fbpx
Print this page
Thursday, 21 November 2019 07:55

New approach called for on lending

Written by  Nigel Malthus
Peter Nuthall. Peter Nuthall.

Banks need to take a different approach to lending to farmers, according to new Lincoln University research.

Banks usually look at historic business statistics and equity levels, but the research suggests that a better indicator of a farmer’s credit worthiness is his or her skills, attitudes and knowledge in running a farm.

Honorary Associate Professor Peter Nuthall said the study emphasised the fact that the world runs on individuals and their skills.

While a lender might form a subjective impression about a would-be borrower…“they rely on those records, credit ratings and so on to make those decisions rather than their personal feelings,” he said.

“I think that in cases where the lending levels are high, they [lenders] should be looking at not only the history but also the personal characteristics of the people concerned.

“And if you’ve got a new person coming in wanting to borrow to put up a new farming venture of some kind or other, there isn’t a great history to work on so they should be looking more formally at their personal characteristics.

“It’s all common sense really. We’ve put together some figures that show that common sense is quite good sense.”

In the recently published study, Nuthall and his colleagues Bruce Greig and Dr Kevin Old used data from a representative sample of New Zealand farm owner/operators to come up with a model which they then tested with data from a postal survey.

“The results make it clear a manager’s personal characteristics are highly correlated with debt payback and, logically, are very likely to be the drivers,” Nuthall told Rural News.

Under personal characteristics, the team considered such factors as age and experience, objectives, management style, relationships with friends and colleagues, spousal influence and even the number of children. 

“A farm manager’s personal characteristics are likely to be a better predictor of future debt payback performance,” he said.

“They have a lifetime of education and experience. A farmer’s objectives, and that of their associated household, can be considered part of the human capital which should be considered including attitudes to risky situations and their originating factors.”

Nuthall said it was also important to note that the human characteristics related to payback can potentially be modified and improved.

“Counselling and psychotherapy can have very positive impacts and are likely to change a manager’s basic characteristics.

“This is a positive approach which might be used when difficulties first surface, preventing further problems. However, the manager must be prepared to cooperate in positive action which will then have lasting impacts.

“This is in contrast to short-term fire sale action.”

Nuthall and his colleagues have previously done research on factors such as farmers’ use of intuition in decisionmaking, and on farms’ financial sustainability.

While there was currently widespread concern about banks’ potentially tightening up on farm lending, Nuthall said people tended to hear only about the cases of extreme debt.

He added that, on average, most farms are not at their lending limit at all.

“There’s a goodly proportion of farms that have no debt. People seem to forget that.”

More like this

Cows part of the solution

New Lincoln University pastoral livestock production lab research is defining how to get the maximum benefit from cows predisposed to urinate nitrogen (N), resulting in less leaching to waterways.

Lincoln launches new research

Three new farming systems are being implemented to expand Lincoln University Dairy Farm’s (LUDF) focus and extend its outlook through to 2030.

Keeping an eye out for water-logged paddocks

Surface ponding water is the factor that has the most effect on cows' lying time - and hence animal welfare - in winter grazing paddocks, says DairyNZ senior scientist Dawn Dalley.

Start recording your fert usage

Farmers need to start now keeping accurate and detailed records of their fertiliser use to meet new pastoral nitrogen limits, says Ravensdown’s Phil Barlow.

National

Labour pains hurt grower

Despite struggling to find workers, fresh produce grower and trader T&G is still forging ahead with growth plans.

China demands, NZ delivers

Meat Industry Association chair John Loughlin says China is one of the most demanding export markets in the world.

Leaving on a jet plane - again!

Damien O'Connor is planning to head back to Europe again shortly to breathe oxygen into the free trade agreements that…

Machinery & Products

Helps tame the wind!

Amazone's recently released WindControl System automatically monitors and adjusts the spreading pattern to compensate for the effect of the wind…

First Claas patent hits a century

While Claas has registered more than 3,000 patents during its 108-year history, the company is currently celebrating the 100th anniversary…

JD invests in robotics

Global giant Deere and Co has acquired Silicon Valley start-up company Bear Flag Robotics, which specialises in autonomous driving technologies…