Chairman of the Board of Bank Sergey Agroprogres Szczepanski shared practical experience in financing agriculture and spoke about the opportunities and risks of lending to farmers under agaroses during the conference "the Resumption of lending in Ukraine: background and new trends", organized by the NABU
Unlike the previous speaker Alex Lsits, who spoke about the problems in relations between banks and agricultural producers, Sergei Szczepanski during his presentation was more optimistic. The banker is confident that the agricultural sector remains one of the most promising sectors of the Ukrainian economy and it is only necessary to create the appropriate conditions for its development.
Potentially, farmers can attract 10-20 billion. annually. "The potential of the agricultural market – tens of billions of dollars. It is actively developed and has a high added value. Banks understand this and the credit portfolio is growing, but not enough to meet the needs of farmers", - said Sergey Szczepanski.
The problem is that banks provide ruble-denominated loans, but the products of the agricultural sector tied to the currency. Because equipment, chemicals, seeds and other necessary components for operation of the farmers are imported and therefore the calculations are conducted in dollars. After the 2008 crisis, banks were looking for a prospective sector for lending and the agricultural sector became one of the priorities. "What happened after the crisis of recent years? When farmers, for example, received funding for 5 billion. and after 3 years, this amount was two times less. The good news is they were able to survive. Bad – did it without us. And now the banks are back in this niche is quite difficult. But if we offer the farmers an alternative, then out of the blue can attract customers 2 – 3 billion.", - said Sergey Szczepanski.
This new alternative tool, which will allow the banks to confidently return to the agricultural sector, Sergei Szczepanski believes agricultural receipts. In fact, it is one of the types of collateral, when banks lend for future harvest. According to the landowner agrees to a fixed period to make delivery of a specified amount of products at a specific place. In this case the lender is guaranteed repayment of the loan, and the farmer receives the money for the production and protection of the devaluation and price fluctuations.
Agricultural receipts are used in Ukraine for more than three years, but most banks are not willing to lend on a crop. So listless interest is due to a weak understanding of how to work with this pledge and how to protect yourself in the event of default of the borrower. In turn, the farmers who have proven that they can work and survive even in a crisis, you do not have a standard for Bank Deposit. "We are the first Bank in Ukraine, which provides funding for agricultural receipts, and an active member of the project "Agrarian receipts in Ukraine" International Finance Corporation. And we already have real results - as of may 23 this year, 40% of all agricultural receipts issued for our participation. And a 120 receipts in the amount of UAH 0.9 bn. If any event of default for the 2016 season there, "- said the Chairman of the Board Agroprombank Bank.
Sergey Szczepanski expressed hope that the banking community in the end will reconsider their attitude to such a tool as agricultural receipts. Of course that needs state support is in the form of a solution to the question of introducing a land market, the reform of the judicial and Executive power, since all is - a links in a chain. After all, if lenders will get their rights, enshrined in law, agricultural producers – new types of collateral banks can lower interest rates on loans. The combination of all these steps will give a new impetus to the development of lending in the country as a whole and not only in the agricultural sector.
"There is a good example in the world. In the 90 years, Brazil was faced with a similar problem: crisis, devaluation, corruption, stagnation of judicial reform, funding for agriculture had practically stopped from the state and private capital, - said Sergey Szczepanski. - However, since 1994 they have made of the receipt of the instrument binding. Agricultural receipts generated more than $ 30 billion. working capital to small and medium farmers. And that 70 million hectares of land. The result of this step speaks for itself: today Brazil is a global leader in the production of grain".
Now receipts, and derivatives provide up to 60% financing of the working capital of the Brazilian farmers, often 100% of working capital financed through receipts.
According to Sergei Szczepanski, receipts became successful due to several factors. Namely, the "Strong guarantee" to the lender: the harvest is pledged, there is no demand. That is, all buyers check the registers of receipts and don't buy grain in the pledge. Also the lender has the right to inspect the fields, maintaining the technology, storage and the like. It is important that this type of pledge is valid for a few seasons and has priority on the collection of over other types of collateral. The foreclosure process is simplified to the minimum. So, the decision of the court shall be made up to three days, and usually in practice one day. Transparency in the use of this tool is achieved through the registers of receipts. As a consequence, the level of defaults on receipts is only 0.5% of the banks to 1.5% from distributors.
"Our results can't be worse. We have less than half the cultivated land, however, is a potential $ 15 billion. in agribusiness of Ukraine. And if all stakeholders - agricultural producers, lenders, banks, the state will come together and decide to do the crop tool, it will allow to attract resources for $ 10 billion.", - assured Sergei Szczepanski.