News
05.02.2010
Lending to agricultural producers plummeted 3.5 times
According to the Agrarian Policy Ministry, lending to Ukraine’s agriculture plummeted 3.5 times in 2009 as of December 3 against this same time in 2008: from UAH 20.05 Bl to UAH 5.79 Bl.
The structure of loans is bad: long-term loans account just for 8.6% of the total volume. The loans were taken out on interest rates varying from 16% to 39%. With regard to earlier loans, UAH 3.1 Bl was extended in 2009 out of the UAH 3.9 Bl needing extension.
In opinion of IG Sokrat analysts, this situation developed as a result of winding up credit programs by banks, devaluation of the national currency, and ineffective government policy. The sector’s considerably lower financing may have a long-term impact: slower production growth and missing favorable opportunities. Under these conditions, large agricultural companies which did not face credit shortfalls have an advantage over smaller operators.
Some companies, who lacked access to credit, looked for other ways of financing their operations. Many sought investors to take an equity stake in operations rather than borrow money. An excellent example of such a strategy can be the company group named Kreativ. Being heavily indebted due to large-scale investment programs and the hryvnya devaluation, the company attracted investors to take a 49% equity stake in the construction of a soybean crushing plant valued at $40 Ml with the option of buying out the remaining shares in the future.
“With regard to the plans for 2010, crediting the agricultural sector substantially depends on the government support and, to be optimistic, must renew after the presidential election. In addition, both candidates included significant support to agriculture in their programs,” the experts said.
