The farmers who started their own bank

Posted: May 25th, 2012 | Author: Johann Tasker | Comments Off

History suggests a group of East Anglian farmers who have started what is effectively their own bank could be on to a good thing.

Launched this month, the Anglia Farmers scheme enables farmers with surplus funds to lend to other farmers who need credit to purchase agricultural inputs.

How? By taking advantage of the disparity between low interest rates for savers and much higher interest rates for borrowers.

“Investor members will receive a better return on their money as the interest rate for investors will be set above the market rate,” explains Anglia Farmers chief executive Clarke Willis.

“This rate will, however, be below the market rates normally available to borrowers making this a win/win situation for all participating members.”

In a nutshell, it means farmers with money are lending it to other farmers at better interest rates than either would achieve on the financial market.

The scheme – headed up by AF board member and accountant George Bell – is based on a model encouraged by the Bank of England.

Will it be successful? Time will tell of course.

But a look across the English Channel suggests the scheme has big potential. As the name suggests, the French bank Crédit Agricole has its roots in farming.

Crédit Agricole can trace its history back to the 19th century, when French farmers were struggling to find long-term, flexible and cheap credit.

Keen to attract the agricultural vote by supporting small family farms, the French government authorised the creation of local banks owned by their members.

Crédit Agricole started out as one of these cooperatives, operating a system of mutual credit to growers and livestock producers, just like Anglia Farmers.

Today, Crédit Agricole is the largest retail banking group in France, second largest in Europe and the eighth largest in the world.

One of the reasons for its success?

Its early reliance on farmers – enabling them to boost agricultural output by buying new equipment and inputs to improve production.

Photo: Kit Papworth (Anglia Farmers chairman), George Bell and Clarke Willis.