Transcript Slide 1

General Assumptions
Crediting the primary agriculture in Uzbekistan and Tajikistan,
with the exception of livestock farming, remains problematic due
to dominance of strategic crops (cotton, wheat) with some
subsistence farming mixed in. There is a lack of commercially
viable fully private farms and activities that would generate
incomes for farmers and, hence, be profitable for commercial
banks.
On the contrary, agricultural sector in Azerbaijan is more liberal,
commercially viable and relatively free from political influence
and government regulation.
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Rural (Agricultural) Lending - The LFS
Approach
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Rural and semi-urban lending in Central Asia is commercially
more viable than pure agro-lending
Rural lending will significantly contribute to the profitability of
branches in the relatively small towns
It will broaden the client base, generate non-credit income and
broaden the refinancing base
From a developmental perspective, access to financial services
for rural businesses and households is a high priority. Such
include:
1.
Access to reliable savings facilities
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Access to money transfers and remittances
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Provision of bank cards for easier and safer
payments
4.
Provision of different credit products, such as
business, consumer, educational and personal
credits
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Key Concepts for Successful
Lending in Rural Areas
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Establish rural lending as opposed to agricultural lending
Approximate rural credit product with the lending scheme
currently used by LFS
– Finance activities more conducive to monthly cash flow
– Conduct business/household analysis in addition to
business analysis
Avoid financing activities that require balloon payments at
the end
Pay closer attention to sources of secondary income of rural
businessmen and use the proceeds to “force” monthly
payments of at least interest
Establish future cash flow projections for each and every
loan regardless the loan size
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Key Concepts for Successful
Lending in Rural Areas
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Keep loan term relatively short to reduce risk
Due cyclicality nature of agriculture, consider issuing credit line
financing instead of conventional term loans
Establish frequent monitoring
Consider mobile cash payment centers or cash collectors
Give more importance to collateral
Allow higher loan/collateral ratio
Be more conservative with assessment
Obtain detailed knowledge of agricultural markets, crop/livestock
production specificities, production methods and other external
factors inherent to farming and ranching
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Loan Products
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Micro loans: for working
capital and investments
loans up to USD 10,000
(or the equivalent in local
currency
Small business loans:
Working capital and fixed
asset loans up to USD
50,000 (and higher) to
SME clients
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Rural Activities Being Financed
Today by LFS
Agribusiness
Wholesale
 Retail
 Storage & warehousing
 Commercial construction
& equipment purchase
 Food processing
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Agricultural Activities to be
Financed in Future
Production (Livestock)
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Animal Husbandry
Dairy
Poultry & Broiler operation
Honey production
Farm implements and on-farm
construction
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Agricultural Activities to be
Financed in Future
Processing, Equipment & Machinery
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Ag. machinery and equipment
Agribusiness services
(planting, harvesting,
processing and etc.)
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