Farmhouse Renovation Law Impacts Farmers' Associations? Agricultural Finance Bureau: Farmers Completely Unaffected
The Council of Agriculture originally planned to amend the law by the end of June so that only farmers could buy farmhouses. Recently, however, the amendment was reportedly put on hold by the Executive Yuan due to election pressure. Legislators and local representatives opposed to the amendment all criticized the move as bullying rural farmers, causing farmland prices to crash, affecting loans, and creating a systemic financial crisis; supporters argued that if farmers were already using farmland for farming, they would not be affected by the amendment at all, and that many of those opposing it were doing so for their own land-speculation interests.
Who exactly does the farmhouse amendment affect? Will it cause a financial crisis? How do farmers who actually farm view these disputes? NewsMarket will analyze the impact of this farmhouse amendment from the perspectives of agricultural finance, national land planning, and administrative management. This is the first article, examining whether the farmland amendment will have an impact on agricultural finance.
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Will the farmhouse amendment trigger a systemic financial storm? The Bureau of Agricultural Finance slaps it down: no impact at all
To avoid bad debts, the Agricultural Bank reserves 26.6 billion
Hsu Wei-wen stated that there are indeed investment-type farmhouse borrowers who use farmhouses as collateral and may, because the amendment restricts who may buy and sell, face cash-flow problems and be unable to make payments normally, but they account for only 10 percent, and when farmers' associations extend loans they assess the possibility that the money cannot be recovered and set aside "allowances for doubtful accounts" in advance, to prevent the farmers' association from running short of cash.
At present, the total allowances for doubtful accounts of credit departments of farmers' and fishermen's associations across Taiwan amount to 26.6 billion, the overdue loan ratio is 0.64%, and the coverage ratio of allowances for doubtful accounts is 439%. That is to say, for every 100 yuan lent, 0.64 yuan will be late in being collected, but for the money that is late, every 1 yuan has 4.39 yuan in reserves; the higher the coverage ratio of allowances for doubtful accounts, the stronger the financial institution's ability to withstand bad debts, and the better its financial health. According to the Financial Supervisory Commission's definition, an overdue loan ratio of less than 3% counts as good financial health.
Quite a few farmers said privately that most of the farmers' associations' profits come from their credit departments, and that in order to boost performance they pull people in for loans everywhere and try every means to raise farmland prices, "no different from real estate agents." Farmers' associations were supposed to look out for farmers, yet they keep doing finance. "The outside world keeps saying farmers' rights and interests will be harmed by the amendment, but it is not us people who actually farm who have a problem."