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  • 1. Goran Živkov Landing to agribusines/rural SMEs and micro-enterprises Development of rural finance in Serbia REPUBLIC OF SERBIA Ministry of Agriculture, Forestry and Water Management www.minpolj.sr.gov.yu East Agri 2005 ANNUAL MEETING Rome, March 2005 East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 2.
    • Agricultural land: 5,734,000 ha
    • Cultivatable land: 4,867,000 ha
    • Agriculture land per capita: 0.56 ha
    • Arable land per capita: 0.46 ha
    • 35% of population have access to land
    • 87% of land is private ownership
    • Number of farms: Around 700.000
    • Average size of farm: 3 ha
    • Number of villages: 4.706
    • 44% of the population live in rural areas
    • 93% of municipalities and 75% of villages with negative population growth
    Less then 75 85 - 90 75 - 85 Over 95 90 - 95 % of cultivable area Agriculture resources East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 3. Agriculture - Major component of the economy
    • Primary production from agriculture, hunting and forestry accounted for 21 percent of GDP (25 % agro-processing)
    • Exports of primary agricultural products account for 26.3% of total export
    • More than 10 % of employed are in primary agriculture and agricultural processing industry
    East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 4. Important in terms of household food & income security, so ensure continued access to inputs, but exclude from commercial policy Encourage switch to high-value crops &/or expansion to private farms, with some reducing to ag. households Ensure further development and enlargement Establishment of democratic structure, transformation to modern cooperatives or other structures Privatization and restructuring The policy challenge : one size does NOT fit all !!!!! East Agri - 2005 ANNUAL MEETING, Rome, March 2005 549 8% 100 10% avg 700 Kombinats 510 1% 50 5% avg 400 Cooperative 100,000 44% more then 10 46% more then 5 ha Private farms 400,000 41% 3-5 35% 1- 5 ha Small holdings 200,000 6% 1-3 4% less than 1 ha Agriculture households Number of farms Cows own % Cows own Land own % Land own  
  • 5. Agricultural Products Trade (m io USD) Liberalization 2000 dabbled the trade Deficit decreased East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 6. Budget expenditure for agriculture in 2000-2005 (in billion dinars ) East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 7. Modernization of the agriculture and adjustment to the EU Budget goals 2005 … +1…..______________n_______________….-1…..EU East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 8. Current situation in development of the rural credit market East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 9. PRIVATE BANKS State Commodity Reserve Input suppliers Farmers Processors PRIVATE BANKS PRIVATE BANKS PRIVATE BANKS Organizatiors of production
    • Fertilizers
    • Pesticides
    • Seeds …
    • Millers
    • Oil factories
    • Sugar factories …
    • Zadruge
    • Directors zadruge
    • Kompanies …
    • Farmers
    • Cooperatives
    • Kombints …
    Ministry of Finance Ministry of Agriculture Development Fund HIGH INTEREST RATE Subvention (Limited influence) Current situation SHORT TERM CREDITS Hidden interest rate 30-70% East Agri - 2005 ANNUAL MEETING, Rome, March 2005 Proizvod Pare
  • 10. Current situation MEDIUM TERM CREDITS High demand *** Available to the processors and SMEs not to the farmers *** ProCredit Bank (around 20 mill € per year, average credit size 3.000 €, interest rate 2% per month linked with € ) *** Mechanization suppliers *** Ministry of economy – leasing for domestic mechanization *** UNDEVELOPED MID-TERM CREDIT MARKET East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 11. Current situation LONG TERM CREDITS Not exist and No sign that will be established soon East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 12.
