"KazAgro" answered to 6 questions on spring field work

In early February of 2017, it was announced that "KazAgro" National Holding begins financing of spring-field and harvest works (SFaHW). For this purpose, short-term loan in the amount of 60 billion tenge will be directed from the national budget through the structure of the Holding. This is an annual and tried-and-tested practice in order to assist in the major agricultural activities in rural areas, according to KazAgro.


In addition to the budget, "KazAgro" intends to support the domestic economy and agro entities by funding from other sources. For example, in 2016 Holding sent a 114.9 billion tenge (including financing from budget) for the sowing and harvesting campaigns, in 2015 - 101.3 billion tenge.


60 billion tenge is an annual short-term (from February to December) budget loan. Why this year the funds will be used primarily for the development of fodder production, oilseeds, promoting co-operation in the village, and so on?


It is well known that the provision of a strong food base is the foundation of full development of livestock, poultry and other agricultural sectors, and as a result – increasing of the export potential. In addition, there is a need to load domestic processing enterprises with raw materials and reduce the share of food imports.


For example: the share of import in domestic consumption of fat and oil products is 30-40%. At the same time, the existing 85 oil and fat enterprises of the republic are loaded on 45-50%.


The applications of farmers will be financed by designated priority areas, after that funds will be used for the production of other crops, such as some cereals. It should be noted that 60 billion tenge it is not the whole amount, which goes to the spring field work. There are, as mentioned above, their own and borrowed funds of "KazAgro" and its financing subsidiaries, there is a second-tier banks (STB), which also lend sowing.


There are 182 credit unions (CU), bringing together more than 12 thousand farmers. A wide network of microfinance institutions and e.t.c. are working. That is, the grain producers have no obstacles for lending. But the budget money will be spent primarily on the issues that is more important at the moment.


Why in 2017 budget program the operator is a subsidiary of the Holding - "Agrarian Credit Corporation" (ACC), "whereas in the past year Food Corporation was involved" "in the distribution (PAC) through a forward purchase of grain"?


ACC defined as operator for financing agribusiness entities for spring field and harvesting campaigns in order to expand the availability of credit, and include more agricultural commodity producers. The very season of spring field work is a fairly short period of time. In the context of limited duration generated a large flow of requests from households and agro entities on lending. In order to maximize the acceleration of the time of the lending ACC directly receives a budget loan and through funding opportunities involves a wide network of other financial institutions: commercial banks, credit unions, microfinance institutions.


"Food Corporation" now reformed into a company focused on the implementation of the targeted export policy and promotion of Kazakhstan's brand of organic products.


PAC is a member of financing scheme for spring field and harvesting works as the guarantor of the purchase of the harvest. At the same time, they are expanding its list of purchased plants. If PAC has previously purchased wheat and barley, in the current year, farmers will be able to pass oilseeds (canola, flax, sunflower, soy).


"Why money through the CU more than money, that goes through banks by 2%?".

  The publication notes: "The ACC has pleased farmers announcing that lending rates decreased by 2% this year. That is, through a branch, you can get money at 3% per annum (in the past year - 5%). The interest rate for lending by banks is amounted to 6% by CU and  8% MFI".


First of all, what is credit union? It is an independent co-operative financial institution that combines funds of its participants for mutual credit, and provides financial services to its members only. At present, "Agrarian Credit Corporation" is the main source of funding CU.

One of the components of the formation of interest rates is the value of the credit risk and the risk of non-repayment of funds provided. The risk of non-repayment of CU is much higher than on the STB. In addition, in the case of default of borrowers, these funds will be returned by the bank's own sources. While credit unions do not have sufficient available cash to repay the loan to ACC, within the prescribed period.


At the same time, according to the terms of Agrarian Credit Corporation, funding of CU is limited only by the upper limit interest rate of not more than 8%, and the right to establish a partnership and a lower rate for its members, while reducing the amount of commission.

Why "in the allocation of shares the banks are given 8 times more than CU?".


Distribution of funds between financial institutions is made on the basis of the number of applications and the demand in financing the credit unions. In addition, it should be noted, that in case of insufficiency of funds allocated under the CU SFaHW financing program, farmers are able to obtain financing through the CU under the other lending programs of ACC. It should be noted, annually "Agrarian Credit Corporation" JSC loans to farmers through the CU more than $ 30 billion tenge from all sources for the various programs, including SFaHW.


Why "... farmer must first make a share in the statutory fund in order to obtain financing through credit unions. Here, a 20-fold factor. That is, if the farmer needs a loan of $ 4 million tenge, then he must pay 200 thousand tenge "?


To obtain a loan from CU, it is necessary to become a member and make contribution to the authorized capital. Note, that the sum will be paid once for the entire crediting period. This opens a line of credit to the borrower for a period of 15 years with an annual loan.



It should be noted, that ACC annually finances farmers for spring field and harvesting campaigns through the CU system in the amount of 10.0 billion tenge. Thus, borrowers of CU once becoming a member and making a contribution to the authorized capital may annually receive funding for various purposes for 15 years, including holding SFaHW.


Why is "too short loan term. Funds allocated in spring must be repaid by farmers before 1 December"?


We are talking about the budget loan in the amount of 60 billion tenge to support the spring-field and harvest works in 2017. In accordance with the decision of the Government of RK №38 from 06.02.2017, budget loan granted to Holding KazAgro" in the conditions of urgency, payment and repayment up to 20 December 2017. Funds allocated for SFaHW should be returned by Holding Company within one fiscal year. Therefore, the possibility of accumulation of the allocated funds Holding set period of return provided by financial institutions up to 1 December  2017.


In general, "KazAgro" supports the need for "long" money to finance SFaHW. Holding and the Ministry of Agriculture has repeatedly raised this issue and worked out future possibility of prolongation of the financing.