According to the data of the Russian Statistics Authority the production amount of the agricultural products in 2013 went up by 6.2% in compari­son with 2012, having exceeded RUR 3.79 trillion. The official and inde­pendent entities state about the forthcoming growth of agricultural production in Russia in 2014. Ana­lysts of Russian Agricultural Bank are sure that gradual development of the industry depends on support from the state and financial sector.

FINANCING SCOPE IS GETTING LARGER

Russia has a great potential in the agro-industrial sector: if the conditions are favourable our country may become one of the leading experts on a number of foods. Support of agricultural pro­ducers, investing to the agro-industrial complex remains a top priority for the state. "We are in a hard economic situ­ation. We reduce a number of expenses, wind down some projects. But I'd like to state that no agricultural program will undergo any sequester", said Dmitry Medvedev, RF Prime-Minister, at the meeting of rural settlements of the country that was held in April 2014. The Prime-Minister emphasized that the Russian village had been under­financed for long, back since the Soviet times, and that the Government had to invest almost in everything connected with agriculture.

"Since now the parameters of the village's sustainable growth will become one of the key points in estimation of authorities' work on all the levels", said Dmitry Medvedev.

Even the experts who are the most critically tuned towards the Russian authorities admit that the governmental financing of agricultural production has been acutely increased recently. Imple­mentation of advanced technologies has brought about that in a number of areas they have achieved the best global parameters on yield of cereals, corn, sugar beet.

In the opinion of specialists, the list of existing arrangements of the state support for the agro-industrial complex is quite wide: reimbursement of a por­tion of costs of agricultural producers for payment of the insurance premi­um, reimbursement of a portion of the interest rate on the loans and credits, subsidies for investing into plantation and animal breeding development, sup­port of winery, subsidies to milk pro­ducers etc.

An important constituent of the agricultural policy lies in the devel­opment of lending. Namely the bank sector is vested with a major role for mobilization of the corporate capital for long-term investments into the large-scale re-equipment of the production and agro-industrial complex as under­lined by the analysts of Russian Agricul­tural Bank.

"A growth of production of the domestic agricultural products, intro­duction of capacities on reprocessing and sale of the foods is the sole way to resolve the task on ensuring the import-substitution and food supply security as a whole", declared Dmitry Patrushev, the Chairman of the Board of Russian Agricultural Bank at the meeting of rural settlements of the Russian Federa­tion. "Creation of new productions in the regions, implementation of invest­ment projects will make it possible to the fullest extent to take advantage of the agricultural potential of Russia, as well as to provide the villagers with work­places and decent wages, to develop the housing and social infrastructure".

The analysts are sure that the res­olutions as made by the Government testify to the change of approaching the agricultural sector's problems: the issues of agricultural industry are trans­ferred to the area of the national and food security of the country.

Pursuant to the survey made by EY company, the most of CEOs of the Rus­sian agro-companies expect a growth of the agricultural products in 2014 on the level of 5-15%. In the opinion of some respondents, the prospects for the industry development are directly dependent on the governmental sup­port arrangements to the agricultural companies: 56% of respondents have stated that the agricultural enterprises will not be able to reach or preserve the adequate level of the earning capac­ity in case the governmental support arrangements are cancelled. The bank credits remain the most popular means for financing the companies in the sec­tor; 94% of the companies in the agro-industrial complex use them.

The problem of lending is still acute for the agro-industrial complex. Even before the small-sized banks has not tries to work with agricultural companies as the latter are quite risky borrowers. Therefore, it is no wonder that currently some lending entities has completely refused to work with that category of potential customers. The agricultural producers say that the hindrances they have today include the long term of reviewing the applications and reinforcement of requirements to execution of documents to be granted with a loan.

The decisions made by the Govern­ment shall change this, quite depressing picture. The amount of governmental support for agrarians in 2014 shall be RUR 170 bln, including that they plan to assign about RUR 56 bln for subsi­dizing the interest rate. Alongside the state intends to build up the new rela­tionships with the banking structures.

KEY FINANCIAL TOOL OF AGRARIANS

Russian Agricultural Bank is the key financial tool for development of the agro-industrial complex, plays a signifi­cant role in implementation of the state policy in the area of the food supply security provision. The scope of loans of Russian Agricultural Bank OJSC as issued within the bounds of realization of governmental program for develop­ment of agriculture and regulation of markets of the agricultural products, raw materials and foods for 2013-2020, made RUR 562.9 bln in 2013. The sta­tistics shows the effect of such support on the industry's development: last year the agrarians showed the best produc­tion dynamics among all the industries of the real sector of the economy.

