Kyiv, Ukraine, February 3, 2020—Small farmers will have improved access to finance given a new endeavor that aims to boost capital markets development in Ukraine, enabling refinancing opportunities for creditors in agriculture. Launched by IFC, a member of the World Bank Group, this advisory project will be implemented in partnership with the Swiss Secretariat for Economic Affairs SECO.
As Ukraine opens up its land market this year, farmers will need more working capital to plant crops. To manage increased financing demands from farmers, creditors too will require new instruments. Against this backdrop, IFC—through its four-year Ukraine Agricultural Capital Markets Development Project—will work with the government to equip local financial institutions with necessary tools and knowledge. This will help them access capital market liquidity through financial securities backed by an innovative instrument called "crop receipts."
Crop receipts, introduced by IFC in 2015, allows Ukrainian farmers to use future harvests as collateral. This has helped over 4,000 farmers obtain nearly $1.3 billion in financing to date. This is significant for a country where the agricultural sector is a key economic driver and a major employer. Building upon the success of IFC's Crop Receipts Project in Ukraine—implemented in partnership with SECO—IFC's new project will help create a secondary market for these receipts. This can be achieved through the securitization of agricultural receivables, which can be traded on the stock exchange bringing additional liquidity to the sector.
"While securitization will be performed by major creditors and market players, the end beneficiary of strong agricultural capital markets in Ukraine will be the small farmer," said Nicole Ruder, Head of Cooperation at the Embassy of Switzerland in Ukraine. "Expanded access to finance for small farmers will consequently boost agricultural productivity, foster innovation in the farming sector, and support economic growth."
"One of IFC's strategic priorities in Ukraine is to strengthen the nation's agriculture sector. Following the success of crop receipts over the last five years, IFC's new project will help transform these instruments into electronic securities. This will make crop receipts cheaper and more efficient, creating a foundation for the secondary market, thereby contributing to a resilient economic recovery," said Jason Pellmar, IFC's regional head for Ukraine, Belarus, and Moldova.
As part of a wider effort to drive more investment to Ukraine's high-potential agriculture sector, IFC will work with the Ukrainian government to introduce the necessary legislation, including the modernized law on crop receipts and the law on securitization. This will help create a solid enabling environment for agricultural capital markets development in Ukraine.
About IFC
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2020, we invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org.
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About SECO
SECO is Switzerland's competence center for all core issues relating to economic policy. SECO's economic development cooperation strives to achieve inclusive sustainable growth and poverty reduction in its partner countries. Its activities aim to create more and better jobs, to enhance trade and competitiveness, to support effective institutions and services and to foster climate resilient economies. For more information, visit www.seco-cooperation.admin.ch.
