National guarantee fund for agriculture and livestock

Since I am not very busy from a technical point of view, I believe it is easier for me to look at this issue thoroughly, which means that we have a fantastic opportunity to build upon some very meaningful examples that have been created during the last 18 months thanks to a direct support that the government has provided through the AARD. These are very few examples to imagine the radical change we want, but they are absolutely enough to understand that the readier we are to support with funds the construction, the creation of as such examples as much as possible, the closer we are to the target of a radical change in agriculture.

I believe that these examples tell us that those issues which seem irresolvable from afar, such as the land fragmentation, documents and so on, actually do not exist. We need to identify and support those entrepreneurs who have clear ideas and the base on which they enhance their capacity in infrastructure and technology, so that the employment chain and a closed production cycle are guaranteed.

These are things that I have seen with my own eyes. Nobody has told them to me, neither have I read them in books. I have seen with my eyes how a significant part of these examples, that we have here as well, have transformed the figures of production, processing and export. And this has been possible thanks to a support which, in my opinion, has been very modest compared to the one that a financial instrument supported by banks can provide.

What we want is to go one step further. For this we have talked with the European Bank for Reconstruction and Development, to which we have asked that in the new program with Albania they focus their attention on one of the three main priorities, which is the promotion with financial instruments of the values chain and closed cycle of products in agriculture.

On the other hand, we have shown our willingness to take a step further and transform the AARD, from the payment agency it is today, into a mediator between entrepreneurs and banks. So, the novelty we aim at is first of all to change the existing direct relation between the entrepreneur and banks and establish our agency of payments as e mediator, which will take on the whole process of information, training, contact, projects collection and applications submission to the banks. This will neutralize the extraordinary difficulties that en entrepreneur encounters today in the sector of agriculture and livestock, when he asks for support from a bank. On the other hand, the Payment Agency will play not only the role of mediator, but also the role that the state wants to take upon in separating the risk and in supporting the drastic reduction of interests. This is the idea.

After an analysis, EBRD approved this idea and has considered since the beginning that it has the potential to increase tenfold the funding for these enterprises. So, if in the first year together with AARD we could fund a limited number of enterprises, some of which were brought as examples in the presentation, there is a potential to increase them tenfold. Of great importance is the fact that, if we have today crediting problems in the country, the agricultural sector does not have to recover any loan, so they are loans with little or no problems.  The problem farmers have today is that they cannot do this process on their own, and cannot face up the current loan interests because, basically, this is impossible for them from a financial point of view. But as all the cases we have analyzed show, when it comes to loans in agriculture, this is the part which has the less problems, even zero problems in the relation with banks.

We are confident based on the AARD experience, and following the administrative and territorial reform that has allowed a radical transformation of the territorial organization, since instead of the former 400 municipalities and boroughs, we have today 61 municipalities starting from Tirana to the smallest municipalities, which have a totally different territorial dimension, not from a geographic point of view, but from the content.

It is basically impossible today for municipalities across the country to avoid direct responsibility of having also a rural development dimension. We are working here on how we will divide these responsibilities, because we believe that one of the main problems encountered today in this moment of turning point by the agricultural development, which is a problem that the banks cannot solve, is that of knowledge. There is an historic backwardness in the field of knowledge, of receiving information, of getting acquainted with every aspect of today’s information on how to develop a farm, on how to develop the sector. This backwardness is dramatically observable when we look at the capacities a farm has today to turn into funding projects very brave ideas and the instincts to open the path of farmers’ development.

In this aspect, we have and will take the responsibility of radically changing the state structure, starting from the fact that so far the state has been a symbol of failure as far as drainage and irrigation are concerned – that’s why issues concerning irrigation and drainage canals are the most addressed, and sometimes the only one address, by those who want villages to be managed by municipalities; to continue then with support for inputs and the quality assurance of inputs to be done by the central government, which will monitor and establish standards, and by the local government. We will continue with the fundamental part which relates to knowledge. Today, our directorates cannot meet and have no chance to meet the need we have to transform them into hearths of knowledge, information, of training of people who work the land, and at the same time make them catalysts for the approval of these examples.

I believe that these examples must be known by everyone in the village, and this will be part of our job and policy and, going back to the reason why we gathered here today, the funding capacity must increase. We will increase the funding capacity of these projects only by aiming first of all at this scheme. Stories of the European Union and of the support by the European Union are very complicated stories, and we are doomed to fail in relation to these stories if, first of all, we are not able today to plant across the territory these examples of success and transform them across the territory into hearths of knowledge for others.

The most encouraging thing in this process is that what experts, academia, domestic and foreign theorists have considered as the number one problem on our path of development, and which is the fragmentation of land, is a problem that does not exist in the examples I have seen.

This problem does not exist because entrepreneurship needs only to establish a contractual relation with farmers, each according to their land, and unite them on the road of production and guarantee that their products are sold. From that moment, a farming family who has today 5 acres with which can do nothing but plant tomatoes, eat some and hope that the rest will be sold in the street, this family will be part of the chain and turn into a small business. This is the only way to formalize the process and move from a situation of big informality to a situation where these chains are formalized.

