What’s Amiss With Cheaper Agro-Credits?
30 May, 2013
What’s Amiss With Cheaper Agro-Credits?
Very few of reprocessing industry enterprises have availed of preferential agribusiness credits disbursed in frames of the Preferential Agro-Credit Project of the Ministry of Agriculture of Georgia (MOA) within a month of its launch on March 27, 2013. Economic analysts think the reason is the credit program is more tailored to banks’ interests rather than to the agriculture reprocessing industry that should play the first fiddle in agriculture sector revival and development.
“The state had better to rehabilitate the old
processing plants built during the soviet time in regions that were calculated on the needs of the regions where they were built and bringing profits as old statistics show. It would give an impetus to agriculture and then privatize them to local entrepreneurs/farmers. It might be much more effective and cheaper than this co-financing scheme that very likely is just a waste of money,” Muller said. “A monthly statistic is not bad for the beginning but cannot be effective for the focus is not made on reprocessing,” Ditrikh Muller, a co-founder of Georgian Investment Group, said in the interview to Georgian Journal.  “The reprocessing of harvested product is the key problem to small household farmers who make around 90% of farmers and who simply cannot take their harvest to the market.” Moreover, the co-financing mechanism is nothing than a waste of money. It tempts banks to disburse credits and get guaranteed state co-financing even if the creditor fails to pay its due. Finally the creditor may go bankrupt and the money paid by the state will be a squander.  Over GEL 12 million are disbursed totally through 933 preferential credits since March 29 to May 2 of 2013 in frames of the Preferential Agro-Credit Project consisting of three components as following: free of charge 6-month credits up to GEL 5 thousand targeted to small farmers; 2-year credits within the range of GEL 5 thousand -100 thousand available for middle sized and big farmers; and 7-year credits within the scopes of USD 30 thousnad-600 thousand available to enterprises involved in agriculture product processing. The agro-credit program aims to make the expensive credits available to agriculture sector by co-financing the interest rates through the Agriculture Development Fund of MOA. The co-financing rate [covered by the Fund] ranges within 9% and 12% thus making agriculture credits [charged by at least 15-17% of yield by financial sector] available for 3% and 8% to the second and third component beneficiaries respectively. The credit disbursement criteria are completely at discretion of banks that makes sector pundits skeptical that banks and not the agriculture sector will avail of the program in fact. Agriculture businesses have already complained that banks ask for prestigious property for collaterals and unrealistic pay-back timelines such as to start the credit clearance in 6 months while the least period given to medium farmers and particularly processing plants is 3 years experts say.   The first monitoring results of the disbursed loans released agriculture minister on May 21, 2013 bespeak that the reprocessing sector is neglected. Out of 933 credits handed to the Program beneficiaries only 8 [6 wineries and 2 corn drying-and-storage infrastructures] were financed from the enterprises component by slightly over USD 3 million totally. GEL 375 442 came to 587 small consumer credits of the first component and GEL 6 485 415 was issued to 338 small and medium farmers of the second component.
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