Analysts predict a further increase in agrocredit and lower interest  rates on them

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.