For farmers, heading into debt discussions with the bank can be an intimidating – and expensive – process.

To help level the playing field, the Ministry for Primary Industries implemented the Farm Debt Mediation Scheme on July 1, which aims to make the mediation process more accessible.

“Being in debt not only impacts farmers on a financial level, but on a mental and emotional level as well, which often impacts the whole family,” says MPI rural communities and farming support director Nick Story.

“The Farm Debt Mediation Scheme can help set out a way forward for the farmer to turn things around so they can stay in business – or, at worst case, provide them with a dignified exit.”

The scheme

Under the Farm Debt Mediation Act 2019, it is compulsory for creditors to offer mediation before taking debt enforcement action.

The cost of mediation is shared equally between creditors and the farmer, but the farmer’s contribution is capped at $2000 – which is one-third of the total average price of mediation.

Two mediation organisations – the Arbitrators and Mediator Institute of New Zealand and Resolution Institute – have been appointed to deliver the scheme.

Nick says MPI has had several enquiries from both creditors and primary sector businesses since the scheme came into operation. “It’s too early to have the data on how many mediations have been completed. The mediation process has a 60-day timeframe to complete, so we expect to have statistics on the scheme uptake later this month.”

Adviser approved

After witnessing the impact interest rate swaps had on farmers in the mid-2000s, financial adviser and Smart Money Advice owner Janet Natta can’t recommend the scheme enough.

“The whole point is to prioritise fairness when farmers have to face the large lending institutions.

“Farm debt is complex and there are lots of issues to work through, so having that support is so important.”

While it’s compulsory for creditors to offer mediation before an eligible farmer defaults on payment, farmers can independently request mediation any time, says Nick.

“We know Covid-19 and drought is placing financial pressure on some farmers. If you’re struggling with debt, find out more about how the scheme may help you as early as you can,” says Nick.

“Mediation is far better than forced foreclosure – it’s a fairer system in the interest of all parties.”

For more information, visit https://www.mpi.govt.nz/funding-and-programmes/farming/the-farm-debt-mediation-scheme-2/