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Bank lending to agriculture makes up about quarter of all available resources, comments by Irina Pereli, head of development mechanisms for projects financing, Pro-Consulting company. UKRINFO
KYIV, April 5 /UKRINFORM/. Financing of agricultural enterprises in the form of bank loans makes up approximately a quarter of all available resources (25-26%).
Head of the department for development of financing mechanisms of the Pro-Consulting company Iryna Pereli was reported by UKRINFORM.
"If we say about the main sources of financing for the agricultural sector enterprises, financing in the form of bank loans, according to the European Fund for Southeast Europe (EFSE), makes up approximately a quarter of all available resources (25-26%) and ranks the second only against the inner self-financing of agricultural farms. This form of financing is about 56-57%. A small proportion - 12% of total available funding sources of agribusiness companies - are personal savings of farm owners A small share in financing of farmers (5%) falls on suppliers of resources, processing enterprises and traders,” the analyst said.
According to her, lending of the agricultural sector by commercial banks is now considered as an interesting and promising area. The most popular financial products for the agricultural sector are such as seasonal loans for crop production, investment resources to purchase agricultural assets, loans for agribusiness (long-term financial products (for 5-7 years) to expand business) and financial leasing of agricultural machinery.
According to the National Bank of Ukraine, the expert continued, the average long-term lending rates of commercial banks for business entities (including for farms) as of mid-March 2013 in local currency was approximately 19.7% per annum (although in some cases the rates reached 24-25%), and in the foreign currency - 11.7% per annum.
Meanwhile, she said, the results of last year showed that new players began to appear on the market of bank lending. Thus, Akta Bank, Bank Credit Dnepr, All-Ukrainian Development Bank, Erste Bank and First Ukrainian International Bank have emerged on the market with separate programs for agribusiness lending. Such banks as Raiffesen Bank Aval, Credit Agricole Bank, VAB Bank, Privatbank and Ukreximbank are also not losing their positions in the lending segment.
In August 2012, the share of agricultural loans in total loans increased to 6.3% and reached its highest value since October 2009, the expert said. In November 2012, farmers received a new tool to attract funding - agricultural warehouse receipts. These are the warranty documents from storehouses for stocks of certain agricultural products that can be used as security (collateral) for a loan. Such a mechanism of involving money was offered by several banking institutions in the country. "Concerning the collateral, it is worth mentioning that today banks impose higher requirements for collateral than before. The value ??of the coefficient of loan collateral coverage ranges from 1.5 to 2. This means that if the company provides as security an object at UAH 2 million of its market value, it can count on the borrowed loan amount up to UAH 1 million,” the interlocutor says.
She explains that acceptable collateral for agricultural credit can serve both capital assets and goods in circulation. The preferred types of collateral for banks may be the real estate, including elevator buildings, agricultural equipment, grain crops that are traded in the market (wheat, corn, sunflower, etc.), which acts as reliable and solid collateral, framed through simple or double warehouse receipts (certificates). At the same time, this pledge of future crops is considered by banks more as an instrument of control over the primary source of repayment rather than as a real support.
Among special programs for farmers, Perelia singles out funding of elevator facility construction, insurance against crop failure, other partner lending program for farmers (purchase of equipment, replenishment of working capital, etc.). These banking products are well represented, in particular, in Raiffeisen Bank Aval.
Ukraine has already started the sowing campaign, the Pro-Consulting Spokeswoman emphasizes, and the need to attract financial resources for this season is quite large. Lack of funds for the spring sowing work in the agricultural sector is about UAH 7.9 billion, according to the Agricultural Policy and Food Ministry. At the same time, the farms are going to finance the necessary work to the amount of UAH 31 billion. The lacking funds will be attracted in the form of bank loans (up to UAH 4 billion), commercial loans - up to UAH 3.7 billion and through the mechanism of forward purchases of grain -up to UAH 0.3 billion.