In total, since the realization of the National Project "Agro-Industrial Complex Development" and in the course of implementation of the gov­ernmental programs for development of agriculture, Russian Agricultural Bank disbursed the 1.7 mln loans for the amount of RUR 2.5 trillion. The sup­port was given for implementation of 4 555 investment projects on construc­tion, reconstruction and updating of the agro-industrial complex facilities. In the current year of 2014 Russian Agri­cultural Bank will go on financing the agro-industrial complex of the country, including through granting of loans for performance of seasonal field opera­tions, investment credits for develop­ment of the priority sub-industries of agriculture, as well as for the technical and technological modernization of the agro-industrial complex companies.

They in Russian Agricultural Bank emphasize that the analysis of recent trends of the agro-industrial complex development in Russia has shown that the large agricultural business needs effective mechanisms of financial sup­port no less that the middle-sized or small businesses. Alongside, the effect from development of the large modern agro-business is obvious: the produc­tion or processing complex in a specific area may become a point of growth, cre­ating for personal subsidiary husbandry and other small forms a potential for sale of products, stimulating the devel­opment of other industries. That's why one of the priorities of Russian Agricul­tural Bank is the investment and pro­ject financing. The bank takes part in implementation of a number of projects on foundation of large animal breeding and poultry complexes, for example, the large-scale project on breeding and processing of turkeys in Penza region, which was launched by the Group of Companies "Damate"; creation of the innovative, high technology complex on duck breeding "Donstar" in Rostov Region. The new investment projects include the financing of reconstruc­tion of the feed-milling plant "Shatsky Myasokombinat" OJSC.

They in Russian Agricultural Bank say that such large investment pro­jects are realized as a rule upon sup­port from the regional administrations. It is evident that both the tax receipts to the regional budget and the level of the people's employment are directly depending on the degree that the busi­ness is confident in the region. There­fore, namely the local authorities posses the most detailed information about the sector of business that needs support and which things shall be done for its development.

Where the local authorities co-finance the construction of the infra­structure facilities at the cost of budget funds, subsidize the interest rate on the loan, apportion the direct subsi­dies, ensure tax preferences, as well as provide the guarantees, the effect from support by Russian Agricultural Bank is multiplied. One may give an example of such investment project as the launch of the high technology agro-hold­ing "Akashevo" in Mari El Republic. "It is a plant of the world-wide level. So that it would emerge, we had to have a coordinated work of the bank, govern­ment of the Republic, administration of Kuzhenersky District and builders", tells us the Director General of Agro-Holding, Nikolay Krivash. With that, in Bashkiria they are building the poultry complex named after M. Gafuri, and in Kaliningrad region, owning to the loans by Russian Agricultural Bank, they are getting ready for commissioning the animal breeding complex "Zales-je Agro" OJSC, the large investment projects are being realized in other areas of the country. Undoubtedly the implementation of the said large pro­jects raises the competitiveness of the Russian agricultural products at the domestic and foreign markets, and also promotes the import-substitution and growth of the agricultural export.

A WELL-CONSIDERED STRATEGY IS THE WINNING FORMULA

In 2013, with the high quality and weighted approach to the lending, under the conditions of the efficiency rising for the investment operations and reduction of the share of overdue loans, the bank's loan portfolio grew by 15% up to RU 1.3 trillion. Alongside, more than 80% of loans are represented by those to bor­rowers from the agro-industrial complex, 55% of the corporate loan portfolio is focused on the SME segment. "Param­eters of Russian Agricultural Bank are directly connected with success in the agro-industrial complex", underlines Nikita Krichevsky, the Chief Scientific Officer of the Institute of Economics of the Russian Academy of Science.

In the opinion of experts, the efficient implementation of the large investment projects is a comprehensive objective. The agricultural producers have a number of peculiarities: various natural and climatic factors have their effect, of course, as well as differences in the durations of production cycles; a great role is played by the degree of dependency of this or that company from the governmental support. The risk-management in such a complicated sector provides for a carefully tailor-made approach to every customer.

The bank's active work with the bad and overdue debts of the borrowers has made it possible to reduce them from 9% in 2012 down to 7.7% in 2013. The result was achieved thanks to the improvements of the risk management system.

"It is vital that the typical tool­kit both of the head organization and of our regional network is formed so that we would be able to reconstruct, rehabilitate our borrowers and in any case try not to "let" them going bank­rupts. I would say that this approach is demanded, and our customers are sat­isfied by such actions from the side of the crediting institution", summarizes Dmitry Patrushev, the bank's CEO.

Specialists of Russian Agricultural Bank are sure that the growth driver is the understanding needs of the compa­nies that operate in the area of the agro-industrial complex. The bank knows its customers and understands the way the agro-business is formed and which fac­tors are vital for the risks of investing into one project or another.

Presently Russian Agricultural Bank offers attractive conditions for its borrowers on investment and project financing: 8-years lending (on a num­ber of industries, where it is supposed to provide subsidizing with the maturity of 15 years: 15-years loans), absence of off-the-project pledges and guarantees. Lending under the given terms provides the business an actual opportunity to realize the intended projects both in a town or a rural settlement. And that, in its turn, creates conditions for a further well-balanced economical development of the country's areas.