    • The lack of investment credit generally in the economy
    • The particular risk and low profitability associated with agriculture
    • The lack of collateral available (unfinished cadastre)
    • Inefficient legal protection
    • The relatively small loan size required in the private sector and the associated relatively high fixed cost of establishing and monitoring it
    • Lack of expertise in the banking sector for appraising agricultural business plans
    • Lack of experience and expertise amongst farmers in developing and presenting business plans
    • Farmers do not trust to banks (and opposite) - lack of credit history
    The lack of commercial credit for agriculture can be attributed to: Agriculture credit market in Serbia never existed! East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 13. Are there successful agriculture without developed credit market? To wait or To do something to speed up (slow down) process East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 14. FARM REGISTRY FARMERS Ministry of Agriculture MINISTARSTVO POLJOPRIVREDE, ŠUMARSTVA I VODOPRIVREDE BANK BANK BANK SMEs Cooperatives BANK BANK BANK BANK BANK BANK Open account Budgetary payment Commercial credit Short term credit Medium term credit 70.000 farmers open account in one of the bank Bank started to be interested for farmers East Agri - 2005 ANNUAL MEETING, Rome, March 2005 Direct payment & Price support RD (Investment payment) Structural payment
  • 15. MAIN OBJECTIVES: DURRATION: BUDGET:
    • Development sustainable system for financing agricultural sector from real sources
    • Develop credit history
    • Improving of production through ensuring access to capital to farmers
    • 5 – 7 years
    • 700 millions to 1 billion EURO
    Priorities: Financing System Development East Agri - 2005 ANNUAL MEETING, Rome, March 2005 2004 2005 2006 2007 2008 2009 2010 … Needed capital Banks money State budget (MoA)
  • 16. Short term credit
    • Short term credit to buy inputs
    • Loans on 1 years with interest rate on 7% (din)
    • Linked with farm size (150 – 1000 EURO)
    • Important to build credit history
    • Source of money is agrarian budget
    • Banks are managing credits
    • Programme 2004
      • 68 SMEs received credits in total amount of 6.7 mill EURO (avg. 89,338 EURO)
      • 28.125 farmers received credits in total amount of 21.6 mill EURO (avg. 807 EURO)
    East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 17. Medium term credit
    • Investment credit on 5 years with interest rate of 3% per year ( €)
    • Source of money is agrarian budget and banks
    • Banks are managing credits
    • Banks have 10% risk
    • Government Guaranty found secure credit
    • Programme 2004
      • 157 SMEs received credits in total amount of 21.3 mill EURO (avg. 135,880 EURO)
      • 740 farmers received credits in total amount of 12.04 mill EURO (avg. 16.271 EURO)
    East Agri - 2005 ANNUAL MEETING, Rome, March 2005
  • 18. Kratkoročni plasmani preko banaka AGRARNI BUDŽET 100% AGRARNI BUDŽET 100% MINISTARSTVO FINANSIJA MINISTARSTVO POLJOPRIVREDE UPRAVA ZA JAVNA PLAĆANJA 7% (din) BANKE Grejs period 12 meseci 5% Posredničke banke 95% Revolving Fond Rizik Administrativna zabrana na premije za poljoprivredne proizvode Obezbeđenje kredita od 6 -12 meseci Ročnost Obrtna sredstva Namena kredita Budžet Vlade Republike Srbije Izvor kredita
  • 19. Sednjoročni plasmani preko banaka AGRARNI BUDŽET 70% BANKA 30% AGRARNI BUDŽET 80% FARMER 20% MINISTARSTVO FINANSIJA MINISTARSTVO POLJOPRIVREDE GARANCIJSKI FOND FOND ZA RAZVOJ 3% (euro) 1.9% (euro) BANKE 435   UKUPNO: 1 Meridijan banka 2 Kontinental banka 2 Delta banka 2 DDOR 3 PB Agrobanka 3 Aik banka Nis 4 Kred.-Eksp.banka 6 Atlas banka 7 Privredna banka Pančevo 7 Hipo Alpe-Adria banka 10 Novosadska banka 11 Kulska banka 13 Jubanka AD banka 14 Panonska Banka 14 JUBMES 19 Kosovsko Metohij. 38 Eksim Banka 94 Komercijalna banka 185 Nacionalna štedionica Odobreni broj korisnika kredita BANKA
  • 20. FARMERS LEAGAL ENTITIES TOTALLY East Euro Link, Zagreb, January 2005 Livestock production Green Houses Start up of Fruit production Agricultural mechanization Irrigation Systems By fond By banks Nr. of Conf. Credit 146,314.09 149 19,455.61 436 TOTAL 136,044.82 119 15,478.46 141 Livestock production 191,816.67 8 15,681.10 26 Green Houses 105,846.67 20 17,473.58 22 Start up of fruit production 0.00 0 17,207.23 186 Agricultural mechanization 980,000.00 2 37,828.01 61 Irrigation Systems Average Credit Value( €) Nr. of Conf.Credit Average credit value (€) INVESMENTS
  • 21. HVALA Thank you East Agri - 2005 ANNUAL MEETING, Rome, March 2005