Transcript Financing Investments in Agriculture

Macedonian Bank for Development Promotion
Agricultural Credit Discount Fund
FINANCING INVESTMENTS
IN AGRICULTURE
Efimija Dimovska
Brussel, January 2011
Agricultural Credit Discount Fund
 Financial instrument to support rural
investments
 Established in 2002
 Revolving Fund of EUR 38 mill. (IFAD, WB,
EIB)
Agricultural Credit Discount Fund (contd.)
Goal
Enable sustainable agricultural financial services which are
commercially viable and yet appropriate and affordable by the
target groups
How?
 Involve the formal financial sector in provision of
agricultural loans trough establishment of refinancing
scheme and offering incentives
 Integrate the rural population in the banking system
 Develop appropriate credit products
Institutional Framework
MBDP
Policy Committee
Discount Credit Committee
ACDF Unit
PFI
PFI
PFI
Beneficiaries
Beneficiaries
Beneficiaries
ACDF Activities
 Management of the refinancing facility
 Institutional and capacity building support to
Participating Financial Institutions (PFIs)
Refinancing Facility
 Selection of National Bank licensed
financial institutions
 Subsidiary Loan Agreements signed with
PFIs
 ACDF charges 0.5% interest on the
refinanced amount
On-lending terms
 Matching of capital
ACDF – 80% of the loan
PFI – 20% of the loan
Borrower – 20% of the total investment
 Controlled use of the loan funds
 Credit risk on the PFI
 PFIs apply their own lending policies to sub-loans,
except the interest rate
Refinancing procedures
 Client
PFI : submission of loan application
 PFI : loan application appraisal and final decision for
approval or rejection
 PFI
ACDF: submission of request for refinancing
 ACDF: processing of the refinancing request
 Decision by Credit Committee in 5 working days
 ACDF
PFI : disbursement of the refinancing amount
in 2 banking days
 PFI
Client : disbursement of the total loan amount
in 10 days
Target Group
 Individual farmers (responsible person of
registered agricultural holdings)
 Primary production SMEs
 Agro-processing SMEs
 Agro-export SMEs
Loan Categories
 Primary production loans – for
investments and working capital (EUR
100,000)
 Agro-processing loans - for investments
and working capital (EUR 300,000)
 Agro-export loans - for investments and
working capital (EUR 200,000)
Operational Performance
 ACDF Loan Portfolio - December 31, 2010
Loan category
Number
of
approved
loans
Total amount
% of approved
loans (EUR)
%
Average
loan
amount
(EUR)
Primary
1 production
4539
94
28,554,577
58
6,290
Agro2 processing
252
5
18,800,159
38
74,603
3 Agro-export
39
1
2,309,652
4
59,221
4830
100
49,664,388
100
10,282
Total
Institutional (PFI) Impact
 Increased agricultural lending portfolio
 Enlarged number of rural clients
 Rural branch network expanded
 Increased number of agriculture-oriented staff
 Decentralised decision making
 Softer collateral introduced
 Improved overall PFI performance
Smallholder Impact
 Connection with the formal financial sector
 Access to affordable financial services
 Economic impact on household level (increase of
incomes)
 Economic impact on enterprise level (turnover and
profitability growth)
 Modernization of production
Government benefits
 Policy instrument for the rural development
 Instrument that effectively connects the rural
activities to the mainstream economy
 Loan-based development instrument with
no financial impact on the state budget
Rural lending - problems
 Profitability of agricultural and rural operations is





poor and can’t generate the cash flows needed for
adequate debt-servicing
High delivery cost
Poor road infrastructure and difficulties to reach the
clients
Collateral issue (no property lists, low value
property)
Difficulties in obtaining building permits for
investments in production facilities
High real lending risk
Implementation in other countries
Use of the ACDF instrument in other countries and
regions would require:
 careful study of both the financial sector and the
structure of the rural and agricultural markets
 a number of well managed, regulated financial
institutions to partner with
 an interest of the financial institutions to develop
their business in these new markets on a
commercially viable basis.
ACDF Prospect
 Provision of favourable agricultural loans –
defined as a priority in the Government
program
 Key element in strengthening the rural
economy
 ACDF as a support instrument to IPARD and
other national rural development programs
Conclusions
 Implementation of appropriate, tailored,
commercially driven support measures can
increase the confidence of financial institutions in
rurally based lending
 Rural farmers and small-scale entrepreneurs are
able to invest successfully on the basis of
commercial borrowing
 On the long-term rural clients should be served
wholly with the banks’ own resources
Thank you for your
attention!