Farmers will find it easier to get loans from banks – world Bank

Фермерам будет проще получать кредиты от банков - Всемирный банк

To buy land after lifting the moratorium land to small farmers will be farmers will be able to access Bank loans.

About this article for EP writes Vahe Vardanyan, senior financial sector specialist of the world Bank.

It is noted that in 2018, the international Finance Corporation (IFC) conducted a study – it &8203;&8203;asked for nine Ukrainian banks to share as they are interested to Finance land market.

“It turned out that all nine banks have already financed the farmers. They were given loans as small farms (for 25-65 thousand UAH), and for large agricultural enterprises (280-620 million UAH). All interviewed banks were also willing to provide loans for the purchase of land,” says Vardanyan.

According to him, constrains lending, the lack of small agricultural companies and farmers liquid assets, financial literacy and culture reporting.

“If the second and third problems can be solved by training farmers, the first problem is the prerogative of the state,” he said.

Vardanyan argues that one of the most effective instruments to support agribusiness in such a situation are partial guarantees for Bank credit risks.

“The essence of the tool that the guarantee Fund on behalf of the state assumes the cover part (e.g. 50%) risk of the Bank in case of default of the farmer-borrower on the loan provided by this Bank. This reduces risks for banks and facilitates the access of small and medium agribusiness to banking loans.

The Fund is usually non-Bank financial institution with its own Board, management and capital. For a fee she gives partial credit guarantees to banks that have passed the preliminary selection,” he explains.

In case of default on loan size (the lost amount), usually in equal parts is allocated between the Fund and commercial Bank.

Lead financial sector specialist the world Bank calls and other support tools for farmers: grants, subsidies, provision of systemic risks, but, according to him, partial guarantee is more suited to borrowers who do not have sufficient collateral for loans.

“Partial credit guarantee allows you to direct assistance to small manufacturers. Support tools farmers have different goals and can be used together with partial support of loans to specific target groups.

Second, this tool also allows you to “extend” credit resource for farmers, to reduce the size of the down payment, increase the amount of the loan, that does not make the usual compensation of credit rates.

Thirdly, partial guarantee gives good financial leverage: 1 UAH of investment from the state will provide loans to farmers at the rate of 8 UAH “, – said the expert.

According to him, the Bank team together with the NBU, Ministry of Finance, the economy and the banking community is actively working so that partial credit guarantees for small and medium agribusiness in Ukraine simultaneously with the emergence of a land market.