RADIO TRANSCRIPT: RIC CEO JOHN HOWARD SPEAKING TO ABC’S NARELLE GRAHAM ON ABC SOUTH AUSTRALIA REGIONAL DRIVE PROGRAM
NARELLE GRAHAM: John Howard is the Chief Executive Officer of the Regional Investment Corporation, and he has been at the drought forum this week. John Howard good afternoon.
JOHN HOWARD: Hi Narelle, how are you?
NARELLE GRAHAM: I’m well, thank you. Is it correct that RIC loans will only cover half of a farmer’s debt?
JOHN HOWARD: Yeah, part of the eligibility criteria and there’s a range of them, is that we can’t be more than 50 percent of the total debt that a farmer would actually have as part of their portfolio, so we can do up to a maximum of $2 million, and a maximum of 50 per cent of the total debt that they have.
NARELLE GRAHAM: Does that mean that a farmer needs to borrow money from elsewhere and be in debt to another financial institution and then go to the RIC loans scheme and try and get that debt covered?
JOHN HOWARD: Correct.
NARELLE GRAHAM: Right.
JOHN HOWARD: So a big part of it is in putting together this type of product, what the government has recognised is where those that are in financial need is part of the assessment piece, and a big component of that when you’re providing a concessional loan, of which most people are refinancing their commercial debt, is that they’re actually in a position and have debt elsewhere and we’re coming in to help with lowering that cost of capital burden. But not to replace all of that, we’ll only do up to 50 per cent and up to a maximum of $2 million.
NARELLE GRAHAM: Okay. Thank you for that because it’s been really difficult to get clarification from people on that, so it’s really nice to hear it from the horse’s mouth as it were. Is there a RIC loan – because I know there are various things available – is there a RIC loan available to farmers who are leasing their land; that’s something that’s come up on the show too; that they might be leasing, they’re starting out in farming, they might be leasing the land off of a family member or maybe somebody who is not family and but they still need to be, they’re still in debt. Is there an RIC loan that covers that?
JOHN HOWARD: Yes so for new entrants or those that are starting out we have an AgriStarter loan product. So within that it’s either for people that have been operating in the industry but are new to establishing their own farm enterprise, or it also covers in succession planning. When people are starting out it is recognised that they mightn’t actually own the land themselves but they’re able to share farm or agist, or some other mechanism in place that we'd be able to actually help fund that. But again, we can’t be more than 50 per cent of the debt and one of the other obstacles that comes into play is that there needs to be security backing for our loans as well. The same as any other normal banking type product.
NARELLE GRAHAM: And is the interest rate on all of the RIC loans 5.18 per cent?
JOHN HOWARD: Correct. yeah, the methodology of how our loans are established, and renewed every – they’re updated every six months – is the same for all our loan products.
NARELLE GRAHAM: Right. John Howard is on your radio, Chief Executive Officer of the Regional Investment Corporation. So what is the length of time for a loan; is it two years, that’s what –
JOHN HOWARD: No.
NARELLE GRAHAM: No, okay. So what is it?
JOHN HOWARD: No, all of our loans are a ten-year loan term with the first five years of that interest only, and the second five years principal and interest, however in that second five year period with principal and interest, a third of the loan is paid off during that period of time generally is what we put in place, which therefore means two thirds needs to be paid out at the end of that ten year period. So a ten year loan, five years interest only, five years principal and interest.
NARELLE GRAHAM: And who sets the interest rates because I know it’s not you, John?
JOHN HOWARD: Yeah, no, it’s part of the mechanism when we were put in place by the government and it’s a calculation that’s based off the ten-year bond rate plus a portion to cover the operating cost of the RIC so that is all formulated and provided, that methodology is provided to us from the government.
NARELLE GRAHAM: And as I said at the outset, since the scheme has been going, 3400 low interest loans through the RIC scheme, around $3.6 billion has been approved. That’s within the past seven years. Have you got any indication you can give us as to how much has been knocked back?
