Credit union membership rises as farmers applaud cooperative spirit


People’s need for access to cash and in-person rural banking is driving increased growth in credit union business, including demand for Cultivate farmer loans.

A new semi-annual Cultivate 2022 report shows a 37% increase in total loan requests for these “farmer-friendly” loans compared to the first half of 2021. The average Cultivate loan request for the first half of 2022 was €28,083 granted over 5.75 years to a farmer with 34 hectares and a total debt of €126,946 on his farm; with average debt up 22% vs H1 2021.

In real terms, farmers are keeping their level of debt relatively stable. With 33% of these agricultural loans used as working capital, most farmers take on a little more debt to cover their rising costs of fertilizers and other inputs. The other credits relate to agricultural buildings (17%), agricultural equipment (16%) and tractors (14%).

The competitive interest rate of 6.55% (6.75% APR) is clearly attractive to farmers, especially cattle farmers who make up 71% of all loan applicants (compared to 17% for dairy ). Perhaps just as importantly, the withdrawal of so many services by the anchor banks creates a vacuum for which it seems that credit unions are the ideal solution.

“People definitely see the credit union as their best alternative,” said Finbarr O’Shea, chairman of Cultivate’s marketing committee and CEO of Bantry Credit Union. “At Cultivate, we stick to our three currencies for all loan applications: simple, local and personal.

“There is no paperwork, no hassle. Credit unions are cooperatives owned by the communities they serve, rather than always focusing on shareholders. We know the value of personalized service. People want to walk through the door and talk to someone.

“Loan seekers want a simple yes or no. They also want to talk to someone face to face. A farmer wanted to come into the office to tell me why he was taking out a €15,000 loan. I told him it was not necessary, but he insisted on going 20 miles to explain his plans. This is the kind of personal service that people want.

Cultivate Credit Union farm finance, H1 2022 review: How the beef and dairy sectors compare from January to June 2022.

Launched by a handful of credit unions in Galway five years ago, Cultivate Loans were offered by 100 credit union offices by the start of 2021. This has now grown to 150 CU offices in 23 of the Republic’s 26 counties.

As milk production is stronger in Munster and Leinster, Western origins partly explain why cattle farmers are the main clients of Cultivate loans. The other reason is the €50,000 loan cap. Many dairy companies tend to operate with higher levels of funding.

The broader banking situation also plays a vital role in the rise of Cultivate loans and the rise of credit unions in general. The departures of Ulster Bank and KBC, two major players in rural Ireland, were very significant.

Add to that the Bank of Ireland’s decision to close more than 100 branches across the island and AIB’s decision to stop using cash, cutting ATM services from 70 of its 170 branches across the country. For some rural people, that might mean going 80km to 100km back and forth just to get to an ATM. Bantry, a town popular with tourists, currently has only one ATM on its main street.

Contrast that with the service levels of credit unions, many of which are now hiring office staff, rushing to install ATMs, developing mobile apps and adding a host of new mortgage, auto, education and other services to measure.

Bantry Credit Union offers a 3% student loan, effectively cost-neutral to UC and a great start in life for the student. Community service is also at the heart of the scholarship program that Bantry CU has run for 20 years.

The pandemic years, of course, have really shown the community ethos and personal touch of the local credit union for anyone who wants a face-to-face meeting with their loan provider.

“I haven’t heard of any credit unions closing because of Covid,” Finbarr O’Shea said. “Of course, we had to take measures like having two teams, one in the office and one working from home. We followed all the precautions. We are not currently in the process of ‘returning to the office’. We have never left the office.

“What you are seeing now, with all the improved services deployed by credit unions, is a product of the fact that we do indeed belong to our communities. We are financial cooperatives and our only motivation is to stay within our communities. We are here to serve our communities. This is why we exist.

One customer who clearly appreciates this co-operative philosophy is the Irish farmer. In the recently released Cultivate S1 2022 report, this link is visibly translated into numbers.

The report breaks down farmers’ motivations for taking out a Cultivate loan: buying cattle, building additional cattle bays, developing pasture infrastructure from reseeding to roads and water systems, building a calving house, investing in new parlor equipment (e.g. milk tank), build a machine shed, upgrade their tractor or machinery and working capital.

The report also cites a number of member farmers, explaining why the credit union model works for them, both commercially and community-wise.


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