Wednesday, 18 January 2017

Russia sign preferential lending agreement for farmers

The Russian Ministry of Agriculture and the state agricultural bank, Rosselkhozbank, have signed an agreement on the implementation of preferential crediting for agricultural enterprises.

The Minister of Agriculture said "The introduction of a new mechanism for concessional lending at the rate of 5% will facilitate the access of farmers to loans."

He goes on to say that farmers will no longer have to wait for subsidies and divert working capital to pay interest on the loan, except they will, albeit at 5%.

The new agreement will allow banks to provide loans to farmers at a rate of not more than 5% per annum and will simplify the process of obtaining government support for farmers.

The bank is owned 100% by the government so this is essentially a farm subsidy or given that the government will earn a revenue from the loans, a tax.

Having said that, obtaining finance in Russia can cost 20-30% so a 5% preferential rate could be a good thing for Russian farmers.

Depending on the terms.