Banking on Cheese: Rise of Parmesan Bonds

Lending serious weight to the argument that artisanal goods are properly bankable, news has broken that an Italian dairy cooperative has raised six million euros by issuing bonds backed by giant wheels of Parmesan cheese. Yes this is a real thing that happened. The financial system smells so fishy that curdled milk is more palatable.

“We already have some loans but, after a certain point, the banks don’t want to give you any more,” Andrea Setti, the financial controller of the 4 Madonne cooperative, which produces the famous cheese from milk supplied by some 40 dairy farmers, told the AFP. Clearly the cooperative was cheesed off.

The 4 Madonne cooperative, based near Modena in northern Italy, produces the famous cheese from milk supplied by some 40 dairy farmers. It has seen business boom in recent years with production rising to 75,000 wheels a year and turnover hitting 24 million euros in 2014.

But when it sought additional funding to boost its presence in the US market and concentrate on longer-aged cheeses, the cooperative ran into a wall of indifference from traditional lenders still recovering from the 2007-08 financial crisis.

The solution lay in an Italian government-backed mini-bonds scheme under which investors provide funding for six years in return for a five percent yield backed by cheese assets valued at a 120 percent of the bonds’ worth.

The principle behind the scheme is not entirely unheard of in the region: several banks already hold hundreds of thousands of parmesan wheels as guarantees of loans to local producers.

And the use of bonds to offset the capital costs involved in storing luxury products until maturity is already common in the whisky and wine industries.

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