The volume of agricultural lending in Hungary has grown steadily in the recent years, and this trend has continued despite the difficulties of recent years. In addition to subsidies, lending also has a key role in improving the competitiveness of the agricultural sector. Maintaining the lending activity of domestic financial institutions is inconceivable without the effective involvement of the Rural Credit Guarantee Foundation (AVHGA).
The loan portfolio of the food industry exceeded HUF 1,500 billion by the end of 2021, an increase of 150% compared to 4 years ago. The role of institutional guarantees has increased in the mitigation of the crisis caused by the COVID epidemic and in the loan financing needed to help companies in difficulties. The loan portfolio guaranteed by the Rural Credit Guarantee Foundation doubled in 4 years, reaching HUF 500 billion.
70% of the HUF 1,500 billion tender announced by the Ministry of Agriculture last year will be spent on developments and more than half of the HUF 2,850 billion of rural development support still available from 2023 will be allocated to agriculture and the food industry, which will help twice as much investment. The „renewable region, renewable agricultural” programme aims the complete modernization of agriculture and food production.As a result of the implementation of the programme, the goal is to create a competitive, resource-efficient, high value-added and innovative agriculture and food industry by international standards. It is important us to become much more resilient to external economic shocks and the natural factors that directly affect production.
András Herczegh, Managing Director of AVHGA, said that AVHGA has been supporting farmers with its guarantee for more than three decades and encouraging agricultural lending by strengthening the collateral background and taking risks. AVHGA’s guarantee has been in high demand so far, but its role is appreciating due to growing market risks and uncertainty of changes in the EU regulation. It provides security for banks, so the guarantor (independent from the debtor) with a state counter-guarantee will be able to generate more finance, and businesses will also receive additional funding by AVHGA.
In the growing interest rate and risk environment, the good news for businesses is the fee for the agricultural guarantee which remains low, which is available by the fee subsidy by the Ministry of Agriculture and the supporting role of AVHGA.
During its operation, AVHGA has already provided guarantees to farmers operating in more than 90% of the country’s settlements with 120,000 transactions.