Financial Support to Agribusiness

Russian Agricultural Bank assists the Russian Government in implementing federal policy in agribusiness.

RusAg plays a fundamental role in financing domestic agribusiness development. The Bank’s mission and strategy prioritize financing and fostering the development of agribusiness (including fishery and forestry enterprises), and individuals residing in mid-sized towns and rural areas.

RusAg is the key bank in implementing federal and regional agribusiness development programs. The Bank has cooperation agreements in place with regional authorities, SME financing funds and guarantee agencies in the territories where it is present to pursue regional development strategies and federal policies in economic, social, educational and other spheres.

Russian Agricultural Bank takes part in sustainability programs focused on the social aspects and initiated by the Government. The aims of these programs are to provide affordable financing to agribusinesses, to improve their financial performance so that more rural communities may benefit from them.


Financial Rehabilitation of Agribusiness Enterprises

Since 2002, Russian Agricultural Bank has been implementing the Government policy on the financial rehabilitation of agricultural producers.

Such measures are taken by the Bank with consideration of the need for business conservation while mitigating the negative impact on the Bank’s financial performance. Loan book to agricultural producers, participating in the financial rehabilitation program, totaled RUB 72.9 billion at YE2019.

 

Financing Government programs

Russian Agricultural Bank, for more than 15 years now, has participated in the government sustainability programs focused on social aspects.

RusAg prioritizes lending to the following key segments within the framework of the 2025 State Program:

  • Lending for various purposes, such as: machinery, livestock, grain, fuel, and fertilizers purchases, land, warehouses and facilities lease with priority given to agribusiness producers, farmers, agricultural consumer cooperatives, food processing companies, fisheries and aquaculture producers, markets and shopping facilities;

  • Financing seasonal field works. The Bank accounts for 70.4% of total seasonal field works financing, with RUB 381 billion in loans issued for this purpose in 2019;

  • Lending to agricultural credit and consumer cooperatives. This type of support contributes to closer cooperation and integration in rural areas. Credit and consumer cooperatives are an important vehicle for rural financial stability;

  • Support of export-oriented businesses. The Bank’s efforts in this area contributed to national foodstuffs and raw materials exports reaching USD 25.5 billion in 2019, outperforming the target of USD 24 billion. Russian Agricultural Bank issued RUB 241.5 billion in loans to export-oriented agribusinesses which is 41.2% above as compared to 2018 (RUB 198.6 billion).

  • Agribusiness subsidized lending programme (Government decree No. 1528) Under the agribusiness soft lending programme Russian Agricultural Bank lends at maximum 5% p.a. Subsidies are paid directly to banks, which gives farmers easier access to state support;

  • Financing investment projects for constructing and upgrading greenhouses, livestock and fish breeding facilities;

  • Developing all forms of small business, including family-operated farms and startups. Fostering agribusiness startups creates new jobs for young professionals and qualified personnel retention in rural areas.

The Bank is involved in implementing special purpose federal subprograms:

Sustainable development of rural areas

The program is aimed at upgrading living standards, stimulating investments in agribusiness, strengthening positive attitudes towards rural life and developing non-agricultural production and employment; promoting the creation of hi-tech employment opportunities. which is designed to increase living standards of rural residents; mobilize investments in agribusiness; promoting the creation of high tech jobs, stimulating the local communities engagement in socially important projects, creating positive attitude towards rural way of life.

State program for construction development

The program is aimed at support of residential construction for certain categories of citizens, support of solvent demand for housing, enhancing quality of utility services. As part of this program, Russian Agricultural Bank is involved in the sub-program ‘State subsidized mortgage lending’. The Bank provides mortgages to young families, families with children (under Federal Special Purpose Programs) and military servicemen (pursuant to Russian Federal Law No. 117-FZ “On the Mortgage Savings System for Housing Provisions for Military Servicemen”).

Subsidized Lending

Russian Agricultural Bank is a key participant in the mechanism of lending to agricultural producers at a reduced rate (concessional lending), implemented under the State Program on Agribusiness Development (Decree of the Government of the Russian Federation as of 29 December 2016 No. 1528), and maintains a leading position in the market.

Within the framework of the concessional lending mechanism, subsidies are provided directly to authorized banks as a contribution for lost income (in the amount of 100% of the Bank of Russia key rate on loans issued in 2017-2018, and 90% – on loans issued in 2019 and subsequent years).

Subsidized SME lending (Government Decree No. 1764)
The program is aligned with the federal project Improving Access to Finance for SMEs, Including Soft Financing (which is part of the nation-wide project Small and Medium Businesses and Support for Business Initiatives). The program caps the final subsidized rate at 8.5% per annum for the borrower and covers SMEs in prioritized sectors, including agribusiness.

Increasing competitiveness of domestic agricultural producers (Government Decree No. 512)
In 2019, RusAg and the Ministry of Agriculture signed an Agreement stipulating subsidized lending to agribusinesses as part of the Government Resolution No. 512 dated 26.04.2019. The new procedure for providing subsidies is aimed at increasing competitiveness of domestic agricultural foodstuffs and growing the output through better marketability.

Russian Agricultural Bank is the key participant in the State Program for Agribusiness Development 2013-2025, including the mechanism of agribusiness subsidized lending, as the form of state support of the agribusiness sector, whereby:

  • Within the period 2013-2016, agricultural producers received compensation in the form of a subsidy from federal and/or regional budgets for a portion of their interest costs;
  • Starting 2017, subsidies are allocated directly to banks authorized to lend to agribusiness to compensate for income that has been accrued under issued subsidized loans but not received.

New rules came into force starting January 1, 2017, regulating the provision of subsidized bank loans to agricultural producers and agribusinesses. This is a major update to the loan subsidization procedure, introducing in particular a cap on interest rate for subsidized loans, a simplified approval procedure for agricultural soft loans, and a share of small businesses in subsidies (at least 20%).

Rules that apply to loans issued starting 1.01.2017

  • Authorized banks provide loans to agribusiness producers at subsidized interest rates (a maximum of 5% p.a.). The banks get reimbursed from the federal budget for income accrued but not received in the amount of 100% of the Central Bank’s key rate, 90% of income accrued but not received applies to loans issued in 2019 further.

Rules that apply to loans issued starting 1.01.2019

  • Authorized banks provide loans to agribusiness producers at subsidized interest rates (a maximum of 5% p.a.). The banks get reimbursed from the federal budget for income accrued but not received in the amount of 90% of the Central Bank’s key rate.

Rules that were applied to loans issued before 31.12.2016

  • Agribusiness producers get reimbursed for a part of interest rate in the amount of up to 100% of the Central Bank’s refinancing rate (key rate) (including subsidies from federal and regional budgets) depending on the loan term, date of the loan agreement, sub-sector of the borrower (prioritization of sub-sectors within agribusiness is also taken into account).