Lending to small farms that cultivate up to 500 hectares of land is one of the biggest problems for the banking system. This is due to a number of complications that arise in comparison with large agricultural enterprises. However, according to experts, it is important for financial institutions to learn how to work with this segment, even with smaller clients, if they have a stable financial situation. This was said by Ivan Yerko, head of the Agrofabrika project from OTP BANK, in an interview with Delo.ua.

According to Ivan Yerko, farmers with a land bank of up to 500 hectares face two main problems that complicate the process of obtaining loans. The first of them is a limited credit limit approved by the bank. For small farmers, this limit often does not cover the costs that the bank incurs in the lending process. The second problem is the official financial reporting of small farmers, which does not always correspond to their real financial condition. Accordingly, this creates additional difficulties in assessing the creditworthiness of such clients.

Despite these difficulties, Ivan Yerko emphasizes that it makes sense for financial institutions to continue cooperation with small farmers if they have a stable financial situation. OTP BANK has already taken steps to simplify the process of interaction with small farmers. In particular, since 2021, the bank has reduced the minimum land area of ​​​​clients to 200 hectares, thanks to the simplification and unification of the process of considering loan applications. Previously, the minimum size of the land bank for the bank's clients was 500 hectares.

"We are ready to lend to smaller clients if their financial condition is satisfactory. Today, we have more than 50 clients with a land bank of 200 to 500 hectares, and their number is increasing every year," notes Ivan Yerko. In addition, for farmers with a land bank of up to 500 hectares, OTP BANK offers the same programs as for large farmers.

OTP BANK provides several working capital financing programs, including loans at a rate of 5-7-9%, as well as lending with a grant component from the USAID project "Investments for Business Sustainability". There is also an opportunity to obtain a loan secured by agricultural receipts, which allows you to receive up to 20 million hryvnias. In addition, farmers can take advantage of partnership programs with the opportunity to purchase agricultural products from leading Ukrainian and international producers on preferential terms.

The bank pays special attention to investment financing for farmers. This includes loans for the purchase of agricultural machinery, both Ukrainian and foreign, as well as for the purchase of agricultural land. Promissory note financing is also available for farmers who want to gain access to the necessary resources to develop their business.

Despite the difficulties that arise when lending to small farmers, it is important for banks to continue working with this category of clients. With the development of financial programs and simplification of interaction procedures, small agribusiness can become not only a stable partner for banks, but also an important driver of agricultural development in Ukraine.