>@James Baltz/Unsplash
©James Baltz/ Unsplash
  • The needs of farmers and agri-food companies are significant, also in light of the COVID-19 crisis
  • Financial instruments funded with resources from the European Agricultural Fund for Rural Development (EAFRD) have a role to play in bridging these gaps

Based on the feedback of 7,600 farmers and 2,200 agri-food companies across the EU, 24 country-specific fi-compass reports present the main challenges faced by these two groups when it comes to access to finance. The reports also estimate the financing gap for agriculture in the EU between €19.8 and €46.6 billion, while for the agri-food sector the estimated gap is more than €12.8 billion. These financial needs are likely to be exacerbated by the current crisis.

The reports reveal that in most European countries, financing of agriculture is subject to higher interest rates and unfavourable conditions, when compared to other sectors of the economy. In addition, no matter the performance of the sector, the reports found that there was insufficient flexibility in lending and repayment conditions – something that is particularly needed in agriculture.

Commissioner for Agriculture and Rural Development Janusz Wojciechowski said: “The transition towards sustainable food systems will bring new opportunities for farmers and operators across the food supply chain. However, to enable this, access to finance and funding will be essential. This is why I welcome the publication of the 24 fi-compass country reports, which will help national authorities to improve access to finance for farmers and rural businesses. The coronavirus crisis will most likely increase the financial needs for agriculture and the agri-food sector across the EU, making improvements around this even more crucial.”

Andrew McDowell, EIB Vice-President, added: “Financial instruments co-funded by EAFRD are a sustainable and efficient way to invest in the growth and development of farmers, especially young farmers, businesses and resources in the agriculture and in the agri-food sectors, pursuing food security as well as environmental and climate EU objectives. I am particularly proud to announce that, in the framework of fi-compass, DG AGRI and EIB Advisory services have joined forces to publish 24 country reports, which will provide managing authorities with a comprehensive set of information to enhance the use of EAFRD financial instruments in the 2021-2027 CAP Strategic plans.”

fi-compass (a joint initiative between the European Commission’s European Structural and Investment Funds (ESIF) services and the European Investment Bank) analysed in detail the financial environment in which farmers and processors in each country operate. This includes banking systems, major financial players for the two sectors, and what is offered as loans, guarantees and various financial schemes with national and/or EU financing. The reports also provide country-specific conclusions on how to improve existing financial instruments and set up new ones. They also identify weaknesses related to low levels of farmers’ financial literacy and lack of banks’ knowledge on agriculture.

While large farms seem to have a rather easy access to finance, young farmers and new entrants are amongst the most affected groups, and often lack adequate financing possibilities. Small farms face significant difficulties in terms of accessing development investments, due to a lack of assets to use as guarantees (collateral) and of necessary skills on how to prepare business plans.

Regarding the agri-food sector, the analysis shows a better financial environment, where a greater diversity of financing sources exists, compared to agriculture. The reports found that more financial instruments exist in this sector, although possibilities to improve their offer and coverage still remain. In addition, within this sector, start-ups and innovative companies were identified as having the most difficulties in finding the necessary capital to launch or expand their operations.

For the next Common Agricultural Policy (CAP) 2021-2027, financial instruments using resources from the European Agricultural Fund for Rural Development (EAFRD) could be used to finance stand-alone working capital, investments, capital rebates and provide for combinations with grants and interest rate subsidies.