Four of Denmark’s biggest labour-market pension funds have agreed to invest DKK500m (€67.2m) in a state-backed fund to lend money to the country’s farming businesses.

The Danish Ministry for Industry, Business and Financial Affairs is launching the fund, Danish Agricultural Capital (Dansk Landbrugskapital), and investing DKK500m alongside the pension funds via the Danish Growth Fund (Vækstfonden) — a state investment fund set up in 1992.

The giant DKK759bn labour-market supplementary pension fund ATP, social and healthcare pension fund administrator PKA, PensionDanmark and Industriens Pension have each committed DKK125bn to the fund.

Torben Möger Pedersen, chief executive of PensionDanmark, said: “PensionDanmark and the other investors putting money into the new fund can get a reasonable return and at the same time help deliver financing to skilled farmers who have the courage to invest in their businesses. We will contribute to growth and employment in exactly those areas of Denmark where they are most needed,” he said.

Brian Mikkelsen, minister for industry, business and financial affairs, said: “The first loan will be granted as early as this month, and now we are looking forward to the money being put to work in agriculture, which needs new investment to increase effectiveness and boost earnings.”

The fund was already in contact with many farmers regarding loans, according to the ministry.

Since the new financing vehicle was targeted at farmers who need new investment, but who already have high levels of debt, the new fund is offering subordinated loans that are non-callable by Danish Agricultural Capital. 

This means that mortgage and banking institutions will be able to treat the investment loans as if they were equity, the ministry said.

Individual loans are expected to be for typically DKK5m to DKK10m, for terms of up to eight years and at an individually-determined rate of interest.

Between 100 and 200 farms, across sub-sectors, are expected to get loans from Danish Agricultural Capital over the next few years, the ministry said.