ASB has allocated $1 billion to a land optimisation programme which is projected to add up to $4.5b to GDP over the next five years.
In what has been described as a first for New Zealand, the bank’s Every Hectare Matters initiative will fund independent agri-consultants to develop optimisation options specific to farmers’ land, goals and succession needs.
It will lend up to $5 million per customer, with wraparound advisory support over five years to help bring their new model to life. The greatest opportunity is cited within sheep, beef and Māori land.
ASB general manager rural Aidan Gent described it as a genuine shift in rural lending that was ultimately about building the resilience of the primary sector and keeping farms in families.
Modelling by Lincoln University’s Centre of Excellence in Transformative Agribusiness found the programme, once fully implemented, could boost New Zealand’s GDP by up to $4.51b each year and contribute 5% towards the government’s export growth targets.
Access to capital and interest rates would be based on future returns, taking the new model into account, rather than current farm revenue.
To ease cashflow pressure, farmers could finance the full cost of their investment, including interest and short-term losses over five years.
That will give time for enhancements to start paying off, whether that is improving current systems, investing in technology or adding farm accommodation, crops or livestock.
“We’re speaking with farmers who love their land but find themselves stuck, unable to fund improvements to deliver stronger returns, and build businesses that their children want to carry on,” Mr Gent said.
Every Hectare Matters followed research by Lincoln University which was released earlier this year with ASB. It found smarter land use could add billions to the country’s economy, creating jobs and improving environmental outcomes but greater access to finance was needed to achieve that.
Landowners with significant optimisation potential included Māori, and sheep and beef farmers — sectors which despite large land holdings, could face cashflow challenges that limited their ability to invest and generate better returns.
Mr Gent, who also has a dairy farm and small beef block, said it was probably the most meaningful thing ASB could do to address challenges in the industry.
The Lincoln research highlighted three big areas that needed work — capital, advice — including the role of farm consultants and the quality of that advice — and the role of technology.
Every Hectare Matters was the result of just over two years’ work and Mr Gent hoped other banks would pick up on it and launch similar initiatives.
When it came to criteria, the bank had tried to make it as simple as possible; farmers needed to have more than 50% equity in their property — and the majority of sheep and beef properties had that — and they needed to work with the consultant and other advisers on a plan that improved economic viability and was not detrimental to the environment.
There were many farmers who did not know how to approach succession or optimise land in the way they wanted to, and they were nervous about having the conversation. Under traditional lending practices, it might be tough to get that money.
Mr Gent described the new initiative as a genuine win-win across the industry and hoped it was the start of something bigger.
