Azerbaijan, Baku, March 18 / Trend .U.Ismaylova/
There must be government support to create insurance mechanism for agricultural loans in Azerbaijan, researcher of the Azerbaijan Microfinance Association's joint project with Oxfam "Insurance mechanism for agricultural credit" Vagif Rustamov said to press conference on March 18.
"During the research, we came to the conclusion that for insurance of agricultural loans, it is possible to create a special state agency or a guarantee fund to regulate these processes," said Rustamov.
According to him, within the study, the advanced world experience is studied on using the mechanism of insurance of agricultural loans. For example, in Nigeria, Slovenia and Belgium a state agency operates, in Turkey, France, Czech Republic - agency of state cooperation with the private sector, in Lithuania and Estonia - state cooperation with international funds, in Romania and Spain - state cooperation with the private sector and international funds .
The results of study showed that the Azerbaijani insurers are not interested in insurance of agriculture, and local banks in providing loans to small farmers because of the high level of risk in this sphere.
"The limited access to the real funds is the main problem of the Azerbaijani farmers, particularly for medium and small," said Rustamov.
Rustamov said that to develop a more effective mechanism for the insurance of agricultural loans it needs introduce new instruments (bonds from accidents for guarantee, insurance contracts, based on an index of unfavorable weather conditions, the insurance contract based on an index of the territorial production), technological innovation (weather forecasting satellite system, cosmic images, early warning system), promotion of private insurance companies (providing privileges in payment of insurance premiums and payments, subsidies for administrative costs, reinsurance of subsidies).
According to the expert, to introduce a new mechanism, should also be taken into account the risk - natural (weather), health (diseases and epidemics), market (price difference at the local and international markets, changes in quality standards) and political, social, economic, public (war, financial crisis, the weakening of institutional mechanisms).
"The final structure of the alternative insurance scheme for agricultural loans will be announced in mid July," said Rustamov.
Duration of the project "Insurance mechanism for agricultural credit" was defined from 15 January to 15 August 2010.
According to project coordinator Aykhan Nasibli, the main aim of the project is to analyze the current situation, identify best practices in agricultural lending, establish and improve new mechanism, provide guidance to the sphere of agriculture and insurance in Azerbaijan.