11:50 06.09.2019

World Bank supports idea of creating credit guarantee agency in Ukraine to finance purchase of land by farmers

2 min read
World Bank supports idea of creating credit guarantee agency in Ukraine to finance purchase of land by farmers

The World Bank invites the Ukrainian government to consider the creation of the Partial Credit Guarantee Agency as a special financial tool that will allow small and medium-sized agricultural producers to receive financing for the acquisition of land after the launch of the market.

"Partial guarantee for loan contributions is the best option for Ukraine," Lead Financial Sector Specialist for the Finance and Markets Global Practice in Belarus, Moldova and Ukraine Vahe Vardanyan said at a press conference on Thursday.

According to him, at least half of the countries have introduced government partial guarantees as a way to facilitate access to loans. There is also the practice of creating specialized partial guarantees designed specifically for agriculture, for example, in Mexico and Colombia, he said.

In order to receive partial guarantees, the farmer applies for a loan to a bank, which analyzes the application and determines the need for partial guarantee, then the bank contacts the Credit Guarantee Agency. The latter checks the compliance criteria and carries out risk analysis, approves and provides a partial credit guarantee, receives a fee from the bank for issuing the guarantee. Further, the bank provides a loan secured by partial guarantees.

In addition, the World Bank said that the Credit Guarantee Agency (company/fund) is usually a non-banking financial institution, it has its own: management, governance, capital, operating procedures. The legal structure of the agency allows for a mixed type of ownership at a certain stage, the government is not always a full owner. The National Commission for Financial Service Markets Regulation exercises supervision as over a non-banking financial institution.

All over the world, guarantee agencies are state-owned, co-financing, public private partnership is possible, but this is about joining after the first year of the institutions' work, World Bank Country Director for Belarus, Ukraine and Moldova Satu Kahkonen said.

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