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. Kosovo at a Glance. Population: Approx. 2 million Area: 10,000 km/sq

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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


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


Financial Sector

  • Kosovo’s financial sector started to function in 1999 with establishment of Banking and Payment Authority of Kosovo (BPK)

  • Today, Kosovo’s 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


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 don’t have sufficient liquidity in order to increase short and medium-term lending with their own funds.


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.


Component 1: Support to the MFIs

  • donor funded loanable capital/credit line for MFIs

  • capacity development of MFIs in agricultural lending


Donor funded loanable capital/credit line for MFIs

  • Appraisal of MFIs,

  • Financial Disbursement of the loanable capital,

  • Reviews (MFIs )


Capacity development of MFIs in agricultural lending

  • The design of the loan products for agriculture

  • Training on agricultural lending


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


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


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


Thank you


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