Agribusiness operations policy

The agribusiness operation policy was approved by the EBRD board on 28 May 2002. The document aims at setting out the Bank’s strategy in the agribusiness sector. It is the Bank’s second agribusiness operations policy after the first policy (BDS93-14) approved by the Board in April 1993.

Agribusiness has become one of the major sectors in which the Bank has invested since the early nineties. With cumulative commitments of over € 2.56 billion invested in 153 transactions in 21 countries of operations, the Bank has clearly become one of the leading agribusiness investors in the region.

Focus on downstream agricultural production

In accordance with the strategic objectives defined in 1993, the Bank has concentrated its efforts downstream of agricultural production, mostly in agro-processing, marketing and distribution. This approach has proven to be an efficient way to support the agricultural sector by providing farmers with a reliable cash market, seasonal working capital and technological transfers. Direct commercial financing to primary agriculture has proven to be more difficult to implement due to higher risks prevailing in the sector. The Bank has however, developed successful schemes aimed at directly providing seasonal working capital financing to farmers and primary processors. The Bank is also testing new financing instruments specifically geared to the sector.

The regional diversity between the countries of operation is wide, not only between Advanced and Early / Intermediate countries but also within the countries with significant differences between the urban and rural areas. The Bank will adapt its products and sector focus so as to meet the specific market need of any particular country.

Challenges ahead remain significant. It is clear that the reform process in the primary agriculture sector has been slower than in other sectors of the economy. On the other hand, the contribution of agricultural sector to GDP and employment remains significantly higher in the Bank’s countries of operations than in the developed countries, although this higher share also results from the collapse of other sectors of the economy. It is also clear that financing needs are enormous to increase competition and expand markets, to complete the restructuring process; and to transfer skills and technologies.

Bank objectives

Building on its successful track record and high demonstration effect and taking into account lessons learned, the Bank intends to pursue the following objectives to address key transition challenges in the sector:

1. The Bank will continue to finance downstream food and drink sectors as an effective means to support upstream primary production as well as to promote competition, market expansion and the transfer of skills. Direct support to primary agriculture will be selective and limited to transactions where sound banking principles can be implemented. The Bank will focus its attention on industries with strong backward linkages such as primary processing and food retail. The Bank will also pay particular attention to support emerging successful locally owned agribusiness companies. In all its operations, the Bank will pay particular attention to high standards of corporate governance.
2. The Bank will expand the range of products specifically geared to the agribusiness sector. It will continue to expand Multi-Project Facilities and Grain Warehouse Receipt Programmes, which have proven to be an efficient way to deal with transition challenges affecting the sector. It will also continue its efforts to implement leasing facilities to finance agricultural machinery and support private logistical infrastructure such as storage and distribution facilities.
3. The Bank will continue its efforts to improve rural credit systems as a means to promote lending to agribusiness SMEs, including farming SMEs, through local intermediaries. The Bank will promote specific products such as warehouse receipt programmes, suppliers schemes through credit and risk-sharing arrangements and when necessary, technical assistance to local banks and other credit institutions.
4. The Bank will increase policy dialogue as well as institutional building with member countries in co-operation with other development institutions. It will play a more active role on policy dialogue related to specific sub-sectors in which the Bank has invested. However, in recognition of its leading role in the sector, the Bank will increase cooperation with other development institutions on broader policy issues. The Bank will continue to co-operate with the United Nations Food and Agriculture Organisation (FAO) to achieve this objective.

The Bank recognises that the agribusiness sector can have profound effect on human health and on the environment and that its sustainable development is a fundamental aspect of sound business management. It will therefore pay particular attention to compliance with appropriate standards. It will also ensure that its clients are committed to improving health, safety and environmental protection performance throughout the food chain.

The attached operations policy proposes a pragmatic and flexible approach to address the complex transition challenges faced by the agribusiness sector in the Bank’s countries of operations.