ArmInfo. According to the Central Bank of Armenia, by the end of 2018, the total volume of agricultural loans amounted to 136.2 billion drams ($ 282 million), having increased by 3.6% over the past year.
Of these, 74.1 billion drams are dram loans and 62.1 billion drams are foreign currency loans. Moreover, the dram component of agroloans came out in 2018 as dominant - 54.4%, with the acceleration of the y-o-y growth of the absolute value from 17.3% to 38.3%. At the same time, the volume of the currency component of agroloans accelerated the decline from 14.1% to 20.3%.
As of January 1, 2019, the total loan portfolio of Armenian banks amounted to 2.8 trillion drams ($ 5.8 billion), of which agro-loans accounted for 4.9% versus 5.5% a year earlier. It is broken down into components: in the currency loans, the share of agro loans is 4.1%, and in the dram loans - 5.9%. According to analysts of ArmInfo, with a link to the RA Committee, the gross volume of agricultural products, having reached 889.7 billion drams ($ 1.8 billion) at the end of 2018, continues to decline - by 7.6% against 3% in 2017.
Enhanced state assistance
In support of agricultural development, the government involved a number of state subsidy programs: interest rates on agro loans, interest rates on agro loans in the processing sector, leasing agricultural equipment, buying fertilizers and diesel fuel, rates on loans for agricultural raw materials, rates on loans for the establishment of intensive fruit and berry gardens, for the installation of drip irrigation systems and hail nets.
A total of 12 banks participated in these state programs: ACBA-Credit Agricole Bank, Ardshinbank, Ameriabank, Araratbank, Armbusinessbank, VTB Bank (Armenia), Armswissbank, Converse Bank, Armeconombank, INECOBANK, Evocabank, Byblos Bank, as well as leasing company "ACBA Leasing "and universal credit companies (UCC)" Development and Investment Corporation of Armenia "(DICA)," CARD AgroCredit "," PHARM Credit Armenia "," Kamurj ".
State program conditions
Under the program of subsidizing interest rates on agro loans, loans in the amount of 3-10 million drams are issued at the rate of 5% per annum, and for border regions and agricultural cooperatives the rate is 3%.
Under the diesel fuel purchase subsidy program, due to the rise in price of the latter, the subsidy size was revised from the previous 34.4 drams per liter of fuel to the current 60 drams. According to the "State support for agricultural farmers in purchasing fertilizers at affordable prices" program, the cost of 50 kg of a bag of phosphate fertilizers is subsidized for 6000 drams, and 1 bag of potash fertilizers - for 3500 drams. In addition to the grant funds, transportation and loading and unloading operations are organized in the country's communities.
The "Subsidizing interest rates on loans to the agro-processing industry for agricultural raw materials" program provides for subsidies of 9% of the nominal 12%, which allows the borrower to repay the loan at an y-o-y rate of 3%.
Under the program of subsidizing interest rates on loans for laying intensive fruit and berry gardens with an area of 0.5-10 ha, processed using advanced technologies, loans are issued with a maturity of up to 7 years at a rate of 5% per annum.
Under the program of subsidizing interest rates on loans for the installation of anti-hail nets, loans are issued with a maturity of up to 7 years, at a rate of up to 14% per annum, the subsidization of which allows the client to provide a loan at a rate of 2%.
Under the program of subsidizing interest rates on loans for the installation of drip irrigation systems, loans are issued with a maturity of up to 3 years at a rate of up to 14% per annum, the subsidization of which allows the client to provide a loan at a rate of 2%.
Under the leasing program, the lessees can purchase agricultural equipment and equipment on the following terms: prepayment - 20%, interest rate - 4% per annum (including subsidized 7% of the stipulated 11%),), repayment period - up to 8 years.
Immediate plans
Soon, a new program for the development of the processing industry will be presented, under which beneficiaries will be able to purchase equipment for greenhouses, dryers and refrigeration units at affordable prices, all at 4% y-o-y rate. This will not only prolong the seasonality of agricultural products, but also increase farmers' incomes. A pilot project on agricultural insurance in the Ararat and Armavir regions is scheduled for launch in the spring of 2019, but the possibility of testing the program in the Shirak region is also being discussed. At the initial stage, the insurance will concern fruit and vegetables - apricots and grapes. Risks covered by insurance - hail and frost. The system provides for 100% compensation for losses of farmers. The program provides for subsidies of 60-65% of the cost of the insurance policy, and the farmer will have to pay 30-35 thousand drams per 1 hectare. KfW Bank will provide support in the form of a grant of 5.3 million euros, of which 4.8 million euros will be used exclusively to subsidize the purchase of insurance policies.
The Government of Armenia will come up with co-financing of the agricultural insurance program in the amount of 5 million euros. Climate Investment Funds will also provide 2 million euros, some of which will go to subsidize the purchase of insurance policies. 1.9 million euros will be allocated for the creation of a National Agroinsurance Risk Management Agency (NARMA) National Bureau of Agricultural Risk Management, retraining of personnel and the formation of an appraiser institute, the development of secondary legislation and consulting services.
For 2020, it is planned to launch a state support (subsidizing) program for agricultural producers who want to switch from traditional to organic farming.
According to analysts of AmRating rating agency affiliated with ArmInfo, despite the reduction in margins, the active involvement of international donor programs in the implementation of the government's agro- industrial policy will allow banks to increase the availability of credit to agricultural producers, including by reducing interest rates, especially in the dram segment. AmRating analysts predict at least a 7% growth in agro-lending in 2019, taking into account the recent amnesty of fines / penalties for bad loans (including agro-loans) and the technical recovery of credit histories of farms and other small agricultural producers.
