have met the criteria and have applied the loan and lending in the right way. We have extensive audit rights under this scheme. We will have to see whether we would catch someone at that point but we certainly can include that in our audit criteria and review. We will have to do an audit of this scheme at some point. With measures like this, it is very important that we and the Department assess the impact going in and the impact coming out. We would certainly be supportive of a review after the fact to go back and see whether it did what we wanted it to do, whether it got to the right farmers and how many farmers would say in response to a survey that they wanted to get it but could not. Every farmer's situation will be slightly different. If there are situations where they are not comfortable with the terms and conditions of the loan and have chosen not to draw it down, it is quite hard to legislate for every situation. However, we would be happy to look at any individual situation if anyone wants to bring it to our attention.

We are confident that the scheme will be drawn in time given that a full set of applications is in and we know farmers will not be shy about giving the banks a hard time as to why they have not got their money yet. In some cases, there will be paperwork that takes a bit longer. We are seeing the loans come through in volume at the moment. We hope it will be wrapped up in the next couple of months and fully drawn down. We expect it to be fully drawn down.

In respect of Senator Mulherin's question about other schemes and other interest rates, this funding is comparable with a number of different options. They include overdrafts, the Glanbia MilkFlex product, which relates more to supporting investment loans, merchant credit and standard variable loans. Banks overdrafts are 9% to 12%, the Glanbia MilkFlex fund is about 4.2% and merchant credit is anywhere between 9% and 10% up to 14%. This is quite insidious because many farmers do not actually realise what they are paying in that context. Standard variable rates average somewhere around 6% or 6.5%. This is not comparable with the normal SBCI agricultural investment loan scheme loans, which average around 4.5%, because those are only for investment purposes. They are not for working capital purposes. We had to go down that route for state aid reasons.

The banks are specifically not generating any extra profit out of this scheme. This is designed to be cost-neutral for the banks. That is very important for state aid rules. We had to go through a lot of work with the banks to ensure we had the right mechanisms in place to make sure we could verify that they were not upping the price or doing something to be able to avail of some of the support that was coming through. We operate in the same way. The SBCI is a pass-through entity. We do not make a profit or major return on this. We simply charge on the small amount of administration costs of the scheme and a premium for the small amount of risk we share within the overall scheme. We design it in such a way that it is absolutely neutral from the banks' point of view so they are not making any more money but they are not making less money either.