As of June 1 this year, farmers will be able to use future yield as a banking guarantee for the funds they will get before harvest, during harvest. This will be possible thanks to the Law on pre-harvest funding which was adopted November last year and it is becoming effective in less than two weeks.
As the minister of agriculture, Snezana Bogosavljevic Boskovic,said, the law aims at introducing system of funding which will enable farmers to get to loans for agricultural production in simpler and more favorable way.
Insurance of future yield will be one of the conditions to sign a contract on pre-harvest funding but it is difficult to estimate at the moment when the Law has not become effective yet the amount the insurance will increase. Milovanovic says that however, the percentage will increase from current 8% of total agricultural production (according to data of the Ministry of agriculture of the Republic of Serbia).
Terms farmers will have to comply before they sign the contract will be defined through individual contracts between financier and fund users. ProCredit bank, which has been actively participating for more than 10 years in crediting agricultural producers, greeted legal framework for mortgage on future harvest, thinking it will additionally facilitate business of agricultural producers.
- It is essential to mention that deposit itself is never sole basis for a loan
but it is financial analysis of a farmer. Before signing the contract with a bank,
a client must be financially capable and after that it is necessary to fulfill
all terms defined by the Law on pre-harvest funding – they say for "eKapija".
The bank explains that maximal loan amount is not defined while minimal repayment period is 12 months. Users will, repay loan, in line with the agreement with trustees, in goods i.e. agricultural products or funds and the interest rate will be standard in line with price list of a bank the same as for all other kinds of loan.
Taking into an account that fact that these loans are mainly for short-term
investments, they can be used for procurement of all kinds of production
material as well as procurement of cattle for growing, ProCredit bank says.
Market solution for lack of funds for agriculture
Recently held conference on Law on pre-harvest funding at the Agricultural Fair in Novi Sad attended by reps of a large number of representative associations of farmers showed that the interest of agricultural producers for this kind of funding is huge.
The project of EBRD and FAO, within which implementation of the law was carried out, startd at the same time in a number of east Europe countries. Serbia went furthest in its implementation and as such, the law will be implemented in our country for the first time Europe while Russia, Bulgaria, Ukraine have been working on developing similar documents.