National Bank is offering farmers a new way of accessing capital to tackle the problems of skyrocketing land prices and an ageing profession.
Yesterday it unveiled a "rural growth funding" scheme targeting farmers wanting to buy farms with high growth potential, but who lacked the equity to raisea mortgage. The offer comes as the average age of farmers is rising and high interest rates and rising land prices are preventing an influx of young blood.
The number of farmers under the age of 40 is around 15,000, down from more than 20,000 in 1991.
"We need an innovative means of providing capital for farmers," said National Bank's general manager of rural banking, Charlie Graham.
"An ageing farmer population means more owners are looking to pass on farms to the next generation. At the same time, rising land values are making farms less affordable," he said.
Under the scheme, the bank will invest in non-voting preference shares in a qualifying farm company for up to 20 years, with farmer shareholders given the right to buy those shares after 10 years. The bank will be able to force farmers who default on dividends to buy its shares.
Farmers would need to be National Bank customers with a "proven track record" of production growth, increasing farm value by more than the national average, and have at least 25 per cent ordinary equity in the farm company.
Graham said the scheme would give farmers a good incentive to boost performance because the exit price captured any increase in the farm's value above the Quotable Value index, on which dividends would be based.
National Bank said the scheme was based on farm values continuing to increase over the next 20 years.
