Kyiv, Ukraine—The World Bank Group and the Swiss State Secretariat for Economic Affairs (SECO) have launched a program that will allow farmers to use crop receipts as collateral for payment. This new financial instrument for Ukraine will make high-quality seeds and other inputs more affordable for smaller farmers and help boost agricultural productivity.
The IFC advisory team, part of the World Bank Group’s Finance and Markets Global Practice, will work with the government, leading input suppliers, and other partners to introduce crop receipts in three Ukrainian regions – Vinnytsia and Cherkasy in the center and Kharkiv in the east. A country-wide roll-out is planned later in the five-year program.
“As part of our new cooperation strategy for Ukraine, Switzerland is stepping up its commitments over the coming years in several focus areas, including economic sustainability,” said Holger Tausch, the Director of the Swiss Cooperation Office in Ukraine. “Agribusiness is a crucial sector of the Ukrainian economy and better access to finance, including through innovative financial instruments such as crop receipts, will help kick-start growth.”
Ukraine’s Agriculture Minister Oleksiy Pavlenko, said: “The first crop receipt in Ukraine was issued in February for 32 tons of oilseeds, then others followed. We are working step-by-step to enable this simple, affordable instrument to be implemented and used across Ukraine, part of our broader strategy to attract maximum investments to the Ukrainian agribusiness sector.”
The roll-out builds on experience from a pilot project in the Poltava region where crop receipts were first tested earlier this year. Ten crop receipts worth about 40 million hryvnias (about $1.8 million) were issued initially, with more than 470 agricultural producers and 50 notaries trained during the pilot stage.
The instrument, which was modeled on a successful program operating in Brazil, aims to overcome the current lack of acceptable collateral in Ukraine, which imposes a major constraint on financing SME farmers.
“Ukraine is already among the top world grain exporters and it has a potential to do much more,” said Rufat Alimardanov, IFC’s Country Manager for Ukraine and Belarus. “However, growth has been constrained by inadequate access to finance. This is particularly important to small farmers, who operate around 60 percent of the agricultural land in Ukraine. This joint initiative aims to unlock millions of dollars in additional financing from input suppliers, traders, and banks to ensure the long-term growth of the sector.”
With support from IFC and other international financial institutions, including the European Bank for Reconstruction and Development, Ukraine’s parliament passed the law on agricultural receipts three years ago. Yet more work is required to ensure the success of the instrument. Activities under the new IFC advisory initiative will include establishing a government register to be used by notaries to prepare the legal documents and finalize legislative regulations governing their use.
Through its economic cooperation with middle income developing countries and with former eastern-bloc and Central Asian states, SECO seeks to ease its partner countries' integration into the world economy and promote economic growth that is socially responsible as well as environmentally and climate-friendly. For more information, visit https://www.seco-cooperation.admin.ch/org/index.html?lang=en.
About the World Bank Group
The World Bank Group is one of the world's largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.