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Financing of the agricultural sector

Financing of the agricultural sector. financing requirements. d ifferencies in substance in short harvest cycle -> higher need of working capital !. financing method. credit requirements. credit risks. German Wine-maker Case.

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Financing of the agricultural sector

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  1. Financingoftheagriculturalsector

  2. financingrequirements differencies in substance in shortharvestcycle -> higherneedofworkingcapital!

  3. financingmethod

  4. creditrequirements

  5. creditrisks

  6. German Wine-maker Case • smallworking-capital, otherrunningcredits, lowequity, wine-yards between 10 – 25 yearsold, lowto medium quality -> noself-bottling • wholeharvestsoldtothecooperativeasgrapesandwine, fixedmass-contractswith open price • stablecooperativeabletopaytheobligation • needof cash/creditsnearlythewholeyear

  7. German Wine-maker Case • cash-creditamountingto 70 % of a averagelyharvest in averagelyquality/price • all otherrepaymentsfurther on • abandonment/cessionofharvest • abandonment/cessionoffuturereceivables • mortgages on thewine-yards (in Germany the not harvestedyield/fruitsbelongstotheproperty -> contained in themortgage)

  8. cooperation Volksbank andagriculturetrading-units • weare shareholder oftwocorporations (RWZ andlocal) • emergedfromformer Raiffeisen-cooperatives • also others (wine-cooperatives) • wearelenderforthese • mostoftheseplayersareactive in goodscreditsaslenderorgiveadvancepayments

  9. efficientandeffectiveemploymentof modern machinery • expensive andoversizedforsmalland medium companies • lowutilization (f.e. bottling plant) • high capitalcommitment -> cooperationofseveralusers (problem: own legal entityuseful) -> wage work (oneinvestorletsunitand operator, problem: operator) -> unitletandself-operatinguser (problem: careandmaintenance)

  10. Refinancingproblems • lenderhastocalculateandtoincludetheexchangeriskintotheinterest rate • exchangeincreasesborrowerscost (interest + repayment) • lenders fixes interest rate max. congruenttotermofrefinancingcontract • defaultrisktakesthelender

  11. Solution? • lendingandsale in currency • refinancinglimits in national currency • Increase in analyticalknow-howofcreditriskevaluation • regulating variables - judiciaries - proprietaryrigths - increase in attractivityofequityinstruments

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