Of course, the point is to put an end to this instrument of total content. I am not among those who believe that you only need to have money to have success guaranteed. I believe the other way round. If the road is not clear to us, and if we do not lean on knowledge in this sector and on the increase of knowledge capacities, we can say we have a lot of money but we are not necessarily destined to succeed. One year has been enough for us to have strong reasons to be optimistic, and optimism comes from the examples created, and following a very simple supporting scheme according which investments are made fifty-fifty, in order to increase capacities and close the production cycle. In addition, there is no case where the scheme has failed, and this must be heard by banks. Consider that our instruments are not those of banks which are much more controlled and sophisticated. So, every time we have said yes to projects by entrepreneurs, and have divided investment with them fifty-fifty, provided that our 50% will be paid at the end of the investment, we have never failed.

They are all there, and I would suggest you to go on a trip and see in practice these cases; – the Minister of Finance can find the money and pay for it from the reserve fund. You will see the change that our support has brought for Kujtim Lika whom I met yesterday, or for my friend from Dibra, and you will see how the production, processing and export capacity has increased. Kujtim has quintupled export with just one of our projects to support him.

The support we have given is a very simple scheme. Our problem is that we cannot meet every demand with the current fund. Although we have doubled it, and we can double it again next year, this is not enough. This is why we need this instrument, and I am very grateful to the EBRD for its readiness to enter this process.

The reason why we are here today is to start a real discussion and hear your opinion on how to define the instrument, but our final goal is to support entrepreneurs directly, so that they won’t have to be concerned about how many documents they need to submit to the bank. This part is up to us.

On the other hand, together with the EBRD we guarantee that the risk of the banks is basically minimal, not to say inexistent. So, it’s about time you take the money you have in savings accounts and invest it in agriculture, because today the sectors has zero risks in Albania. In addition, this is the time to give a boost and take an historic leap, by using the extraordinary contagious capacities of these examples. All we have to do is support them together, the state with knowledge and training, while dividing the risk with the EBRD, and banks will earn money. Ultimately, your job is the easiest. We have to make money by doing other things, while you have only to make money and we want to help you with this. Thank you very much!

 

I am Kristian from Raiffeisen Bank. Dear Mr. Prime Minister, dear ministers, thank you for this initiative. I have a couple of questions. We have been having this department for agricultural issues for more than five years, and one of the problems we have been encountering is that the amounts we have are small. Let’s say they are some loans that amount up to 1 million Euros, and meanwhile, as far as agriculture is concerned, we tell farmers that they need to cooperate with each other. But if we look at major companies, they are cooperatives. If we want to have the scale economy, we need to have a larger land, we need to have more farmers in order to have a major tendency for export, and not only production for domestic consumption. The second question is how will we enable these people to cooperate, so that we will enable also the scale economy I previously mentioned? Secondly, when will we have further details? Is there a minimal amount, will it be fifty-fifty? When can you provide us further details on this instrument?

 

As far as the first question is concerned, this is the encouraging element we have observed from the support of these enterprises, which means that land fragmentation is not an issue anymore. The reason for this is that the enterprise establishes contractual relations with all interested farmers. If you look at these enterprises, you will see that land ownership is multiple and either it is rented by enterprises or they establish direct relations with people working the land, and commission them the type of product, after providing them the appropriate seed or seedling, in addition to guaranteeing them that the product will be bought. Basically, the “cooperative” is created automatically by funding and after the enterprise’s needs are met. So, we do not start from the idea of the last 20 years, according to which we would first unite people and then lands, and after that we would think on what to do with them. It is not like this anymore, but the other way round.

We visited a fruit processing factory in Peshkopi. Thanks to our support, and to French technical assistance as well as to the technology taken from France, this factory has today the necessary capacities not only to produce for the domestic market, but to export its juices. This is not all, because in addition to farmers in Diber, farmers of Korçe who produce apples have come in contact with the factory, because it is the only one to process apples being apple juice one of its products. Basically, this problem does not exist anymore. Lands are made available to the factory, at the moment people who own these lands rent them, or when the product complies with the factory’s requirement, and they take it to the factory for processing.

As far as details are concerned, since you are probably concerned about the scheme dear Kristian, in our schemes these example have received from us a funding of 150 thousand dollars. This has been our funding, and it responds to this scheme, and the majority of those who are here have given funds for another 150 thousand dollars. But in all cases observed by us, their need for funds is greater. This was a limit put by us. So, there is no concern for a super fragmentation of the funding because it is about funding blocks that, without any doubt, can amount to 1 million and 2 million depending on the project, depending on the accountability and on the extent of the project space.

I want to thank everyone. First of all, I want to thank professor Hausmann, thank the banks here present, and obviously the EBRD and farmers. I hope very much that dialogue will continue intensively with banks in order to finalize the product and reach a thorough agreement on who does what in this process.

I think that our ambition is not at all utopian, since it is based on success stories. Banks talk always about risk, while this is an example of how we have funded success, because our funding has been conditioned by finalization and we have never paid before finalization. I believe that the absorbing capacity and the finalizing capacity in the territory are much bigger. The examples we have created are only indicative on what we can do, but they are not enough both as number of examples and volume across the sector. Meanwhile, we have done a preliminary analysis with the Directorate of AARD on the potential, and it is absolutely possible for us to have an initial potential, without starting with information, training and increase of the project capacity, but to have an initial potential that can amount up to 100 million dollars per year.

So, I would ask you to maintain open this dialogue. Our team and the EBRD will contact you in order to go into details, so that ultimately the finalized product will absolutely be a joint product.

Thank you very much once again. I remain hopeful that this will be an instrument that will ultimately unblock the crediting canal, because I cannot imagine how you deal with all the money you have without loaning it. The idea is to have you get rid of this burden.