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Goran Živkov

REPUBLIC OF SERBIA Ministry of Agriculture, Forestry and Water Management. www.minpolj.sr.gov.yu. Landing to agribusines/rural SMEs and micro-enterprises Development of rural finance in Serbia. East Agri 2005 ANNUAL MEETING Rome, March 2005. Goran Živkov .

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Goran Živkov

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  1. REPUBLIC OF SERBIA Ministry of Agriculture, Forestry and Water Management www.minpolj.sr.gov.yu Landing to agribusines/rural SMEs and micro-enterprises Development of rural finance in Serbia East Agri 2005 ANNUAL MEETING Rome, March 2005 Goran Živkov East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  2. Agriculture resources Less then 75 75 - 85 85 - 90 • Agricultural land: 5,734,000 ha • Cultivatable land: 4,867,000 ha • Agriculture land per capita: 0.56 ha • Arable land per capita: 0.46 ha • 35% of population have access to land • 87% of land is private ownership • Number of farms: Around 700.000 • Average size of farm: 3 ha • Number of villages: 4.706 • 44% of the population live in rural areas • 93% of municipalities and 75% of villages with negative population growth 90 - 95 Over 95 % of cultivable area East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  3. Agriculture - Major component of the economy • Primary production from agriculture, hunting and forestry accounted for 21 percent of GDP (25 % agro-processing) • Exports of primary agricultural products account for 26.3% of total export • More than 10 % of employed are in primary agriculture and agricultural processing industry East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  4. The policy challenge: one size does NOT fit all !!!!! Encourage switch to high-value crops &/or expansion to private farms, with some reducing to ag. households Ensure further development and enlargement Establishment of democratic structure, transformation to modern cooperatives or other structures Privatization and restructuring Important in terms of household food & income security, so ensure continued access to inputs, but exclude from commercial policy East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  5. Agricultural Products Trade (mio USD) Liberalization 2000 dabbled the trade Deficit decreased East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  6. Budget expenditure for agriculture in 2000-2005 (in billion dinars ) East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  7. Budget goals Modernization of the agriculture and adjustment to the EU 2005 … +1…..______________n_______________….-1…..EU East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  8. Current situation in development of the rural credit market East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  9. Proizvod Pare Current situation SHORT TERM CREDITS Ministry of Finance Ministry of Agriculture State Commodity Reserve Development Fund (Limited influence) Subvention PRIVATE BANKS PRIVATE BANKS PRIVATE BANKS PRIVATE BANKS Hidden interest rate 30-70% Input suppliers Processors HIGH INTEREST RATE Organizatiors of production • Fertilizers • Pesticides • Seeds … • Millers • Oil factories • Sugar factories … Farmers • Zadruge • Directors zadruge • Kompanies … • Farmers • Cooperatives • Kombints … East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  10. Current situation MEDIUM TERM CREDITS High demand *** Available to the processors and SMEs not to the farmers *** ProCredit Bank (around 20 mill € per year, average credit size 3.000 €, interest rate 2% per month linked with €) *** Mechanization suppliers *** Ministry of economy – leasing for domestic mechanization *** UNDEVELOPED MID-TERM CREDIT MARKET East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  11. Current situation LONG TERM CREDITS Not exist and No sign that will be established soon East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  12. Agriculture credit market in Serbia never existed! The lack of commercial credit for agriculture can be attributed to: • The lack of investment credit generally in the economy • The particular risk and low profitability associated with agriculture • The lack of collateral available (unfinished cadastre) • Inefficient legal protection • The relatively small loan size required in the private sector and the associated relatively high fixed cost of establishing and monitoring it • Lack of expertise in the banking sector for appraising agricultural business plans • Lack of experience and expertise amongst farmers in developing and presenting business plans • Farmers do not trust to banks (and opposite) - lack of credit history East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  13. Are there successful agriculture without developed credit market? To wait or To do something to speed up (slow down) process East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  14. MINISTARSTVO POLJOPRIVREDE, ŠUMARSTVA I VODOPRIVREDE Direct payment & Price support Structural payment RD (Investment payment) Ministry of Agriculture Budgetary payment BANK BANK BANK BANK BANK BANK BANK BANK BANK Open account FARM REGISTRY Commercial credit Short term credit Medium term credit Cooperatives SMEs FARMERS 70.000 farmers open account in one of the bank Bank started to be interested for farmers East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  15. State budget (MoA) Banks money Needed capital 2004 2005 2006 2007 2008 2009 2010 … Priorities: FinancingSystem Development • Development sustainable system for financing agricultural sector from real sources • Develop credit history • Improving of production through ensuring access to capital to farmers • 5 – 7 years • 700 millions to 1 billion EURO MAIN OBJECTIVES: DURRATION: BUDGET: East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  16. Short term credit • Short term credit to buy inputs • Loans on 1 years with interest rate on 7% (din) • Linked with farm size (150 – 1000 EURO) • Important to build credit history • Source of money is agrarian budget • Banks are managing credits • Programme 2004 • 68 SMEs received credits in total amount of 6.7 mill EURO (avg. 89,338 EURO) • 28.125 farmers received credits in total amount of 21.6 mill EURO (avg. 807 EURO) East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  17. Medium term credit • Investment credit on 5 years with interest rate of 3% per year (€) • Source of money is agrarian budget and banks • Banks are managing credits • Banks have 10% risk • Government Guaranty found secure credit • Programme 2004 • 157 SMEs received credits in total amount of 21.3 mill EURO (avg. 135,880 EURO) • 740 farmers received credits in total amount of 12.04 mill EURO (avg. 16.271 EURO) East Agri - 2005 ANNUAL MEETING, Rome, March 2005

  18. HVALA Thank you East Agri - 2005 ANNUAL MEETING, Rome, March 2005

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