On Lending to Agricultural Sector

The bankers announce their readiness to grant loans to agribusinesses. Nevertheless, lack of financing remains the main deterrent to development of agricultural companies.

It is paradoxical that several years ago banking institutions did not event want to consider the possibility of financing to agribusinesses. At present the situation is reverse: the agricultural producers are nearly the top priority customers for financial institutions. According to the NBU, as at the end of August 2012 the loans granted to agricultural, hunt and forestry businesses totalled UAH 37 billion, of which the major share (UAH 17.6 billion) were granted for the period of one to five years. Almost 10% of those loans, as reported by the financiers, are overdue. Nevertheless, it does not prevent them from working with agribusinesses.

“The average banking loan portfolio of the country’s agricultural sector is UAH 30-35 billion. It is worth mentioning that at the national level only 9-10 banking institutions give such loans,” marks the Head of SME Department of FUIB Yelena Rudik. FUIB decided to concentrate on small agribusinesses, reasoning that 75% of all incorporated agricultural companies in our country are small and medium enterprises. The size of the business is another important factor that draws the attention of banking institutions.

Yelena Rudik assures that the agricultural sector is developing and demonstrates such a growth pace no other sector of the economy can boast about. This is why in 2013 banks will concentrate on this segment, though the focus will be shifted onto specialised programmes for targeted special-purpose financing in small volumes to high-quality borrowers for the period of one-two years alongside with prompt decision making. “Alternative financing instruments, such as promissory notes and documentary operations, will be applied, the cost of which for the customer will be several times lower that the lending rates,” considers Ms Rudik. “Also, we expect the growth in number of propositions of lending in foreign currencies for the companies that generate revenues in foreign currencies. Anyway, banks will be more loyal to borrowers that, alongside with the financing, will be actively choosing the lending bank as their main servicing and deposit bank.”

Full article can be read in the magazine “TOP 100 Rankings of Best Companies of Ukraine”, October 2012.