Unveiling the future of Agribanking: Desjardins

SME Banking
26/09/2023 Interview
profile picture of Sylvain Morel

Sylvain Morel

Vice President, Agriculture and Agri-Food Markets

As we continue to explore the role played by financial institutions in supporting farmers and driving sustainable growth in agriculture, this week we look at how Canadian financial services cooperative Desjardins Group is dealing with the challenges and opportunities in this sector. Sylvain Morel, Vice-President, Agriculture and Agri-Food Market Development and Business Relations at Desjardins, shares insights into the agribanking landscape in Canada and Desjardins’ initiatives to promote sustainable farming practices among its members.

Could you briefly provide insights into the agricultural banking landscape in your region, highlighting any unique challenges the industry has to cope with?

The Canadian agricultural banking landscape is highly competitive. In Quebec, six banks, Desjardins Group and Farm Credit Canada offer farm loans and a specialized farm account manager service.

In Quebec, institutions that play an important role in granting agricultural credit fall into three categories. First are the traditional financial institutions, meaning Canadian banks and financial cooperatives. Second is Farm Credit Canada, a federal government lender that provides credit directly to agricultural and agri-food businesses. Third is the Financière Agricole du Québec (FADQ), which provides loan guarantees in Quebec. Besides its loan guarantee program, the FADQ also offers support programs and advisory services. The loan guarantee (100%) protects institutions from losses and, as a general rule, the FADQ takes a supportive approach in difficult situations. The Ministère de l'Agriculture, des Pêcheries et de l'Alimentation du Québec (MAPAQ) offers a number subsidies and supports to ensure agricultural succession and the adoption of practices and technologies to foster innovation, economic performance and environmental performance.

In terms of the main challenges, , I would highlight the following points:

• Competition between financial institutions remains high, as agriculture is seen as a growth sector with long-term potential.

• The significant and rapid rise in interest rates is a major challenge for farmers, who have to contend with rising costs in general.

• Climate change is increasingly apparent, forcing lenders to intervene more often to support their clients and prompting agricultural producers to adapt their practices.

• Business consolidation is on the rise, and the service offer has to reflect the financial needs of increasingly large companies in the dominant sectors (dairy production, grain production, fruits and vegetables, pig farming, etc.).

• With an eye to increasing food self-sufficiency, large-scale and innovative projects (greenhouse complexes, vertical farming, etc.) are diversifying the client base and making it necessary to adjust the financing offer.

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