Governor Ismaili on the agricultural financing and insurance project: There is great potential for support from the financial industry for crediting and insurance of the agricultural sector, financial support, mitigating risks and increasing sustainability

13/12/2023

The Central Bank of the Republic of Kosovo (CBK), together with the International Finance Corporation (IFC), the Ministry of Agriculture, Forestry and Rural Development (MAFDR) and financial lending and insurance institutions, was part of the project “Agricultural Financing and Agricultural Insurance, Projects of the IFC in Kosovo”.

This project was of particular importance due to the fact that it would allow farmers easier access to finance, more favourable conditions and sustainability of investment, due to the reduction of risk from agricultural insurance products.

“This project should have been of special importance due to the fact that it would enable customers in the agricultural sector to have more favourable conditions through financing from banks and lending institutions, increase competition, stability and independence of development without becoming a burden of state aid for covering losses related to climatic events such as frost, hail, drought or excessive climatic rains”, said Governor Ahmet Ismaili at the closing event of the project.

Governor Ismaili has added that there is great potential for support from the financial industry for crediting and insurance of the agricultural sector in financial support, mitigating risks and increasing sustainability.

“There is great potential for support in this sector also from the financial industry through various forms, such as lending and product insurance in order to mitigate risks and increase stability. Financial protection, access to financial services, general stability of this sector and the growth of the perspective for economic development in general, remain the commitments and priorities of the CBK”, added Governor Ismaili.

In his speech, Governor Ismaili encouraged financial institutions to support agriculture, while giving concrete recommendations for policy making in this direction.

“We encourage lending institutions to increase lending in the agricultural sector with the most affordable conditions and insurance companies to increase voluntary products and coverage especially in the agricultural sector, while we recommend the Ministry of Agriculture, Forestry and Rural Development that when drafting such policies should enable agricultural insurance to be a prerequisite for farmers when they benefit from grants and subsidies, to ensure the stability of investments, yields and the sector as a whole”, encouraged Governor Ismaili.

“It is necessary to strengthen our commitment through different mechanisms, both from the policy-making perspective and from the perspective of financial support and insurance in function of financial inclusion and access to finance at an affordable cost”, emphasized Governor Ismaili.

The head of the CBK has shown that lending in the agricultural sector in Kosovo by banks and non-banking institutions has increased over the years, and currently accounts for 2.4 percent of the total loans issued.

“From when the project officially started until now, lending to the agricultural sector from banks has increased by 22.8 million euros or 50.7%, where the total credit portfolio has reached 67.9 million euros, while from microfinance institutions it has increased by 37.1 million euros, where the total credit portfolio has reached 54.2 million euros. Lending in the agricultural sector constitutes only 2.4% of the total loans issued or 1.4% of the country’s Gross Domestic Product (compared to the participation of agriculture in the Gross Domestic Product with close to 8%), and with a rate of non-performing loans of 3.8%, there is still room for financing with the most favourable conditions”, said Governor Ismaili.

Let’s mention the fact that the Central Bank of the Republic of Kosovo, among others, in this project has contributed to the licensing, regulation and supervision of the activities and products of insurance companies that have expressed interest in expanding their activity to cover risks related to the agricultural sector.

In the end, Governor Ismaili emphasized that climate and environmental risks have been addressed through the CBK Strategic Plan 2024-2028.

“We are witnessing the time that climate and environmental risks have become the problem of this century where governments, regulators, businesses and individuals are taking the necessary actions in response to this critical issue. Therefore, the CBK has addressed this issue through the Draft Strategy for Climate and Environmental Changes and at the same time through the CBK Strategic Plan for the period 2024-2028, in addition to the National Strategy at the country level for addressing climate and environmental changes”, concluded Governor Ismaili.