IFC boosting access to finance for SME farmers from Western Balkans to Central Asia

Agriculture

Agriculture is a key growth area for many countries in ECA region (Eastern Europe and Central Asia). Access to finance can increase productivity and profitability improving livelihoods, the economy, and regional stability. This is why IFC has implemented ECA Agri-Finance Project with the aim to increase access to finance for small and medium agricultural producers. The Project is working with financial institutions (FIs) in Eastern Europe, Western Balkans, Central Asia and Caucasus by providing the following advisory services in agriculture finance: developing agribusiness strategy, policies and procedures, conducting agri-finance bank diagnostics, designing agri-lending products, providing risk assessment instruments, facilitating partnerships, and rendering training sessions on agriculture specifics to increase the capacity of banks for effective agricultural lending.

The Project also provided FIs with access to CLARA (agririsk assessment tool), to evaluate credit risks of agricultural clients. Since the beginning, the project partners granted $167 million of financing to over 12,000 farmers, which is quite significant under unfavorable macroeconomic situation in the countries of operation. In ECA region the Project assisted 10 FIs to develop17 new financial products for agricultural clients. In agriculture insurance, the Project is working on the development of the agriculture insurance systems in Ukraine, Kosovo and Azerbaijan. A wellplanned agriculture insurance system will provide a range of sustainable insurance solutions that help to mitigate impact of agricultural related risks and increase access to finance for agriculture producers.

Another instrument implemented by IFC to boost agriculture in Ukraine is Crop Receipts

Another instrument implemented by IFC to boost agriculture in Ukraine is Crop Receipts. Unlike in Brazil, were crop receipts were piloted in 1990’s and were mainly issued by medium-tolarge commercial farmers, Ukrainian crop receipts are issued by medium and small agriculture producers. This is an instrument of pre-harvest financing, that helps to expand access to finance for small farmers, increase agricultural productivity and support economic growth. The instrument was introduced in pilot region back in 2014, later the instrument was spread out to another 7 regions in different geographic zones.

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As of March 1st, 2018, 237 crop receipts were issued. Creditors financed $69 million to cover pre-season needs of Ukrainian agriculture producers, such as seeds, fuel, chemicals or cash for other purposes. The total number makes 16 includes banks, credit unions, input suppliers, traders, distributors and off-takers. Large commercial banks admit, that now they focus on small and medium farmers instead of large holdings. Thus, this season OTP Bank decreased its minimal land requirement (from 500 ha to 300 ha) and interest rate from 23% to 17%.

Mostly crop receipts are issued against pledge of traditional export-oriented harvests, such as corn, wheat and soybeans. Yet the Project worked out ways to pilot crop receipts in other value chains. In January, the first crop receipt has been successfully launched in the berry sector.

At the same, Ukraine Crop Receipts Project is working towards securitization of this financial instrument and make it a tradeable from party to party on a commodity exchange, enabling agribusiness or financial institutions to bundle it up and trade alongside with other products. Also, the Project is developing a framework for international crop receipt, which will enable foreign companies to fund Ukrainian farmers via crop receipts.

Currently Crop Receipts function in a number of countries besides Ukraine: Brazil, Jamaica, Serbia and are prepared to be introduced in Africa and Asia.

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