Second working session of the Working Group 1,
“Crediting in agriculture, agribusiness and rural areas”
On June 12th, 2018, at the Club of the Members of Parliament in Skopje the Second Session of the Working Group I – Agriculture and Rural Development took place, on the theme: “Crediting in agriculture, agribusiness and rural areas”. More than 50 participants took part in the session from the Ministry of Agriculture, Forestry and Water Management (MAFWE), financial institutions in agribusiness, foreign diplomatic representatives, academic community and civic associations.
Minister Ljupco Nikolovski emphasized in the introductory speech and statement to the media representatives that in the forthcoming period MAFWE will undertake intensive measures for easier access to financing in agriculture, because lending to agriculture is necessary not only for short-term financial strengthening of producers, but also to improve capacities, new investments, increase productivity, modernizing and applying new technologies. He stressed that the State National Guarantee Fund is forseen to start up, in order to facilitate the access of farmers to loans, thereby increasing the investment activity in agriculture. For that purpose, in cooperation with USAID, an appropriate guarantee scheme was established, which covers up to 50% of the amount of the requested loan, the value of which could be as high as 500,000 USA dollars. This year, 30 million denars are foreseen for subsidizing the interest rates for IPARD investments.
Minister Nikolovski expressed expectations that the result from this session where NGO`s actively participated will give birth to a lot of ideas and suggestions regarding the progress of this sector. According to his words, the readiness for cooperation with the non-governmental sector is also expressed by the signing of the Memorandum of Cooperation between the MAFWE and NCEU-MK.
NCEU-MK coordinator prof. Mileva Gjurovska pointed out that the open discussion and the recommendations of the session aim to improve the Euro-integration conditions in the Republic of Macedonia, contributing in a concrete manner to the pre-accession negotiations regarding the Chapter 11 – Agriculture and Rural Development. She emphasized that lending should not only compensate for limited financing opportunities, but due to the specifics of agriculture, such as the uncertainty in the expected yield, prices and time distance from the occurrence of the costs to the receipt of products, all these things must be taken into account. It has a direct impact on the development of the agricultural sector and on the socio-economic stability of farmers.
Slovak expert Marijana Chertikova, Agricultural Customers’ Specialist from Československá obchodní banka, presented the experience of financing farmers in Slovakia through European funds, to whom, besides EU funds, also need government support. Strict procedures and formalities do not allow farmers to devote themselves fully to production, and they can not immediately use the EU assistance, for which the government allows pre-lending to farmers with symbolic interest rates as a kind of pre-financing system. At the beginning of the transition, the loans were with high interest rates and agriculture was considered risky for lending. With the EU accession, investment and lending to agriculture has increased, which today is considered one of the most stable economic activities.
During the session, was presented the analysis of the experts from Working Group I – professor Aleksandra Martinovska Stojcheska, assistant professor Ana Simonovska, from the Faculty of Agricultural Sciences and Food and Biljana Petrovska Mitrevska, from the National Federation of Farmers. The session was moderated by the co-chairperson Maja Lazareska Joveska, Head of the EU Sector at the MAWFE, and Vasko Hadzievski from the Association of Agroeconomists.
In the preparation of the session several meetings were held with the main stakeholders in the process of crediting and financial support of agriculture from financial institutions and banks to direct beneficiaries structured in four groups: members of agricultural cooperatives, women farmers, farmers who did not use loans and young farmers.
It was pointed out that lending is being imposed as one of the most important factors for the development of rural areas and agriculture as the main activity for absorption of the labor force. Access to loans is considered an important element for improving the quality and quantity of agricultural products, which affects the increase of farmers’ income and creation of conditions for keeping the population in rural areas. Agriculture loans account for only 3%, although in the national gross product this activity accounts for 10%, which shows that the agricultural loan market is still not efficient enough.
It should take into account that the level of delinquency loans in agriculture is lower compared to other sectors. Financial institutions note increased readiness and technical preparedness of farmers and agribusiness, which largely comes from their experience in applying for national funds and IPARD. However, there are several key challenges in this area: insufficient information, better training in selecting investments and financial literacy of applicants, lacking innovative and development projects attractive for financing, over 20% of the potential capacities of the Savings Banks are not used.
Agriculture is a very risky sector due to climate and market disruptions which imposes the need for additional measures and interventions by the state. A small number of individual agricultural producers use loans and believe that financial institutions are not flexible enough and require mortgages even for low financial amounts. It is pointed out that farmers are quicker to settle for loans from relatives and friends than to take loans from banks.
In 14 discussions, a series of comments, assessments and suggestions were made regarding the need for greater awareness of farmers about credit opportunities, creation of more favorable conditions for lending to young farmers and women, opportunities for greater state support in lending to farmers and agribusiness, as well as many other issues related to this topic.
Recommendations in the form of key guidelines for improving access to loans in agriculture, agribusiness and rural areas have been adopted at the session.
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