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PROJECT OF DEVELOPMENT OF PRE-HARVEST FINANCING
INSTRUMENTS IN UKRAINE

FAO-150

ebrr 

Danish-Neighbourhood-Programme

AMDI-logo-big

Food and Agriculture Organization (FAO)

European Bank for Reconstruction and Development (EBRD)

The Danish Neighbourhood Programme Ministry of Foreign Affairs of Denmark Agrarian Markets Development Institute

DEVELOPMENT OF PRE-HARVEST FINANCING
INSTRUMENTS IN UKRAINE


BACKGROUND

The Food and Agriculture Organization of the United Nations (FAO) and the European Bank for Reconstruction and Development (EBRD) have been actively involved in providing technical assistance to the Ukrainian agriculture sector. With the assistance from EBRD, Ukraine established the essential elements of the legal, regulatory system for grain warehouse receipts (GWR) in order to address the post-harvest farm financing issues. This project was implemented by EBRD in 2006-2008 through the Kiev-based Agrarian Markets Development Institute (AMDI). Farmers and grain trading companies in Ukraine currently use GWR.

The existing system of pre-harvest financing of farmers in Ukraine remains weak due to the lack of a clear and easily enforced mechanism for debt recovery after the harvest. The financial institutions, grain processing and trading companies that provide pre-harvest financing to farmers in Ukraine suffer from high default rates on pre-harvest financing contracts reportedly up to 30% of financing provided). At the same time, the Ministry of Agricultural Policy and Food of Ukraine (MAPFU), estimated the deficit of pre-harvest financing for farmers at UAH 4 billion (EUR 500 million) from the total of UAH 26 billion required for crop production financing in 2009.

A Crop Receipt is an instrument that can fill this financing gap by providing both the farmers and the financiers/traders with a simple and trusted pre-harvest financing tool. It essentially represents an obligation to supply agricultural products or to make payment in future (Lo the holder of the receipt) in return for received pre-harvest finance (monetary or in kind). This obligation cannot be altered or evaded under any possible debtor’s defence (force majeure included) and can be incorporated as a tradable paper, further increasing its market value.

The instrument originated in Brazil to encourage the financing of agricultural activities by the private sector on a commercial basis. The Certificate of agricultural products (CPR) can be issued by farmers, producers, farmers’ cooperatives, etc., in order to obtain financing for the production, or is used as hedging instrument to avoid the risk of price fluctuation for the upcoming production. CPRs have been used primarily for coffee, but also for cotton, rice, livestock, wheat, maize, millet, soybeans and orange juice. The CPR instrument is now totally integrated into the agricultural financial sector in Brazil.

In March - December 2011, FAO financed the development of the draft per-harvest financing legislation through its Technical Cooperation Programme (TCP) in partnership with AMDI under a Letter of Agreement with FAO. The draft law prepared under the TCP was registered in the Ukrainian Parliament on 19 December 2011 (Reg. # 9610). The Parliament of Ukraine then approved the law on 6 November 2012 (the Law of Ukraine on Agrarian Receipts № 5479-VI) which entered into force on 18 March 2013. The Cabinet of Minister of Ukraine is tasked to work on related implementing regulations. Following the signature of the Law by the President of Ukraine, MAPFU approached EBRD and FAO on 30 January 2013 with a request to provide assistance in drafting the implementing regulations and provide other related teclmical assistance.

According to AMD I estimates, a functioning CPR System in Ukraine, would allow attracting estimated USD 250-370 million of additional farm financing from agricultural input suppliers, traders, and banks in the first years following introduction of the CPR system in Ukraine.

PROJECT GOALS

The ultimate objective of this assignment is to improve farmers’ access to pre-harvest finance and to assist the FAO and EBRD project team in promotion and implementation of this new financial instrument in Ukraine.

ACTIVITIES

The Service Provider will undertake the following activities:
• Support the FAO and EBRD Project Team while working on missions in Ukraine, in particular by facilitating meetings and communication between the relevant stakeholders, hired consultants, Interagency Working Group, MAPFU, agricultural industry organizations, etc.;
• Organize and facilitate the meetings of the Interagency Working Group on Agrarian Receipts, keep track and disseminate the conclusions of the TWG meetings;
• Draft implementing regulations, orders and other outputs.
• Regularly inform agricultural producers, input suppliers, traders and bankers on project activities through local agricultural and banking information sources.

