On July 6, 21 commercial banks signed a memorandum of understanding with the Government to support farmers in accordance with European Union’s Common Agricultural Policy and Common Fisheries Policy.

The document is a consequence of talks between the banks and the Government on June 20 and June 22.

As previously reported by The Sofia Echo, on June 22 representatives of the banks met with Economy and Energy Ministry and Agricultural and Forestry Ministry officials to discuss the banks’ involvement in the absorption of EU funds.

On July 6, the banks reached an agreement with Agriculture and Forestry Minister Nihat Kabil while an agreement with the Economy and Energy Ministry is yet to be signed.
For the Government, Kabil and State Agriculture Fund (SAF) executive director Dimitar Tadarukov signed the memorandum.

The signatory banks include Investbank, Allianz Bulgaria, Postbank, DSK Bank, United Bulgarian Bank, First Investment Bank, Raiffeisenbank, Unionbank, and UniCredit Bulbank.

At stake is 180 million euro that the EU will allocate for Bulgarian farmers and fishermen.

According to the document that was signed, farmers could draw on bank loans by using the expected EU subsidies as bank deposits. Only farmers registered with the SAF can apply to banks, and then only to banks where they are already clients.

Some forecasts say that the interest rate on the loans will vary from six to eight per cent, but the banks are cautious about making specific prognoses. The document says that banks can ask for additional guarantees in order to approve a loan.

According to Kabil, the memorandum was inspired by current practice in a number of other European countries. It will allow greater flexibility of farmer subsidies, which can now be given in advance in terms of plans for future EU support, Kabil told Bulgarian news agency BTA. The process, however, will require a full range of eligibility checks. Kabil thanked the banks “for your faith in this country’s European future” and for recognising agriculture as a lucrative business.

“Thanks to this faith, the country’s farming and food sectors have absorbed as much as two million leva in investments in recent years,” Kabil said.

The financial conditions of such subsidies are subject to negotiation between the banks and the farmers, Kabil said.

UniCredit Bulbank CEO Levon Hampartzoumian described this type of subsidies as an “emergency rescue parachute” supplementing “the main parachute, which is the inherent ability of a business to survive and grow”.

There are a total of 79 000 registered farmers in Bulgaria. According to Tadarukov, farmers can start applying for loans as early as the end of August. Banks, on the other hand, remain cautious and have not given a specific state for the scheme to start.