Improving Access to Finance for the Agriculture Sector

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Improving Access to Finance for the Agriculture
Sector

• Pipeline Project
• UNDP Kosovo
• Building Sustainable Microfinance in RBEC
• Community of Practice Workshop
• 9-11 November, 2005
• Almaty, Kazakhstan

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Kosovo at a Glance

• Population Approx. 2 million
• Area 10,000 km/sq
• GDP per capita (est.) 1,258 Euros
• GDP growth rate (est. 2004) 3
• Agriculture share of GDP (est.) 30
• Human Development Index 0.734

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Financial Sector

• Kosovos financial sector started to function in
  1999 with establishment of Banking and Payment
  Authority of Kosovo (BPK)
• Today, Kosovos financial sector comprises of
  seven (7) Commercial Banks, fourteen (14) Micro
  Finance Institutions (MFIs), tree (3) Other
  Non-Bank Financial Institutions, eight (8)
  Insurance Companies, one (1) Kosovo Pension
  Saving Trust, and two (2) Money transmitter.
• In mid 2005 total deposits of the banking sector
  was around 742 million Euros (30 of GDP), total
  loans granted was around 412 million Euros (20
  of GDP),
• Non-bank financial institutions loans granted was
  around 49.9 million EUR (10.7 of total loans)
• The structure of the loans is relatively uneven
  to some sectors. 84.1 were channeled to the
  services sector

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Problems to be addressed

• Although the volume of loans from commercial
  banks has increased during the last years the
  current level of lending for agricultural sector
  is low,
• it is limited to a few sources
• Lending to agricultural sector by MFIs is at
  minimal or at pilot level,
• is not covering demand in this sector
• Credit methodology of these sources relies
  heavily on short-term loans with frequent,
  regular repayments
• Even if MFIs expressed a desire to increase
  lending into the agriculture, they dont have
  sufficient liquidity in order to increase short
  and medium-term lending with their own funds.

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Strategy

• The aim of the project is to improve access of
  farmers to short and medium term finance through
• i) creation of loanable capital/credit line that
  will provide necessary capital that MFIs require
  to expand their lending for the agriculture
  sector and
• ii) supporting the capacity development of MFIs
  in agricultural lending.

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Component 1 Support to the MFIs

• donor funded loanable capital/credit line for
  MFIs
• capacity development of MFIs in agricultural
  lending

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Donor funded loanable capital/credit line for
MFIs

• Appraisal of MFIs,
• Financial Disbursement of the loanable capital,
• Reviews (MFIs )

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Capacity development of MFIs in agricultural
lending

• The design of the loan products for agriculture
• Training on agricultural lending

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Component 2 Support to Farmers

• training in loan application submission, business
  plan development, and guidance will be provided
  to the farmers by local business advisory
  services/centers identified by each MFI

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Exit Strategy

• To convert the balance into equity of MFIs, to be
  used for continued provision of credit
• conversion will be subject to fulfilment of a
  number of performance targets

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Expected Results

• Number of loans given and the number of different
  clients served
• Higher volumes of agricultural loans
• Increased MFIs activity in financing agriculture,
• More diversity and competition in financial
  markets,
• Wider range of financial services available to
  farmers

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Thank you