PROJECT OBJECTIVES

1. Prepare agendas, and minutes of discussion of the IWG meetings;
2. Drafting orders on implementing regulations on accounting of agrarian receipts, monitoring of the collateral, and other regulatory documents on agrarian receipts as requested by MAFFU;
3. Concept paper for agrarian receipts registration and integration of the electronic register the existing GWHR and pledge register systems submitted to MAPFU and other government agencies;
4. Guidelines on bank lending against agrarian receipt and related provisioning requirements submitted to MAPFU and NBU;
5. Training materials and presentations for the awareness seminars prepared and at least six trainings are conducted;
6. An assessment report on the implementation of the law and the use of agrarian receipts;
7. Proposed amendments to the Law and implementing regulations (as needed and reflected in the protocols of the IWG meetings) are submitted to MAPFU, other agencies and the Parliament of Ukraine’s Agricultural Policy and Land Relations Committee.

EXPECTED RESULTS

• agendas, and minutes of discussion of the Interagency Working Group meetings;
• draft orders on Agrarian Receipts implementing regulations;
• concept paper for Agrarian Receipts registration and integration with the existing registries;
• guidelines on bank lending against agrarian receipts and related provisioning requirements;
• training materials and presentations for the awareness seminars (at least six trainings conducted);
• assessment report on the implementation of the law and the use of agrarian receipts;
• proposed amendments to the Law and implementing regulations, if necessary .

INDICATORS FOR EVALUATING THE EFFECTIVENESS OF THE PROJECT

• The number of meetings of the Interagency Working Group on Implementation of agricultural receipts;
• The number of implemented policies and administrative procedures;
• The number of information seminars and trainings;
• The number of developed amendments to the law and regulations;

EXPECTED IMPACT ON INDUSTRY DEVELOPMENT

Improving of access to finance agricultural systems simplified by the introduction of new financial instruments.

 

 

Фінансові системи та діалог в аграрній політиці

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ПРОЕКТ ФІНАНСОВІ СИСТЕМИ ТА ДІАЛОГ В АГРАРНІЙ ПОЛІТИЦІ

 

ФІНАНСОВІ СИСТЕМИ ТА ДІАЛОГ В АГРАРНІЙ ПОЛІТИЦІ


Опис проблеми

Україна має великий потенціал, щоб значно збільшити виробництво сільськогосподарської продукції. Тим не менш сьогодні, аграрний сектор України використовує менш ніж половину своєї потужності. З 42 млн. га високородючих сільськогосподарських земель, менш ніж 3 млн. га обробляються з використанням сучасних технологій і більш ніж 7 млн. га не обробляються. Зростання аграрного сектора в Україні значно обмежується непередбачуваною і непослідовною сільськогосподарською політикою, відсутністю доступу до фінансових ресурсів і слаборозвиненістю ринків і ринкової інфраструктури.

Мета проекту

Підтримка широкого економічного зростання за рахунок більш відкритого та конкурентоспроможного аграрного сектора.

Цілі проекту

• розширення доступу до фінансування сільського господарства шляхом розробки правових платформ та інструментів для ефективного кредитування під заставу майбутнього та зібраного врожаїв;
• зміцнення державно-приватного діалогу з питань політики, механізми якого призведуть до більш передбачуваної та прозорої сільськогосподарської політики, залученню інвестицій у даний сектор.

Завдання проекту

Завдання 1: Підтримка впровадження механізму кредитування під заставу майбутнього урожаю відповідно до міжнародної практики з метою розширення доступу малих та середніх сільгоспвиробників до кредитних ресурсів.

Завдання 2: Удосконалення законодавства, що регулює обіг складських документів на зерно для розширення доступу малих та середніх сільгоспвиробників до фінансових ресурсів.

Завдання 3: Сприяння та зміцнення державно-приватного партнерства з метою становлення більш прозорої і ринково орієнтованої сільськогосподарської політики на стійкій основі.

