Credit guarantees in Ukraine’s agriculture: a development mechanism based on international practices

Economic Annals-ХХI: Volume 188, Issue 3-4, Pages: 85-97

Citation information:
Starodubtsev, A., & Bakai, Yu. (2021). Credit guarantees in Ukraine’s agriculture: a development mechanism based on international practices. Economic Annals-XXI, 188(3-4), 85-97. doi: https://doi.org/10.21003/ea.V188-10

Andrii Starodubtsev
PhD (Law),
Associate professor,
M. E. Zhukovsky Kharkiv National Aerospace University
17 Chkalov Str., Kharkiv, 61070, Ukraine
andron80088008@gmail.com
ORCID ІD: https://orcid.org/0000-0001-7648-8979

Yulia Bakai
PhD (Law),
Assistant Professor,
Yaroslav Mudryi National Law University
77 Pushkinska Str., Kharkiv, 61024, Ukraine
yuliabakay85@gmail.com
ORCID ІD: https://orcid.org/0000-0002-8009-2915

Credit guarantees in Ukraine’s agriculture: a development mechanism based on international practices

Abstract. The paper deals with the conceptual approaches to the credit guarantee system as an effective mechanism of state support for agriculture. The importance of introducing a credit guarantee system in Ukraine and creating the Fund for Partial Credit Guarantee in Agriculture, a specialized non-banking financial institution, is emphasized. This will help to overcome obstacles to crediting small and medium agricultural enterprises. The authors have analyzed global credit guarantee schemes.

The purpose of this paper is to develop proposals for amendments to the Draft Law «On the Fund for Partial Credit Guarantee in Agriculture», in particular a need to provide legal grounds for non-banking financial institutions, the form of business entities, their mission, criteria for agricultural subjects eligible for partial credit guarantees, financing of the relevant institutions and defining the related management bodies, as well as bodies of state regulation and supervision.

The problem statement is attributable to the fact that the effectiveness of institutions providing credit guarantees for small and medium enterprises in agriculture plays an important role in the national economies of most countries.

The authors have proposed an approximate financial model of the Fund for Partial Credit Guarantee in Agriculture and made the required economic calculations. Thus, with an initial authorized capital of EUR 10 million, the Fund for Partial Credit Guarantee in Agriculture, with 50% coverage, is able to provide guarantees for the purchase of 25 thousand hectares of arable land by small and medium enterprises at an average cost of EUR 820/ha, taking into account the average normative monetary assessment of agricultural land by regions.

Consequently, credit enforcement will allow banking institutions not only to balance credit risk, but also to open access to small and medium agricultural enterprises to bank crediting to the extent necessary for the purchase of agricultural land and investments in production.

Keywords: Credit Guarantee System; Guarantee Fund; Non-banking Financial Institution; Financial Service; Credit

JEL Classification: G21; G28; Q18

Acknowledgements and Funding: The authors received no direct funding for this research.

Contribution: The authors contributed equally to this work.

Data Availability Statement: The authors confirm that the data supporting the conclusions of this study are available in the article.

DOI: https://doi.org/10.21003/ea.V188-10

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Received 1.02.2021
Received in revised form 29.03.2021
Accepted 31.03.2021
Available online 10.05.2021