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EBRD helps Bulgarian Government and Expressbank to increase grain receipts financing
The European Bank for Reconstruction and Development (EBRD) and the Ministry of Agriculture, Forestry and Agrarian Reform (MAFAR) of Bulgaria signed an agreement today to develop a warehouse grain receipts system. Grain receipts allow agricultural producers and processors to obtain working capital by using grain stored in licensed warehouses as collateral.
The EBRD intends to extend credit lines of up to DM 50 million (EUR 25 million) annually over the next four years to Bulgarian banks, to be on-lent to agricultural producers or processors using warehouse receipts. It will also organise technical assistance and give advice to these banks while sharing with the MAFAR its experience on implementing similar programmes in other transition countries. Although the financing will be provided on commercial terms, it is expected that the interest rates charged to the final borrowers will be lower than normal, reflecting the lower risk associated with this form of financing.
Hans Christian Jacobsen, Director of the EBRD’s Agribusiness team, said: "Chronic lack of working capital is a major barrier to the development of the agribusiness sector in central and Eastern Europe. The EBRD believes that the use of warehouse receipts can help to overcome this obstacle. The Bulgarian Government has done a remarkable job in setting up the necessary institutional framework and liberalising grain markets."
Ventislav Varbanov, Bulgarian Minister for Agriculture, said: "I am very pleased that our efforts will attract much-needed financing to the Bulgarian agricultural sector. The backing of the EBRD confirms our belief in the potential of this instrument." He continued: "We also appreciate the assistance of other institutions, such as the World Bank, the United States Department of Agriculture, the United States Agency for International Development, and American Co-operative Development International/Volunteers in Overseas Co-operative Assistance in developing the necessary institutional framework. We are looking forward to continuing our co-operation in the future."
The MAFAR has agreed to maintain and improve the existing regulations in respect of warehouse receipts. It will provide DM 5 million (EUR 2.5 million) for the initial capital of an indemnity fund that will protect depositors of grain in licensed warehouses, and will continue its policy of minimum interference in the grain markets. The indemnity fund will be managed by the National Grain Service, which is responsible for licensing and inspecting public warehouses.
Expressbank is expected to be the first local bank to participate in this programme. A DM 10 million (EUR 5 million) loan from the EBRD, which will be on-lent to Bulgarian small and medium-sized enterprises in exchange for warehouse receipts, was also signed today. Expressbank is one of the main providers of financing to the agribusiness sector in Bulgaria and has 26 branches with 69 supporting offices.
Krassimir Jilov, member of the Board of Directors and Executive Director of Expressbank, said: "We strongly believe that this new product is a self sustainable way of providing financing to the Bulgarian agribusiness sector. By participating in this programme we are investing in the future."
The EBRD was established in 1991 to aid the transition from centrally planned to market economies in central and eastern Europe and the Commonwealth of Independent States (CIS). The EBRD is owned by 60 shareholders: 58 countries, the European Investment Bank and the European Community, and operates with EUR 20 billion in authorised capital. It has considerable experience within the agribusiness sector, with 103 signed projects, valued at more than EUR 1.85 billion, to assist the sector throughout the EBRD’s countries of operations.
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