Mr. Mark Cunningham:

I thank the Deputies for their questions. Deputy Cahill asked about the level of demand. Last year, we provided nearly €400 million in lending to farmers in the primary producer sector. We had an allocation under the scheme of €65 million. As such, it is the level of demand as a proportion of the overall level of agriculture lending we plan to do in 2017. As my colleague, Mr. John Fitzgerald, has indicated, we expect demand to be broadly similar to 2016. One can assume that there will be a commensurate level and a commensurate increase in demand for farmers who qualify under the scheme.

As we indicated earlier, 57% of the scheme funds so far have been used by farmers as stocking lending. That is permitted under the scheme. It is one of the conditions that is allowed. We did not indicate or devise the scheme in that regard. As a result, if people qualify under the scheme, we are in a position to grant them facilities. There is no doubt that there are large levels of merchant debt among farmers. We have constantly indicated that they can refinance that more cheaply with the bank. Average merchant debt trades at probably 1.5% per month and we encourage farmers constantly to look at refinancing it with the bank with normal banking facilities. For a variety of reasons, they chose not to do so. Consequently, a number of farmers have not chosen to refinance merchant debt under the SBCI scheme.

Approval rates in respect of the pig and tillage sectors are no different than other approval rates under the scheme. We did not have any reason to believe there would be lower levels of demand from the pig and tillage sectors than from the sectors from which applications came. Certainly, there was no bias on our part or among proponents of the scheme nationally such that pig or tillage farmers were not in a position to apply.

I was asked about access to capital by Deputy Kenny. All the banks will indicate to him that there is no shortage of capital available for the agriculture, SME, or, indeed, any other sector in Ireland. All the banks are willing to support farmers and provide them with facilities as they look to expand and grow their enterprises. Deputy Kenny also referred to the level of interest rates. Unfortunately, there is a great deal of misinformation out there about the level of interest rates and the comparable rates across Europe. We have done detailed studies and analysis of the whole market. One of the findings when one considers the SME and agriculture sectors across Europe is that the Irish market has three main characteristics which differentiate it. First, over 85% of lending in European markets is for one year or less whereas over 48% of lending in the Irish market is for more than three years. Second, on average in Europe there are upfront fees for lending of between €40 and €100 with a subsequent 0.4% to 1.6% rate for facilities. When one adds the fees in respect of one-year facilities to the interest rates, one gets a very different picture. Third, there are mutual guarantee and co-operative schemes in the agriculture sector across Europe, which are not available in Ireland. That was one of the problems this scheme attempted to address. Over 15% of lending in Europe comes with the benefit of the guarantees from those mutual guarantee schemes, which we do not have. All that tends to alter significantly the level of interest which is ultimately charged to farmers.

When the SBCI, the EIB and KfW were working with us to devise this scheme, they analysed the pricing mechanisms and the manner in which banks and financial institutions priced their products to the market in considerable detail to determine the pricing for the scheme. As I am sure Mr. Nick Ashmore indicated to the committee, the effective pricing for the scheme was designed to ensure there was no net benefit to the banks and financial institutions. In effect, the subsidies and additional premium paid to the banks brought the pricing levels up to the levels at which the banks were able to put credit out into the marketplace. A straight comparison between one interest rate and another is far too simplistic. Any suggestion that we are ripping off the people of Ireland and that our European counterparts are being more munificent is not correct.