Investments & finances

The issue of acquiring financing for purposes of business development or working capital service remains relevant among farming companies. Requirements of financial sustainability of business and raising capital as an instrument to fortify economic feasibility, financing issues continue to be important to farming. Wide range of risks in agro creates additional cost of financial resources for farmers, as well as agricultural companies. Taking into account the diverse and unpredictable climate of Ukraine, entrepreneurs and managers pay high attention to the field of credit, finances and investments. 

2018 left considerable challenges agribusiness unsolved. Although, there have been a further moderate improvement in political and macroeconomic situation in Ukraine, issues of high debt burden and ability of lenders to service debt remain an important problem, both in production and financial sectors.

In 2018 agricultural producers had several options to raise capital, for example through such instruments as banking credit, investments, agricultural receipts, commodity credits and bills.

BANKING CREDITS

As of February 2018, a number of licensed banks was 81, 23 of which are financed exclusively by foreign capital, 41 – by Ukrainian capital and 17 banks with both, Ukrainian and foreign capital. In comparison to the same period of the last year, the total number of banks on Ukrainian market was reduced by 7 banks. This was a result of the sanitation policy which is being conducted by the central bank. Although, one should not expect a dramatic reduction in number of banks in the future. 

Leading banks in agro credit market are CREDIT AGRICOLE, UKRSIBBANK, AVAL, PIRAEUS, ALFA BANK, OTP BANK and AGROPROSPERIS BANK.

Major trend in agro banking industry is operational capital financing, for example, demand for PPMs, seeds, fertilizers and fuels. Bankers are oriented to credit firms producing agricultural commodities as grains, cereals or oilseeds most common in Ukraine.

Commenting the banking "cleanup" campaign in Ukraine, bankers highlight liquidity stabilization, despite of positive short-term achievements, demand for loans still fluctuates in limits of existing macroeconomic and political framework. Demand for leasing and demand for operational capital service financing are already covered with banks’ credit resources, which indicate limits for a rapid development of loans portfolio.

Source: National Bank of Ukraine

In the structure of loans that were issued to non-financial corporations, divided by type of economic activity, prevail those received by the sector of wholesale and retail – they amounted to 34% of the total loan value. The sector of agriculture, forestry and fisheries takes up 8% and is at the same level as the food processing sector. Thus, the total agri-food sector ranks third among all sectors of Ukraine’s economy.

Source: National Bank of Ukraine

In the first half of 2018, the price for loans was volatile, fluctuating within 17.9-18.2% for loans in national currency, between 18.3-19.7% for overdraft in national currency, and between 6.3-11.8% for overdraft in foreign currency. Such high price for loans in domestic currency directly results from the currently high discount rate of the central bank, which in turn, is the result of the inflation targeting policy.  

Source: National Bank of Ukraine

Source: State Statistics Service of Ukraine

Source: State Statistics Service of Ukraine

Source: UCAB's estimations.