Over the past few decades, both the agricultural structure in Germany and the banking structure have undergone changes. In both sectors, there is a trend toward larger units. Farms are expanding their livestock herds and the amount of farmland they cultivate. This growth in farm size, along with the accompanying mechanization and digitization of agriculture, creates a high demand for capital for investments and operating resources, which is typically met through loan financing. Other factors, such as rising land prices and non-agricultural diversification projects, also increase the demand for debt capital in the agricultural sector.
In the banking sector, particularly among savings banks and cooperative banks, mergers are constantly taking place, so that here too the number of institutions is declining, but the average size (geographical coverage, loan volume, etc.) is increasing.
The intersection of these two sectors lies in the services banks offer to agricultural businesses. Here, lending plays a particularly important role, both in the area of investment and in the form of working capital loans and credit lines. But what impact do the aforementioned changes have on lending to agricultural businesses?
This question is being explored by the project “Impact of an Increasingly Consolidated Banking Sector on Agricultural Lending,” funded by the Landwirtschaftliche Rentenbank.
The project examines various aspects:
• The extent of specialization in the agricultural lending sector
• Effects on agricultural lending for farms, depending on different structures,
• The role of the so-called agricultural rating,
• Differences between working capital and investment loans in lending,
• The role of agricultural advisory services,
• Need for action in advisory services, on the part of the agricultural sector, and within credit institutions.
In terms of methodology, in addition to a literature review, the study will include a standardized written survey of agricultural advisors as well as in-depth, guided interviews with various institutions (banks, agricultural associations, public agencies, etc.).
