Good year for vegetable growers and funding

Raluca Andreica, General Manager Patria Credit IFN: „We really finance people, not companies”

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Bucuresti, 04.03.2021

  • The typical Patria Credit IFN client is a vegetable farmer, lives in rural Muntenia and takes out loans of between €5,000 and €25,000, which he allocates to investments. He farms a small area of less than 50 ha and has an annual turnover of less than €40,000. Most of the time, this is the first time he has dealt with a financial institution, because he has no accounting documents, guarantees or access to traditional bank credit. This is the customer segment to which Patria Credit has been dedicated for almost 20 years.
  • The financial results of the microcredit institution show that 2020 was a good year for vegetable growing and for financing local producers. The specific lending technology, with people on the ground and specialized staff, along with years of experience, has generated positive and îgrowing results year over year.
  • Reducing the „distance” between producers and consumers by launching new and novel platforms could further boost agriculture and rural development.
  • Patria Credit IFN's 2020 client is a vegetable grower, lives îin rural Muntenia and takes out loans îbetween 5,000 and 25,000 euros, which îhe allocates to investments. This is the customer profile, according to the statistics of the Patria Credit portfolio.

    67% of clients come from Muntenia, 23% from Moldova, 9% from Ardeal and only 1% from Dobrogea. 90% of the clients are individual agricultural producers and 5% are incorporated (they have a PFA, II, SRL), while 10% are micro enterprises.

    Of the agricultural producers who took out loans last year, more than half (56%) grow vegetables. Grain producers (21%) are the second largest, followed by livestock farmers (18%). 3% of customers have mixed farms and 2% are engaged in fruit or other fruit growing.

    „2020 was a good year for both vegetable growing and financing for local producers. Vegetable growers have paradoxically fared better as a result of the pandemic, as they have had an outlet amidst reduced consumption from imports. And we have seen increases in our portfolio and sales (from a portfolio of €16.6 million at the end of 2019 to €21.2 million at the end of 2020). According to preliminary results, îpending audit, net profit increased by 33% year-on-year, from €841,000 to €1.12 million. And the number of loans for which applications for deferment of instalments were filed îon the basis of OUG 37 was very low: we îregistered only 74 loans with deferred instalments and only 15 outstanding”, explains the figures in the 2020 balance sheet Raluca Andreica, CEO Patria Credit IFN.

    What farmers and smallholders do with their money

    Eight out of ten Patria Credit IFN customers allocate the money they borrow for investments, 9% of them use it as working capital and 11% for both purposes.

    &In 2020, most of Patria Credit IFN's clients – almost half (43%) – accessed loans between  €5,000 and €15,000, almost a fifth (17%) had loans below €5,000, 20% of them needed amounts between  €15,000 and €25,000, and another 20% accessed loans above €25,000. 

    Financing without collateral and guarantees

    Risk analysis and loan approval at Patria Credit IFN follows microcredit patterns: clients receive the requested amount without having to make a thick file, without classical guarantees required on a standard bank flow, specific lending technology based on a customized analysis of the farmer's budget, crop type and production cycle.

    „We go to them, on the road, împ, îin the solar, with our rubber boots îin the trunk. Our employees are local people, village householders, well anchored in the community. We actually fund the people, not the handouts. We look at a business in the social and family context, how the person spends, what they spend on, what assets they have in the household, we make a personalised assessment. Vegetable growers do not keep computerised accounts and the business and family budgets are often confused. We don't put a grid in which those being financed have to fit. In this way, we manage to finance those who are not interesting for the banks, says Raluca Andreica.

    In order to be able to grant loans without guarantees, the microcredit institution has signed partnerships whereby the risks are taken on by institutional partners or financiers such as the European Investment Fund (EIF), the European Fund for South-East Europe (EFSE) or local partners such as the Rural Credit Guarantee Fund (FGCR). As a result of these partnerships, new microcredit products have emerged, such as the small business loan or EaSI (financing with 90% European guarantee) or Tomatina (bridge loan for the subsidy from the support programme for tomato producers).

    &In 2021, the microcredit institution îand proposes to continue the process of digitisation externally (after îin 2020 online card payment of loans was developed, as well as the semi-online process of applying for loans) and internally, to expand its activity geographically, as well as to actively engage îwith the NGO community and partners in creating new lending models and promoting best practices in grassroots agriculture. Agriculture and rural development could also be boosted this year by continuing to reduce the distance between producers and consumers, by launching new and innovative platforms for selling products and by opening new distribution channels to large retailers, say representatives of Patria Credit IFN.

    The information in this press release was also presented în the framework of a Live event on the Patria Credit facebook page whose înregistration is available here