Farmer looking for a loan: "They set such conditions that I ran away from there"

Central Bank Chairman Taleh Kazimov recently announced that the ministry of agriculture is actively engaged in discussions regarding loans. Kazimov stated that new regulations for agricultural loans are being developed, and there is a revision of collateral requirements underway. He emphasized the intention to adopt a balanced approach by taking mitigating steps while considering risks.

Presently, various banks offer agricultural loans funded by the Agricultural Credit and Development Agency. These loans carry an annual interest rate of 7-12%. The loan amounts range from 1000-200,000 Manats, with durations of 1, 3, and 5 years.

One of the main conditions for loan approval is that the entrepreneur must contribute at least 30% of the project amount as their own funds. Additionally, the borrower must possess liquid collateral property.

A farmer named Ismayil Ahmadov, residing in Tovuz, shared his experience with RadioAzadlig, expressing his struggle to expand his business. Ahmadov, who specializes in potato production, desires to increase his output by utilizing additional land. However, when he attempted to secure a loan, he was overwhelmed by the imposed conditions and withdrew. He complained about the high interest rates and extensive documentation required.

Efforts to obtain comments from the Central Bank, the Ministry of Agriculture, and other relevant bodies on this matter were unsuccessful.

Nonetheless, Rufat Guliyev, a member of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, informed Turan news agency that plans are underway to establish a separate micro and small credit line for agriculture. He highlighted previous projects initiated during the COVID-19 pandemic, where loans up to 15,000 Manats were quickly granted, accompanied by favorable foreclosure conditions for farmers. The forthcoming package aims to broaden these initiatives, potentially increasing loan amounts while minimizing interest rates. Guliyev emphasized the importance of expedited loan issuance, asserting that agricultural loans should be provided within 10-15 days due to the time-sensitive nature of agricultural activities. The expected changes aim to benefit the state, the market, and entrepreneurs alike.

Agricultural expert Vahid Maharramov informed RadioAzadlig that previously, loans in Azerbaijan were often granted to close acquaintances and relatives of officials involved in agriculture. He stated that a single phone call from an official was sufficient for banks to allocate credit resources to the official's relative without requiring collateral.

The expert noted that the actual interest rates on loans, with or without collateral, are considerably high in Azerbaijan. In comparison to neighboring countries like Georgia and Armenia, where the interest rates on agricultural loans are approximately 6-7%, the corresponding figure in Azerbaijan approaches 20%.

Maharramov highlighted two main issues: Firstly, low productivity in Azerbaijani agriculture leads to high costs and minimal profits for farmers. Consequently, they struggle to repay the bank interest from their limited income. Secondly, there is a significant problem in accessing expensive means of production, which further hampers the country's agricultural sector.