Очікувані результати

• Фінансові установи та постачальників ресурсів почнуть надавати кредити для сільгоспвиробників під заставу майбутнього урожаю.
• Фінансові установи та постачальників ресурсів почнуть надавати кредити для сільгоспвиробників під заставу зібраного урожаю.
• Сталі і прозорі механізми державно-приватного партнерства, сприятимуть збільшенню інфестиційної привабливості і приведенню сільськогосподарської галузі у відповідність з правилами СОТ.

 

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PARTNERSHIP FOR SUSTAINABLE WATER SUPPLY

FOR AGRICULTURE DEVELOPMENT IN CRIMEA

 

WATER FOR CRIMEAN AGRI SECTOR


PROJECT GOALS

Goal – Rehabilitated water infrastructure systems and improved water supply for rural population and agricultural production with a positive impact on the productivity, size and predictability of agricultural yields and well-documented lessons-learned and procedures for scaling up the approach to other communities in Crimea. 

Communities operate best when the resources necessary for their health, social and economic development are within their rasp and that optimal management of those resources is dependent upon empowered and informed decision makers with access to working infrastructure.

PROJECT TASKS

Task 1: Develop PPP Models and Regulatory Framework for Cooperative Water Supply. 
Task 2: Implementation of PPP Models in Cooperative Water Supply in Rural Areas for Pilot Communities.
Task 3: Financing Rural Water Supply Infrastructure Investments.
Task 4: Development of a Draft ARC Program ”On Cooperative Water Supply for Rural Communities and Agriculture Producers”.
Task 5: Capacity Building and Information Dissemination.

PROJECT OBJECTIVES

• enhance pilot communities potential for ramping up irrigated high-value crop production and yields increase
• mobilize and establish community commitment and engagement in water resource management;
• provide access to community-owned improved infrastructure;
• create sustainable community ownership of stable water resource supply and management (water management cooperative as a member of private- public partnership (PPP);
• develop and implement sustainable financing mechanisms for water systems and replication of the project results.

ANTICIPATED RESULTS

Three basic improvements:
• economic growth by improved farming and sales;
• economic growth by better water supply;
• better life conditions leading to an improved social environment.

 

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AMDI staff used to work as STTA/ Local for USAID, UNDP, WB, TACIS, EBRD and other donors.

Among AMDI’s most recent and current ones are the following operations:

AMDI staff members served as a key team while creating a Grain Warehouse Documents System under the EBRD/ USAID Project “GWHR Implementation in Ukraine” and the Institute is continuing the system expansion in Moldova, and holds negotiations on its introduction in Georgia.

The Institute is implementing the USAID Project “Agrarian Policy and Regulatory Reform in Ukraine”. AMDI specialists are engaged in legislation drafting and implementation, tax and subsidies system reforms associated with Ukraine’s accession to the WTO, standards harmonization, restructuring of the Ukrainian Academy of Agrarian Sciences and deregulation issues.

AMDI is also providing policy advice on agricultural sector development and the regulatory reform agenda and anti-corruption measures to the governments of Ukraine and Moldova, and is working on issues of the Black Sea Basin agricultural markets integration according to the Order of the Cabinet of Ministers of Ukraine addressing the request of the Government of Moldova.

The Institute employees have been also involved in MCC threshold draft action plan preparation.

AMDI works on a contract basis with the Ukrainian Ministry of Agrarian Policy and the Academy of Agrarian Sciences on harmonization of the Ukrainian system of standards on food safety, grain industry, livestock industry, as well as data and information processing systems with the European and international ones.

AMDI has started its work on establishing national branches of international associations. The Institute has already obtained the approval of the World Association of Animal Production (WAAP), European Association of Animal Production (EAAP), the Direction of International Congress on Animal Reproduction (ICAR), and International Bull Evaluation Service (Interbull).

AMDI develops and implements E-registers, IT technologies, computer systems and networks, as well as conducts R&D on advanced and energy saving technologies.

The Agrarian Markets Development Institute guarantees a high quality of its performance, meeting agreed deadlines and results, as well as the full compliance with client’s reporting requirements.

 

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