Financing of agricultural projects – risks and perspectives, by Serghei Cebotari, Moldova Agroindbank SA

Agriculture is one of the largest economic sectors of the economy of the Republic of Moldova. It accounts for 15% of GDP or 30% including the agro-processing industry. The rich soils and mild climate are ideal for farming and the country has the potential to become a great supplier of agricultural products. The share of agro-food exports stands at 45%-50% of total exports. The employment in agriculture exceeds 28% of the active labour force.

Despite the size and significance of the agricultural sector in the Moldovan economy, there are a lot of problems and constraints:
1. Farmers operate low-technology businesses on small and fragmented plots of land, without proper seeds and other productivity enhancing methods.
2. Although the majority of the country’s territory is agricultural land (73%), and in particular arable land (54% of the country) with fertile soils, only a small share is irrigated (13% of the arable land). This makes the sector dependent on natural precipitation.
3. The level of training and technical capacity of the rural population is very low. The economic and social standing of Moldova has been marked by the long-term decline of production, unemployment and departure of a significant part of skilled workforce to other countries.
4. Agriculture is marked by weak export potential and lack of storage capacity.
5. Access to loans and credits is limited (lack of collateral and long-term credit resources). All small-scale entrepreneurs face problems in providing loan collateral to financial institutions. Usually, they have few assets, or these are in a form that is not liquid and have little of their own capital to contribute to the project.
6. Low returns (rural capital turns over slowly, has low profit margins and is seasonal) make investments in agriculture non-attractive for investors.                                                                                                                                          7. Weak rural infrastructure.
8. Insurance in agriculture is not well-developed.

Read the article here: Financing of agricultural projects – risks and perspectives, by Serghei Cebotari, Moldova Agroindbank SA

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