Azerbaijan's Agrarian Agency: Farmers' access to unsecured loans to be simplified
BAKU, Azerbaijan, Apr. 11
By Fidan Babayeva - Trend:
The decree signed by the president of Azerbaijan on stimulation of financing of the agricultural sector will simplify the process of lending to farmers, Chairman of the Agrarian Credit and Development Agency under the Ministry of Agriculture Mirza Aliyev said, Trend reports on Apr. 11.
According to the chairman, the new mechanism allows farmers to provide microloans without collateral.
“As you know, about 80 percent of farmers are part of small and medium-sized family farms. They use a total of 230,000 hectares of land. These farmers' access to finance is mainly in the form of government subsidies, soft loans and commercial loans provided by various banks,” the chairman said.
“If we look at the overall picture, we will see that the loan portfolio in this field is about 60 million manat ($35.2 million), and farmers in this category are given subsidies in the amount of 40-45 million manat ($23.5-$26.4 million) depending on the year. But looking at the big picture, we see that our farmers need an additional 140 million manat ($82.3 million). This demand can be financed with the help of newly created financial tools,” Aliyev noted.
The agency’s chairman also noted that the decree on stimulation of financing of the agricultural sector allows forming a mechanism for providing unsecured microloans to farmers up to 15,000 manat ($8,823).
“The mechanism provides for the issuance of microloans at an interest rate two times lower than the average market price. The maximum interest rate on microloans can be 12 percent. Previously, the average term of such loans was 1-2 years, but now the maximum repayment term has been increased to three years,” Aliyev added.
“One side of the mechanism is the state that allocates funds in this sector, the other side is the farmers who need microloans, and the third side is the banks involved in the process. One of the main advantages is that the state partially covers possible risks in this issue for banks,” he stressed.
“Providing banks with access to a cheaper means and the state’s response to risks make this mechanism attractive to both banks and farmers. This mechanism will significantly expand the access of our farmers to financing,” Aliyev said.
The chairman added that given the seasonal activities in agriculture, grace periods for the payment of microloans are also envisaged.
($1 USD = 1.7 AZN on Apr. 11)
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