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09 august 2021
5 min
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Financing Agriculture

Financing Agriculture

Business in recent years is flourishing not only in cities; thanks to government support the program for the development of productive employment and mass entrepreneurship "Enbek" became an impetus for the development of rural entrepreneurship. I'm sure many people have heard about the main operator of the state program - the Fund of Financial Support of Agriculture. However, it turned out, not everyone knows about the specific areas of work of the Fund. Especially beginning entrepreneurs and those who only think of starting their own business in agriculture. Today World of NAN will share the fund's mission and what real help in agribusiness people of Kazakhstan have already received.

A little bit about the fund.

"The Fund for the Financial Support of Agriculture was established in 1994 as a State Fund, and then it was transformed into a joint-stock company. The Fund has started lending directly to rural entrepreneurs within the framework of state programs on employment support since 2005. Since March 16, 2021 it has been a part of the JSC "National Management Holding "Baiterek". Currently, the fund is the only company in the structure of the Holding "Baiterek", which provides direct financing of projects of micro and small businesses. The organization is engaged in financing small businesses in order to develop the priority areas of agriculture and increase employment. Individual and collective farms, agricultural production cooperatives, legal entities and individuals can count on financial support. 

As at 1 January 2021 the Fund's loan portfolio amounted to 185.9 billion tenge. The number of active borrowers to date is 49,948 customers.

The "Enbek" program

The Fund acts as the main operator on microcrediting within the framework of the State Program of development of productive employment and mass entrepreneurship for 2017-2021 "Enbek". The organization grants microcredits for beginning entrepreneurs and small businesses. If previously only residents of rural areas could participate in the program, then since 2019, the fund extends loans to urban entrepreneurs as well. Funding under the program "Enbek" is carried out for the development of livestock, crop production, development of rural entrepreneurship, for the implementation of projects for processing and storage of agricultural products.

Rural and urban entrepreneurs can get microcredits of up to 4, 6, 12 million tenge for up to 6.5 years at an annual interest rate of 6%. The effective interest rate does not exceed 6.7% per annum. Preferential micro loans help unemployed people to start their own small business. According to the information of specialists of the fund, in 2020 within the framework of the program "Enbek". 42,897.1 million tenge was allocated (including for villages - 31,137.9 million tenge and for cities - 11,759.2 million tenge). Of those, 6,121 in the amount of 25,084.3 million tenge were allocated to support start-up projects; 4,859 in the amount of 17,667.1 million tenge were allocated to the "Bastau Business" project; 161 in the amount of 1,560.5 million tenge were allocated to anchor cooperation. As a result, 12,032 jobs were created.

"With a diploma to the countryside".

The Fund acts as an Agent under the programme "With Diploma to the Village", which aims to provide budget loans for purchasing and constructing housing for specialists who have moved to the countryside. The loan amount up to 1,500 MCI, the long term (15 years) and the low interest rate of 0.01% made this program popular and in demand among young people. Last year, at the initiative of the Ministry of Economy, the list of specialists for whom financial assistance is provided includes civil servants of akims' offices of villages, settlements, rural districts. In 2020, 4,931 loans in the amount of 19,524.7 million tenge were issued in this direction. In total, in the period from 2015 to the end of 2020 under the program "With diploma - to the village! 22,650 specialists were granted budget loans in the amount of 76,708 million tenge. At present 33,543 people are being served under the program.

Insurance in the agro-industrial complex

Insurance is one of the most important measures of support for agricultural producers in the Fund. From 2020 crop insurance is voluntary, while previously all producers of cereals, oilseeds, sugar beets and cotton were obliged to insure their crops at fixed rates and standard costs. Now the farmer decides for himself how much he needs to reduce his risks. The registration procedure is conducted online, on the website qoldau.kz. The state supports crop growers who insure their business: 50% of the cost of the insurance policy is paid in the form of a subsidy. It is also important that the human factor is excluded in determining the insured event. The fact of insured event occurrence is fixed by information system, based on satellite data. This ensures objectivity and transparency of the insurance payments mechanism. If in 2020 56 Kazakhstani agricultural producers were insured against drought and payments amounted to 535 million tenge, this year it is planned to spend 3.3 billion tenge to subsidize agricultural insurance costs.

