The Wisconsin Bankers Association is seeking more transparency around hemp producers and processors in the state, as bankers navigate shifting regulations at the state and national level.
“One of the things we are looking to make happen is more openness in that dialogue between DATCP and the financial institutions looking at banking with these customers,” said Scott Birrenkott, assistant director of legal for WBA.
After a law was passed authorizing a pilot program for industrial hemp in the state, engagement with the program has risen significantly.
The state issued 242 grower licences and 93 processor licences in 2018, the first year of the program. So far this year, that’s already grown to more than 1,400 growers and 711 processors. And the new head of the DATCP, Brad Pfaff, has requested a funding increase to help meet certain requirements related to industrial hemp.
Hemp businesses are required to file “a ton of paperwork” with the DATCP, Birrenkott said, but all the information they submit is kept private.
He says when the legislation was being written, authors likely didn’t anticipate that banks would want access to these records. But now that more businesses are exploring the possibilities of hemp, bankers in Wisconsin are paying attention.
“There are rules and regulations that banks have to know their customer,” he said. “It’s very important they understand what this business in engaged in.”
BIrrenkott explains that banks are very comfortable dealing with farmers planting corn, soybeans or other common crops because they already understand the risks.
“They know good soil conditions, they know good weather,” he said.
That means the lender can gauge if the grower is making a good decision about how much and when to plant, as well as other factors.
“Hemp is so new that on the loan side, they’re going to have to learn more about it,” he said.
Birrenkott hasn’t heard from any bankers yet that have received loan requests from these hemp businesses, but he says “quite a few” bankers are getting requests to open deposit accounts from farmers, processors or even retailers of hemp-derived products.
Discussions on industrial hemp usually include an explanation of how the crop is different from its well-known cousin, marijuana. Namely, hemp contains only trace amounts of the chemical that gives cannabis its psychoactive effects.
WBA weighed in on the topic of banking with marijuana businesses after Gov. Tony Evers recently proposed a path toward legalizing medical marijuana in his budget.
The group has urged the guv and state lawmakers to ensure that banks are protected by law in dealing with marijuana businesses, if they end up existing in Wisconsin.
“Looking at marijuana for example, that would be something we would want to have a dialogue with, and make sure there’s a mechanism by which financial institutions can have access to those records,” Birrenkott said. “Financial institutions, In order to work with these customers, might need to know that these businesses are engaged in this activity legally.”
Listen to a recent podcast with Birrenkott: http://www.wisbusiness.com/index.Iml?Article=393584
–By Alex Moe