June 15 2006, 18:14

Commercial banks improve lending process for agricultural producers

This season Odesa farmers-vegetable producers continue to take loans in order to finance field activities. Various banks issue loans for interest rate 18% to 23% per year. As a rule, those farmers have higher rates who apply for loan for the first time. And, farms with good loan records use loans for minimal rates. Farmers use loans mainly to buy fuel, fertilizers and plant protection assets and very rarely - to purchase machinery.

Privatbank is worth mentioning as a loan bank in Odesa oblast. This bank utilizes "Agro+" loan product, specially created for agricultural producers, including farmers. Agricultural departments of Privatbank have been already working in Odesa, Izmail, Belgorod-Dnestrovskiy. Farmers found it very convenient not to go to the oblast center 200-250 km away but to take loan locally. They save time and money.

AVAL bank is closer to farmers as well this season. Now bank clients can take loans (up to $10,000) for input supplies purchase. The scheme is much easier, but farms should be registered as legal entities. There are several unpleasant moments this season as well.

There are not enough funds in the state budget for partial compensation of interest rates for agricultural loans. State can not allocate money in order to support farmers. Budget sum is not enough even to compensate long-term loans taken in previous years. That's why agricultural enterprises can not count on state support now.

Small and medium farms have had much better access to loans in recent years, Oleg Stoyanov says, the Loan Specialist of the Agricultural Marketing Project. But, interest rates are still rather high for agricultural loans. Major small farms (excluding vegetable production leaders) have small profitability, so that there are limited possibilities for them to take long-time loans in order to purchase new machinery.