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Improving Access to Finance for the Agriculture Sector

Improving Access to Finance for the Agriculture Sector. Pipeline Project UNDP Kosovo Building Sustainable Microfinance in RBEC Community of Practice Workshop 9-11 November, 2005 Almaty, Kazakhstan. Kosovo at a Glance. Population: Approx. 2 million Area: 10,000 km/sq

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Improving Access to Finance for the Agriculture Sector

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  1. Improving Access to Finance for the Agriculture Sector Pipeline Project UNDP Kosovo Building Sustainable Microfinance in RBEC Community of Practice Workshop 9-11 November, 2005 Almaty, Kazakhstan

  2. Kosovo at a Glance Population: Approx. 2 million Area: 10,000 km/sq GDP per capita (est.): 1,258 Euros GDP growth rate (est. 2004): 3% Agriculture share of GDP (est.): 30% Human Development Index: 0.734

  3. Financial Sector • Kosovo’s financial sector started to function in 1999 with establishment of Banking and Payment Authority of Kosovo (BPK) • Today, Kosovo’s financial sector comprises of: seven (7) Commercial Banks, fourteen (14) Micro Finance Institutions (MFIs), tree (3) Other Non-Bank Financial Institutions, eight (8) Insurance Companies, one (1) Kosovo Pension Saving Trust, and two (2) Money transmitter. • In mid 2005 total deposits of the banking sector was around 742 million Euros (30% of GDP), total loans granted was around 412 million Euros (20% of GDP), • Non-bank financial institutions loans granted was around 49.9 million EUR (10.7% of total loans) • The structure of the loans: is relatively uneven to some sectors. 84.1% were channeled to the services sector

  4. Problems to be addressed • Although the volume of loans from commercial banks has increased during the last years the current level of lending for agricultural sector is low, • it is limited to a few sources • Lending to agricultural sector by MFIs is at minimal or at pilot level, • is not covering demand in this sector • Credit methodology of these sources relies heavily on short-term loans with frequent, regular repayments • Even if MFIs expressed a desire to increase lending into the agriculture, they don’t have sufficient liquidity in order to increase short and medium-term lending with their own funds.

  5. Strategy • The aim of the project is to improve access of farmers to short and medium term finance through • i) creation of loanable capital/credit line that will provide necessary capital that MFIs require to expand their lending for the agriculture sector and • ii) supporting the capacity development of MFIs in agricultural lending.

  6. Component 1: Support to the MFIs • donor funded loanable capital/credit line for MFIs • capacity development of MFIs in agricultural lending

  7. Donor funded loanable capital/credit line for MFIs • Appraisal of MFIs, • Financial Disbursement of the loanable capital, • Reviews (MFIs )

  8. Capacity development of MFIs in agricultural lending • The design of the loan products for agriculture • Training on agricultural lending

  9. Component 2: Support to Farmers • training in loan application submission, business plan development, and guidance will be provided to the farmers by local business advisory services/centers identified by each MFI

  10. Exit Strategy • To convert the balance into equity of MFIs, to be used for continued provision of credit • conversion will be subject to fulfilment of a number of performance targets

  11. Expected Results • Number of loans given and the number of different clients served • Higher volumes of agricultural loans • Increased MFIs activity in financing agriculture, • More diversity and competition in financial markets, • Wider range of financial services available to farmers

  12. Thank you

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