BANKS are seeing new opportunities in the Slovak agricultural sector. While financial institutions used to consider the sector too risky, they are now increasing the volume of loans they provide to farmers and food producers.
The reason is not because farms are suddenly producing as a significantly improved rate but that banks have access to guaranteed EU funds earmarked for the agricultural sector.
"As soon as a farmer fulfils the conditions [for an EU subsidy] he gets a certificate from the Agricultural Payment Agency guaranteeing the EU money. Thanks to the certificate, banks are more open to farmers these days," Stanislav Nemec from the Slovak Chamber of Agriculture and Food told The Slovak Spectator.
After Slovakia's accession to the EU in 2004, Slovak farmers had to say good-bye to advance subsidies from the Slovak state budget. They had to accept new, EU-approved subsidy systems and wait until the end of 2004 before funds from the union's budget became available.
The waiting period hurt. Unable to cut costs sufficiently without interrupting their basic operation, many farmers decided to take bank loans.
Banks were more willing to finance their loans since the EU guaranteed a certain budget for agriculture. In previous years, farmers had to first negotiate the level of subsidies with the Slovak state. Even after arriving at a figure, it was never certain that a farmer would actually receive what was promised. In that case, banks were unwilling to use future state's subsidies as collateral for a loan.
Martin Štiblický from Tatra banka agrees that the relationship between banks and farmers is changing.
"Bank loans in agriculture have increased. The reason is the new subsidy system. For sure, agriculture has a significant potential and banks will try to use it more than in previous years. Companies are gradually stabilizing. And apart from the new subsidy system there are other financial sources like EU structural funds. What is most important is that many companies changed their methods of financial planning," he explained.
According to Štiblický, farmers come to Tatra banka for help with constructing agro-tourism centres or reconstructing buildings to be used for tourism. Quite often the bank supports infrastructure projects. He says that farmers also want to borrow money to buy new technologies and improve production.
There are no statistics showing the exact numbers of loans granted to farmers and food producers. Based on a personal estimate from Jaromír Matoušek, head of agribusiness financing at Unibanka, the volume of such loans might reach around Sk13 billion (€340 million) in 2005.
11. Sep 2005 at 0:00 | Marta Ďurianová