1. the role of the PCG IN increasing access to finance to small farmers
ECA AGRI-FINANCIAL SERVICES
Leah Soroka
Program Manager

2. PREPARING FOR ACCESS TO FINANCE TO HELP SMALL FARMERS BE ABLE TO PURCHASE LAND
BIG FARMERS
SMALL FARMERS
have accountants have lawyers know how to deal with banks
do not have layers/accountants
lack experience with banks
lack financial literacy and records
face higher transaction costs
face higher risk premiums
The lifting of moratorium will initiate a demand for land purchases by agricultural producers of all sizes, but not all farmers will be able to finance their demand

3. ASSESSMENT OF THE AMOUNT OF FINANCING REQUIRED
The value of land is estimated based on the cost of the lease
The value of land is estimated on the basis of net profit of producers
Millions
Millions
Limitation:
Limitation:
Limitation:
Trade of land enables enormous access to finance through land as collateral

4. PARTIAL CREDIT GUARANTEE (PCG) SCHEME
OBJECTIVE OF PCG:
to support the development of long term farmland financing in Ukraine by covering some portion of the losses incurred by lenders when SME borrowers default on loans.
INITIAL TARGET GROUP
LEGAL FORM
ADDITIONAL VALUE
family farms with total cultivated area as of the end of the previous year below 100 ha
independent non-for profit financial company with state participation under the supervision of Non-bank Financial Sector Regulator
could be used for capital cost acquisition and working capital finance requirements of small farmers
PCG scheme will enable access to finance for small farmers and facilitate the purchase of land by allowing 8 hryvnas of investments by the banking sector for each hryvna of public funds invested in the capital

5. CREDIT GUARANTEE SCHEME (CGS)
CGS PROVIDES
third-party credit risk mitigation to lenders with the objective of increasing access to credit for SMEs through the absorption of a portion of the lender’s losses on the loans made to SMEs in case of default, typically in return for a fee
PCG IS AIMED TO:
substitute or enhance borrower’s collateral
reduce bank’s risk of landing to the target group
create incentives for banks to get engaged with small farmers
CGSs CAN PLAY AN IMPORTANT ROLE
in countries with weak institutional environments by:
improving the information available on SME borrowers in coordination with credit registries
building the credit origination and risk management capacity of lenders

6. AVERAGE PROFITABILITY
SMALL FARMERS CAN BE PROFITABLE BUT THIS SECTOR IS NOT UNDERSTOOD BY BANKS
Untapped profitable, low risk, lending opportunities amounting to UAH 1.6 B exist with small farms
PORK
BEEF
DAIRY
EGG
BROILER
FRUIT
VEGETABLES
AVERAGE PROFITABILITY
OVER 15%
Extensive analytical work showed 1,900 profitable SME livestock farms that are bankable and seeking to expand but are still underfinanced

7. IFC SMALL FARMER PROGRAM
IFC has determined that small farmers in the livestock sector are very profitable but not understood by banks.
IFC has developed an in-depth training program for banks to adapt to small farmers in an efficient way through understanding the business model of key profitable small farmer value chains II
IFC has determined that small farmers need assistance in understanding the necessity, development and use of:
business plans
financial statements
what banks look for in granting credit
the language of bank documentation
necessity of security
IFC has developed an in-depth training program for selected farmers to be more bankable and to improve their farm financial literacy to help them communicate with banks
Farm producers will receive financial training and tools to successfully gain access to financing and take the fear out of approaching banks

8. SUMMARY
Access to finance remains limited for Ukrainian farmers, especially for small agriculture producers
The lifting of moratorium will initiate a demand for land purchases by agricultural producers of all sizes, but not all farmers will be able to finance their demand
PCG scheme will enable access to finance for small farmers and facilitate the purchase of land by covering some portion of the losses incurred by lenders when SME borrowers default on loans
In addition to the introduction of the PCG, an intensive program for banks to understand the livestock and other business models and a program to improve these farmers’ farm financial literacy to help them communicate with banks, will facilitate increased lending to small farmers
The establishment of PCG scheme, training and capacity building in agricultural finance sector in the country will boost agricultural development in Ukraine

9. ECA Agri-Finance Project
THANK YOU!
ECA Agri-Finance Project
Kyiv, 01010, Ukraine
1, Dniprovsky Uzviz, 3rd floor
Tel
Fax
Leah Soroka
Program Manager
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