Development banking would focus on 91% of farmers without credit

In a context in which 9 out of 10 (91%) agricultural producers in the country do not access formal financing, the Government announced the creation of a development bank based on Agrobanco, Cofide and Banco de la Nación, within the framework of of the second agrarian reform that is mainly focused on small farmers.

How would it work? The former president of Agrobanco Marco Vinelli explained that the main objective of a development bank is to encourage the sector to grow on equal terms. In this case, it is intended that the majority of farmers have access to credit, not just a few. “You have to start from the idea that today the data reflects: only 10% of them have formal credit. I would set a goal of 5 years of Government that at least 40% to 50% of farmers are reached, there is a large gap to cover, “he said.

The specialist explained that currently Agrobanco has not managed to become a development bank because it has many restrictions. And the interest rate is very high (35%) because, in the absence of technology and offices nationwide, operating costs become high.

“In the advertisement they say they use the same Agrobanco tool and incorporate Cofide and Banco de la Nación. That will definitely give it greater scope because the Banco de la Nación has offices nationwide and Cofide can raise money at lower rates, in such a way that it can bring a competitive rate to the farmer, “said the director of the master’s degree in Agribusiness of ESAN.

For his part, the head of the Ministry of Agrarian Development and Irrigation (Midagri), Víctor Maita, said last week that they will precisely strengthen the Agrobank with headquarters in the provinces to be close to farmers and provide them with access to loans. “We have proposed the agrarian development bank and we are leading it as a pillar of the second reform,” he said.

Conditions aligned to the reality of the sector

What does it take to make this financing model work? For Vinelli, this should be a bank that focuses on farmers who, for example, have never received a loan, in order to build a credit history for 2 or 3 years and then enter the private financial market. “The difficult thing is the new ones due to the lack of credit history, payment compliance, among other factors. I would leave that role to Agrobanco to generate the promotion and development that we are looking for ”.

He also indicated that their products should be well differentiated, such as sporadic crops. That they are short or medium term loans, but not with monthly installments but with an initial one, partial disbursements and finally the installment when it is commercialized.

“In the months of sale there should be the payment quota, because if we put the monthly quotas some of them have nowhere to get money from. This sector has another business model and the products have to be adapted to that. They should be well differentiated because agriculture is not like a winery that sells every day, you have to understand that. This development bank should know those profiles ”, he emphasized.

Finally, for the idea to work, Vinelli pointed out that the private financial system should be involved: microfinance companies, savings banks and banks that would act as intermediaries. And, unlike the FAE Agro, instead of auctioning rates, the State would set its cost of the money granted to the private sector and this would charge its operating cost to lend.

The data

State purchases. Minister Maita pointed out that it is intended that more than 30% of state purchases of agricultural products come from family farming.

Reactions

Víctor Maita, Minister of Agrarian Development and Irrigation

“In this second reform, credit is also important to start any business. And in agricultural and livestock activity, capital is essential ”.

Marco Vinelli, expdte. by Agrobanco

“The State should promote financial inclusion in the agricultural sector because only 10% of farmers access financing from traditional banks in Peru.”