Insurance in livestock farming

The Fund supports livestock breeders by insuring livestock animals (ordinary and extended coverage). As noted in the Fund, as of January 1, 2021 insurance company "Jysan garant" signed 6 contracts for cattle insurance, the number of insured cattle was 2,117 heads of cattle. Under the state support for these contracts subsidized insurance premiums in the amount of 8.3 million tenge.

Meat cattle breeding

As noted above, if you decide to engage in livestock, the fund will help you with the financing of the acquisition of livestock. The Fund has already financed 29 projects worth 1.3 billion tenge for 2,715 imported breeding cattle and 9 projects worth 83.3 million tenge for 2,715 breeding cattle. Under the projects financed under this direction since 2018, 35,279 head of cattle were imported from Russia, the Czech Republic, Slovakia, Belarus, Hungary and other countries. In addition, 19.4 thousand cattle, 34.4 thousand cattle, 424 camels and 7.7 thousand horses were purchased inside the country.

Guaranteeing functions

In addition to microcredit, the organization provides guarantees for loans issued under the state program "Enbek" by microfinance institutions and credit partnerships, which allows loans to program participants who do not have sufficient collateral. Guarantee is provided to existing entrepreneurs in the program "Enbek" - up to 50% of the loan amount, for first-time entrepreneurs - up to 85% of the loan amount. Borrowers from low-income or large families can receive a loan guarantee in the amount of up to 95% of the loan.

In addition, in 2020 the Fund worked out the issue of guaranteeing second-tier bank loans for agricultural projects. Its purpose is to increase the accessibility of bank lending in the agro-industrial complex through partial coverage of credit risks. Entrepreneurs who receive loans under the programs implemented at the expense of the national budget, the National Fund of the Republic of Kazakhstan, the Unified Accumulative Pension Fund, regional akimats and JSC "Agrarian Credit Corporation" may apply for the security. Loans issued by banks for investment purposes, including the purchase of fixed assets, construction, purchase of farm animals, machinery and technological equipment; replenishment of working capital (including on a revolving basis) are subject to guarantee, with the size of working capital should not exceed 50% of the project amount. The size of the guarantee for priority investment projects before commissioning the project is up to 85% of the loan amount, but no more than 2.55 billion tenge. After the commissioning of the project guarantee is reduced to 50%, but no more than 1.5 billion tenge. The maximum amount of a loan/microcredit to be guaranteed is 8,000 MCI, 23.3 million tenge for 2021. The guarantee for guarantors is provided on a non-repayable basis.

Where to apply for a loan?

To get a credit for starting or expanding your own business you have to apply to the Employment and Social Programs Center in your place of residence, where you will be registered and given an instruction on the basics of entrepreneurship. The next step is to develop a business plan in which you show the goals and objectives of your project, as well as calculations of profitability. With a certificate of training and a business plan you once again go to the Employment and Social Programs Center, which gives a referral for a loan. Having collected the full package of documents you send an application for crediting to the regional branch of the Fund of financial support of agriculture. The Fund, having considered the package of documents, makes a decision about crediting. In case of a positive decision funds are transferred to your account. Within three months you are to confirm (by providing all the necessary documents, photos) the intend use of the credit.

Lending through the Fund for Financial Support of Agriculture in 2020 amounted to 63.1 billion tenge. Preferential loans were used by more than 12 thousand entrepreneurs. This year the Fund for Financial Support of Agriculture plans to grant 64 billion tenge as micro loans. As noted in the fund, it will finance more than 13 thousand projects in the sphere of small entrepreneurship.

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