Parliament expands lending opportunities for farmers

Parliament expands lending opportunities for farmers

The Verkhovna Rada of Ukraine has supported the creation of a Fund for Partial Credit Guarantee in Agriculture.

According to an Ukrinform correspondent, 262 MPs voted for the adoption of bill No.3205-2 at second reading, which regulates the activities of the new agency.

The purpose of the Fund for Partial Credit Guarantee in Agriculture is to support small- and medium-sized agricultural enterprises that own or lease up to 500 hectares of agricultural land. To this end, the state will guarantee the fulfillment of obligations of farmers under credit agreements.

According to the authors of the bill, the establishment of the Fund will improve the access of economic entities engaged in primary agricultural production to credit resources, increase production, improve the financial condition of such enterprises and raise their competitiveness.

It is envisaged that the Fund will acquire the status of a nonbank financial institution and receive a license, as according to the law, the provision of credit guarantees belongs to the category of financial services. The authorized capital of the Fund will be formed at the expense of the state budget and contributions of participants.

The Fund will provide guarantees of up to 50% of the outstanding principal amount on the loan. Such guarantees will be valid for the entire term of the loan agreement, but not more than 10 years. Lending mechanisms will be similar to those envisaged by the program Affordable Loans at 5-7-9%.

The Fund will offer portfolio guarantees that banks will use as part of the collateral. This should reduce the cost of lending to farmers from the current 20-22% to 15-17% per annum (as in other sectors of the economy).

As reported, since the beginning of 2021, Ukrainian farmers have received more than UAH 26 billion of loans under the program "Affordable loans 5-7-9%." This is actually half of the total amount of preferential loans obtained by domestic businesses. The program is extended for the next year: the draft law on the 2022 state budget, approved at first reading, provides UAH 3 billion for compensation of interest rates.


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