March 7 2006, 16:59

Ukrainian banks are reluctant to credit small produce farms

Many farmers - vegetable producers of Odesa oblast complain that it has become much more difficult to get loans this year; the loan procedure got complicated and more expensive in some banks, according to the information provided by Oleg Stoyanov, the Credit Specialist of Odesa office, Agricultural Marketing Project.

It is early March now; it left a little time before the start of spring sowing campaign. Lacking own funds, many farmers are seeking for the affordable loan variants.

Some years ago small and medium farms didn't practically use bank loans; they preferred to borrow money from the private persons. Nowadays many of them try to get loans in banks, as a significant part of interest rate is reimbursed by the state budget funds.

It is worth mentioning that the major banks either do not want to work with the agricultural producers at all, or prefer to work only with large farms. Low cost efficiency of some branches of Ukrainian agriculture is the reason for it; and, the borrowers are sometimes characterized by poor credit discipline, while banks find it difficult to assess the possible risks.

Many banks do not pay attention to the sector of small, but highly cost effective and quickly developing produce farms.

Past season a number of the farmers - AMP clients got and repaid successfully loans to NADRA commercial bank under the assistance of Agricultural Marketing Project. Judging from this successful experience, the cooperation between banks and produce farms can be profitable for both parties; the main thing is that banks should learn how to work exactly with this borrowers' category. To our regret, not all banks have specially trained credit specialists able to evaluate effectively and timely the loan applications from moderate vegetable or orcharding farms. As for today, this problem is maybe the only obstacle confronting the mutually beneficial cooperation between the farmers and banking institutions of Ukraine.

AMP information. Trying to simplify the lending process for medium agricultural enterprises, the specialists of Micro-Lending Project of Ukraine (UMLP) developed a special program "Agro+". Six banks - UMLP partners started to work on this program in Odesa, Kherson, Mykolaiv, Zaporizhzhya and Dnepropetrovsk oblasts. Western region has been covered by the mentioned activities since the beginning of 2006.

The following banks participate in the program in Odesa oblast: Privatbank (Odesa, Izmail), FORUM bank (Odesa), and NADRA bank (Odesa).