“The current guarantee instruments in the market are not sufficient. A new Guarantee Fund could address the lack of collateral at farmer level and stimulate banks to increase their lending activities in agriculture,” says the report
TIRANA, April 22 – Lack of organization creates a vulnerable position for farmers in Albania in the value chain, making them an unattractive segment for most banks, a study financed by the Dutch embassy in Tirana has found out.
The report prepared by Rabo International Advisory Services (RIAS) unveiled that Albania lacks a conducive environment for agriculture and agricultural lending.
“Although climate and soils are excellent for farming, targeted agri policies, infrastructure in rural areas, a solid regulatory framework and effective monitoring quality and food safety standards by the government, transparent land ownership systems, access to good quality agri inputs and access to markets, enforceable securities for banks are partly absent or poorly developed,” the study found.
As a result, banks typically finance the larger agribusiness corporates, leaving farmers dependant on credit from informal money-lenders, family and middlemen. “In combination with the fragmentation of farm land into plots of little more than 1 ha (1.2 ha on average split in 4 parcels), it is clear that Albania is not well prepared to compete on international markets,” showed the study.
Albania is exporting particularly vegetables and fruits to some of its neighbouring countries and herbs/aromatic plants to the EU and the US mainly due to low labour costs and excellent natural conditions are key drivers behind these exports.
The report says poor lending to the agriculture sector, currently at only 1.8 percent of the GDP, is a result of high informality with 80 percent of Albanian farmers lack a NIPT (identity nr card for VAT tax purposes).
The interviews with the banking sector in Albania showed that only ProCredit bank and the Albanian Saving and Credit Union (ASCU) were really focused on the agricultural sector.
Where ASCU is focusing on the informal bottom of the pyramid lending small amounts, ProCredit is successfully targeting the segment of farmers/agri SMEs with credit potential over EUR 10,000 compared to an average loan of Euro 2,500 of ASCU.
Rabo International Advisory Services which carried out a scoping mission in Albania in late 2014 assessed the seeds, vegetables and dairy sector, drafting a plan to improve access to finance in these sectors.
The mission recommends the Albanian government should explore opportunities to develop a Guarantee Fund focused on agricultural financing.
“The current guarantee instruments in the market are not sufficient. A new Guarantee Fund could address the lack of collateral at farmer level and stimulate banks to increase their lending activities in agriculture,” says the report.
The agriculture sector, which employs around half of the population and accounts for 20 percent of the GDP, is one of the least financed and attractive sectors with FDI stock of only 1 million euros.
