Agriculture credits project witnessed imbalance
24 April, 2014
Agriculture credits project witnessed imbalance
The Georgian agriculture loans portfolio has increased more than five-fold from GEL 59 million to GEL 318 million within a year, this in the framework of the state initiated Preferential Agro-Credit project. The project started on 27 March 2013 and implies State co-financing of banking credits for farmers and agriculture related enterprises to boost the sluggish agriculture sector of Georgia. 14,100 preferential credits with a total volume of GEL 318 million were disbursed in more than 30 agriculture branches, statistics
show. 70 new processing enterprises were set up and 400 old ones were renovated. The result is estimated as positive but far from satisfactory because similar statistics show a staggering imbalance in the credits’ redistribution between the east and west parts of the country.
The program started with three components, however, it changed with time in accordance with the needs of the beneficiary sector and now it consists of seven components. The basic three components offer: free of charge 6-month credits up to GEL 5,000 to small farmers; 2-year credits within GEL 5,000-100,000 charged by maximum 8% for middle sized and big farmer; and 7-year credits within USD 30,000-600,000 and capped by 3% as ceiling interest to enterprises involved in agriculture product processing. The co-financing rate ranges within 9% and 12% for the second and third component respectively that makes agriculture loans [charged by 15-17% normally] available for 8% and 3%.
However, the west part of the country enjoyed less preferential loans this time. For example out of GEL 168,644,280 and GEL 96,991,211 that was disbursed within the second and third components respectively roughly 92% and 83% went to the east Georgia. As a result, out of 70 newly created enterprises, 58 are in the east and 12 - in the west. The west highland part of the country turned out the most neglected in this regard. In comparison, 215 credits were disbursed on enterprises in Kakheti and 136 in Kartli, the lowland regions in the east, and only three credits went to Racha-Lechkhumi, one of the highest mountainous regions of Georgia. On the other hand, by number of population west Georgia exceeds the eastern part of the country. But the east part is richer in agriculture potential, Lasha Dolidze, a specialist at the local office of the Food and Agriculture Organization of the UN, explains. “This is a logical result because Kakheti and Kartli offer much more diversified agriculture products and whoever is richer responded to the credit project more. The regional imbalance can be eradicated only via the long-term state strategy and this happens in all countries not only in Georgia. The EU for example has special funds to alleviate this problem in its new member-countries, but Georgia has very restricted financial resources and has to redistribute this on priorities in time,” Dolidze told Georgian Journal.
To fill the gap the state added a new seventh component to the preferential credit Program two months ago. It implies a 40% state grant to enterprises in regions with a low economic activity, Giorgi Chkheidze, Head of Agriculture Projects Management Agency put in charge with the preferential credit program, said in his interview to GJ. This is a 10-year special preferential credit up to USD 500,000 and maximum 2% of interest rate which requires only 10% co-financing on side of the entrepreneur: 50% of the business project is funded by the preferential credit while 40% is a state grant. No credits are disbursed as of yet, as we are scrutinizing the business projects at the moment and will start credit disbursement soon,” Chkheidze said.


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