Banks see fertile ground in farms

Kyodo News

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Major banks are considering agribusiness as a potentially lucrative business sector if use of farmland is deregulated.

Proposed amendments to the Agricultural Land Law now in the Diet would allow a corporation to take a 25 percent stake in a farming operation instead of the current 10 percent, a measure that could make it easier to raise funds when a highly creditworthy company is involved in the farm business.

The proposed changes would also allow a corporation to lease farmland for 50 years, up from the current 20 years.

Existing farm cooperatives function as moneylenders to meet the needs of local farmers. But major banks are now trying to take such measures nationwide, relying on their vast amounts of customer information.

In February, Mitsubishi UFJ Financial Group Inc. held one of the largest trade fairs ever staged at the Makuhari Messe convention complex in Chiba Prefecture, bringing together 2,350 companies both large and small and 55 farming concerns to consider more than 200 business proposals.

“The event enabled us to talk with representatives from major food service firms from across the country and this should help us expand our marketing channels,” said Michito Otsuki, a senior manager of Tachibana, a Chiba Prefecture firm that grows a new breed of leafy green vegetable like spinach.

One of the challenges facing smaller companies in the farm business is the difficulty of finding the right partners. Arranging a get-together for such firms is an easy task for megabanks, which operate branch offices nationwide and serve vast numbers of borrowers.

In February, the Bank of Tokyo-Mitsubishi UFJ held such events in Sapporo, Sendai and Fukuoka.

“Fund demand from farming-related businesses is going to grow since we are now getting 60 or so inquiries regarding agricultural matters every month,” said Masanori Yamamoto, an official in charge of smaller firms at BTMU.

In December, Mizuho Bank, a core unit of Mizuho Financial Group Inc., partnered with a nonprofit organization named the Japan Professional Agriculture Total Support Organization. The purpose of the NPO, which is headed by Uichiro Niwa, chairman of trading house Itochu Corp., is to train and support professionals in the farming industry and especially those aiming to build up their operations into large-scale businesses.

Mizuho has deployed experts at its head office to handle inquiries on funding, marketing and other issues of the farming business that its branch offices receive around Japan.

“Since we have enlisted the help of an organization specializing in farm businesses, we can offer advice and consultation services not available at other banks,” a Mizuho official said.

Sumitomo Mitsui Banking Corp., under the wing of Sumitomo Mitsui Financial Group Inc., began offering noncollateral loans to livestock and other farming businesses in its fiscal year ended March 2006. The bank had lent a total of nearly ¥30 billion as of last March.

According to Norinchukin Bank, a de facto central bank for farm cooperatives, the outstanding balance of money lent by private financial institutions to farm businesses was in excess of ¥2.5 trillion as of the end of March 2008. Of this amount, the JA Bank Group, which is presided over by Norinchukin, accounted for more than 70 percent.

Smaller regional banks have also taken to doing business with farming corporations, a sign that competition among financial institutions of various kinds in the farm business sector is likely to heat up.