Uman NUH | today: 10/16/2024

Bank loans to agricultural entities under martial law

Author(s) Bechko P.K., Candidate of Economics, , Uman National University of Horticulture, Ukraine
Vlasyuk S.A., , , Uman National University of Horticulture
Kolotukha S.M., Candidate of Economics, , Uman National University of Horticulture, Ukraine
Huzar B.S., Candidate of Economics Sciences, ,
Lysa N.V., Candidate of Economics Sciences, , Uman National University of Horticulture, Ukraine
Category Economics
year 2024 issue Issue number 104. Part 2
pages 277-284 index UDK 631.162
DOI 10.32782/2415-8240-2024-104-2-277-284 (Link)
Abstract The paper finds that the main prerequisite for the effective functioning of agricultural entities is the continuation of production involving both their own sources of financing and bank loans, with bank loans directly replacing the agricultural entities' own sources of funding in both operating and investment activities. The agricultural sector is found to produce about 50 % of GDP, two-thirds of consumer goods, employ about 40 % of the labor force, and generate directly or indirectly 70 % of the country's consolidated budget. This paper shows that for the further development of credit markets, it is important to improve the credit relationship between banks and agricultural entities and to increase the role of bank lending in the budget formation and production activation of agricultural entities. At the same time, the realization of these tasks is accompanied by a number of problems, such as the high risk of bank loans to agricultural entities, including military actions, risks specific to agriculture, depreciation of fixed assets, financial instability of a large number of economic entities, lack of diversification of activities, and consequent dependence on climate conditions. It is worth noting that the gross output of Ukraine's agricultural sector in constant prices of 2016 in 2022 amounted to UAH 532.1 billion or 79.3 % compared to 2018. The main reason for the decrease in gross output is the occupation of parts of Zaporizhzhia, Kherson, Donetsk and Luhansk regions. Russia's invasion of Ukraine has caused enormous destruction and problems for agricultural businesses and rural areas. The war has not stopped, but rather intensified the contradictions for financial resources in general and state support between large agribusinesses and peasant farms in particular. The multi-sectoral nature and scale of the "Affordable Loans 5-7-9 %" government program can be characterized as direct government intervention in market mechanisms. As a result, there is a risk of violating market discipline, deviating from incentives, and creating financial risk. The author proposes to supplement regulatory framework with appropriate amendments to improve the banking mechanism for loans to farmers under martial law in order to establish financial market equilibrium.
Key words credit, bank credit, agricultural production, agrarian business, state program, financial resources, financial support
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