Éamon Ó Cuív (Galway West, Fianna Fail)
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258. To ask the Minister for Agriculture, Food and the Marine his views on the new €200 million European Union fund for Ireland to deliver affordable loans for the agri-sector and the rural sector; when this credit facility will be operational; if financial institutions will provide the credit funding or if the Government will provide it directly to farmers; how much will the Government leverage the scheme; what will the interest rates be; and if he will make a statement on the matter. [2328/16]

Simon Coveney (Cork South Central, Fine Gael)
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The European Commission and the European Investment Bank (EIB) have outlined a model guarantee instrument for agriculture, developed within the framework of their Memorandum of Understanding on co-operation in agriculture and rural development within the EU. The model instrument aims to help ease access to finance for farmers and other rural businesses. Member States and regions can adapt and use this model to set up financial instruments funded by their rural development programmes (RDPs) under the European Agricultural Fund for Rural Development (EAFRD). No such funding has been allocated by the EIB or under Irelands RDP to date. I am considering whether to include Financial Instruments (FIs) in Ireland’s Rural Development Programme. Financial instruments can take the form of loans, guarantee funds or equity investments and the funding for any such FIs would have to draw on Ireland’s existing RDP allocation of European Agricultural Fund for Rural Development funding as well as National Exchequer funding. It is also possible to incorporate funding from other sources for such instruments.

So far 7 Programmes from 5 Member States have implemented a FI for the current programme period. In order to include a FI as a measure in a RDP an Ex ante Evaluation is required by EU regulation. This evaluation can take between 3 months to a year to complete. It includes a range of steps and must assess:

- Market analysis - need to prove that FIs are required due to investment gap. This gap must be quantified.

- Estimation of value added of FI

- Estimation of public and private resources to be raised

- Reflection on lessons from other instruments

- Development of a proposed investment strategy (i.e. choice of instrument) and description of the advantages and disadvantages of different types of financial products

- Discussion about how results will contribute to RDP objectives

- Revision and updating of the ex-ante assessment in the case of changing market conditions.

Once this is done, an agreement must be reached between my Department and any other potential stakeholders/financial institutions on a clear investment strategy that is developed from the gaps, if any, identified in the ex-ante evaluation. Following this, a new measure description would have to be drafted and inserted into the RDP by way of an amendment.

My Department continues to explore new and more competitive sources of funding for the agri-food sector. For example, the Strategic Banking Corporation of Ireland (SBCI), which includes the EIB as one of its funding partners, provides an ‘Agriculture Investment Loans’ product. This credit is available at favourable terms for investments in primary agricultural production, the processing of agricultural products or the marketing of agricultural products. The features of the SBCI products compared with those currently on the market are lower interest rates, loan amounts up to €5m and increased repayment flexibility. Since its launch the SBCI has made €750 million of lower-cost loans available for Irish Small and Medium Enterprises (SMEs), including farmers. In its last report, the SBCI stated that of the loans approved and drawn down by SMEs, a third had been accessed by the agriculture sector.