JOHN HOWARD: Not off the top of my head, no. But, look – we’re not there for everyone. And there’s clear eligibility criteria firstly from, things like we’ve touched about before we can’t be more than 50 per cent of the loan product in total. They must have commercial debt. Must show in financial need. Need to show a two-year impact of a drought, doesn’t need to be two-year actual but there could be, you need to show a two-year impact. So there’s that eligibility piece, but the other key component is the financial side of things. So showing that you’ve got a viable entity and able to repay the loan and that you’ve got sufficient security cover to be able to support that loan application.
So in going through an application, there is clear eligibility, it’s really nicely set out on our website, ric.gov.au, so we encourage people please go there, follow through the steps there you’ll get visibility around what’s actually required to be eligible for our loans and more importantly don’t self assess yourselves, we’ve got a great contact centre that’s able to help you through that process as well. Reach out, have the question because we’re there to help those that are in financial need, that are suffering hard times like South Australia and Victoria have been experiencing recently, so please reach out. We’ve got a product that’s there to support and if you need contact and help with that please don’t hesitate to go on our website or reach out to our contact centre.
NARELLE GRAHAM: What’s the rough length of time that people are waiting for an answer these days, John?
JOHN HOWARD: Yeah, it varies quite a bit. What we try to do is make it as quick as possible up to the point of making a decision so we’re aiming for, we are achieving an average of less than 50 days to be able to get that clarity. When it comes to the point of actually going from a decision through to settlement because we’re 50 per cent of a total loan we’ve generally got a security position behind a bank and there’s also varying complexities in the structure of people’s operations that can impact the time from decision to settlement. But the main one we try to do is give clarity for them of whether they’ll be successful with a loan or not, and our target there is to have that in less than an average of 50 days which we have been able to achieve.
NARELLE GRAHAM: As I mentioned, John Howard, the Chief Executive Officer of the Regional Investment Corporation that you were a part of the drought forum that was held in – National Drought Forum held in Gawler this week. Do you anticipate changes to RIC loans to come out of that National Drought Forum; have you walked away from that with that expectation?
JOHN HOWARD: Unfortunately, I had to be a late withdrawal because of family matters from that drought forum panel, but I have been able to make sure I have been over some of the outcomes of it. Look, I think what’s been coming through is major support for the RIC. What we saw also from the announcement from the Prime Minister two weeks ago was not only a support for ongoing operations of our current loan products, but there was also the announcement of another additional $1 billion dollars in funding coming forward and also the announcement of two new loan products, one very pertinent to South Australia in response to the South Australia’s algae bloom crisis that’s been seen.
NARELLE GRAHAM: Yeah.
JOHN HOWARD: But also another loan product to assist improve climate resilience, boosting sector productivity, supporting ag to be part of Australia’s Net Zero transition. So quite not just out of the drought forum where there’s clear support of RIC and products that we’ve got, but also the government’s been coming forward recently with additional products.
NARELLE GRAHAM: Yeah, so that – as you rightly pointed out that was before the National Drought Forum. Do you think that there will be – is there a desire to move towards no interest loans?
JOHN HOWARD: There’s definitely sector desire.
NARELLE GRAHAM: Farmers want it. Is there that desire from the government?
JOHN HOWARD: It’s not one for me to speak on behalf of the government, and they’ll make a decision out of that. But I think the message was coming through not just at the Drought Forum but before that, is the importance of having concessionality and how far that goes also a matter for the government to decide as they move forward.
NARELLE GRAHAM: Sure. Did you come away from that Forum – I know you were a late withdrawal sorry – but have you come away from that with a bit of a to do list for the Regional Investment Corporation, things to look at?
JOHN HOWARD: We are definitely working with government, a key part of that additional $1 billion funding and everything from the Prime Minister was very much a cornerstone of that is looking at our operations and how we do things. And how they can be potentially nuanced or changed, varied modified, improved going forward, and I’m sure that that will be a process that we’ll work with the government on over the next period of time. Especially as the recent announcement that did come out from the Minister at the Drought Forum is a response to the review of our act and operations that the government will be making that by the end of the year.
NARELLE GRAHAM: John Howard, thank you.
JOHN HOWARD: My pleasure Narelle, thanks for having me.
NARELLE GRAHAM: Chief Executive Officer there of the Regional Investment Corporation.
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