Financing in Agriculture

On July 7, Expocity Albania launched a new webinar focusing on an important topic, Financing in the Agricultural Sector. In these unprecedented times, very important sectors of the Albanian economy have been seriously impacted.

The agricultural sector was also affected as a result of the global pandemic, being this is one of the main sectors Expocity Albania covers, we launched this discussion with the with the following panel speakers:

Mr. Agim Rrapaj, Director of Albanian Agribusiness Council
Mr. Fatmir Nikolli, Regional Director for Agribusiness, NOA
Mr. Alban Mara, Head of Credit Approval Sector, Risk Department, OTP Bank
Mr. Ervin Boci, Coordinator of Credit for Agriculture, Credins Bank

As a Director of the Albanian Agribusiness Council (KASH), Mr. Rrapaj explained the sector was less affected by the global pandemics than other sectors such as: tourism, transport, etc. Financial problems in this sector initiated with the recent earthquake in Albania which coincided with the autumn planting campaign and vegetable harvesting. A few months later, the COVID-10 pandemics affected the spring planting campaign and fruit harvesting.

Mr. Rrapaj highlighted two key issues of this sector:

  • Harvest time and planting time are closely related to costs. If farmers do not plant/harvest on time, the loss is on average 30%. In both cases, the earthquakes and the pandemic have affected this sector.
  • Entities in this sector have not reached the consolidation stage but the income they generate from their work, is reinvested, causing an issue in liquidity. They fail to balance demand with financial means. In this case, the resources remain remittances and microcredit institutions that are extremely important.

Director of KASH, Mr. Rrapaj, during his discussion introduced the latest economic-financial package proposed to support agribusiness manufacturing entities and the main links in the food supply chain.

The proposed package is based on four main pillars:

  1. Cooperation and Coordination;
  2. Mechanization, Innovation and Digitalization;
  3. Improving the financial offer and disbursement of grant funds, mainly for manufacturing entities and the main links in the food supply chain;
  4. Improving legislation and legal acts that have a direct impact on manufacturing entities and the main links in the food supply chain.

Mr. Rrapaj stressed the need to focus on the farmer. Out of 300,000 farmers, only 15% of them are formalized and the rest is out of the market. The bank finds it very difficult to penetrate this market but it is a necessity. He added that it is equally important to increase funding and solve collateral issues. The farmer faces many difficulties in meeting the collateral criteria. However, it has great potential in this regard. The KASH proposal is to create a well-organized book on agricultural mechanics tools in order to meet the criteria required by the bank. The agricultural mechanics sector needs to be formalized. Mr. Rrapaj continued his analysis by touching on the argument of the guarantee that the EBRD has allocated in the amount of 200 million euros and the banks should use this guarantee efficiently to complete the collateral.

Attention to the farmer, the whole food chain must be supported with financing, transparency, cost reduction to become more competitive in the market. Opening up in the regional market poses an increased risk as we have a disproportion between the subsidies of the surrounding countries and Albania. This is a problem that cannot be solved without the support of financial institutions, said Mr. Rrapaj.

Then the discussion was followed by the three representatives of financial institutions who initially spoke about the impact that global pandemics have had on the agricultural sector analyzed by the positions and institutions they represent. Mr. Ervin Boçi, from Credins Bank explained in this webinar that the beginning of the pandemic was accompanied by uncertainty from all sides, mainly during the first weeks of March. Subsequently, with the opening of international transport routes, the situation normalized. According to him, the agricultural sector managed to be structured and decisive. It does not mean that it was not affected and there was no decline, but compared to other sectors of the economy during these three months, the agricultural sector has been crucial for the Albanian economy.

Mr. Fatmir Nikolli, Regional Director of Agribusiness at NOA said also that agriculture is less affected by this global pandemic based on the gross domestic product figures, the number of people investing in this sector and the growing trend of exports. He also said that in some sub-categories of agriculture, this global situation has had a positive effect, highlighting the production of vegetables in greenhouses and the price level that has had a positive trend. Overall, the agricultural sector is an attractive sector for investment.

Mr. Alban Mara, Head of Credit Approval Sector at OTP Bank, said that at the beginning of the pandemic, agricultural sector, unlike other sectors, did not reflect panic. On the other hand, Mr. Alban quoted that OTP Bank has been very active especially with EBRD schemes and risk sharing as it is very difficult for banks to operate alone in such an unstructured market. The Bank has not changed interest rates, has not changed risk assessment parameters. He stressed that very soon OTP Bank will have a proper strategy for the agriculture sector supported by the group. Mr. Mara calls for the involvement of farmers in fiscal legislation to reduce market gaps in this regard.

A very important indicator of support for the sector is the role played by the banking system during this global situation, the approach to the agricultural sector in the conditions of a shrinking economy. Measures taken by banks during this time to respond to the demands of the sector. The agribusiness segment at Credins Bank is a well-organized structure composed of specialists in the field in both the lending and risk sectors. During this time the bank has not stopped financing. Mr. Ervin mentioned that in addition to March, when there was uncertainty from the consumer and the business regarding the continuity, then Credins Bank has had a normal performance in terms of financing this segment. In coordination with the Bank of Albania, every request for deferral of installments has been reviewed and it has resulted that there have been fewer requests for the agricultural sector than in other sectors. The agribusiness coordinator at Credins Bank briefly introduced the bank’s product created specifically for agribusinesses during and after the global pandemic. The “Së Bashku” package aims the recovery of the sector by financing up to 700,000 ALL without collateral, without guarantors and interest rates with a 5% reduction from the norms that the bank applies. One of the options of this package is the possibility for the client to be exempted from paying the principal for the first three months of the loan.

The financial institution NOA, which traditionally since its establishment 21 years ago, is focused on the agricultural sector, has continued uninterruptedly and at the same pace the lending process by staying close to the Albanian farmer to support him for short-term and long-term investments. This is what the Regional Director for Agribusiness, Mr. Fatmir Nikolli, said, adding that NOA, in the framework of the measures taken for the situation, has launched the offer of progressive installments, giving customers the opportunity to perform lower payments in the first installments and increase them gradually with the income stabilization. The focus of NOA is not only financing but also consulting campaigns on Agri-technical processes that take place on the farm.

The discussion in this webinar was wrapped up by Mr. Rrapaj calling on all financial institutions that to support not only the agricultural sector but also livestock, fisheries, agro-processing, agro-industry, agro-livestock markets, beekeeping, etc. According to him, the banks are moving away from the weak links in the chain, but attention should be focused there.

See you in the next webinar!

You are invited to follow the full webinar on link