EU backs agriculture loans

Grant for Kafalat to increase guarantee ratio

The Ministry of Agriculture (MoA) signed an agreement with the European Union (EU) and Kafalat for funding agricultural loans. The $4.5 million-grant is part of the EU’s Credit for Agricultural and Rural Development (CARD) program. The project aims at supporting the agricultural sector through extending loans to small- and medium-scale farmers. The loans, supported by the Central Bank and guaranteed by Kafalat, will have low interest rates.

The grant will allow Kafalat to increase the guarantee ratio it offers on loans (75 percent of the loan amount) by an additional ten percent in order to further lower the interest rates and reach new borrowers. Khater Abou Habib, Chairman and General Manager of Kafalat, said two types of loans will be offered through the program: “The first loan could reach $350,000 and has a maturity of ten years with a three-year grace period, the second loan is for a maximum amount of $45,000 and has a maturity of seven years with a six-month grace period.” In 2012, Kafalat offered guarantees to 1,025 loans, including some 400 loans for agricultural projects.

Antoine Howayek, Head of the Association of Lebanese Farmers, said extending bank loans to farmers is not a productive support scheme: “Though the Cabinet allocated $130 million to the MoA to support the sector, a very small number of farmers benefit from loans.”

Howayek said loans to farmers should not be offered through commercial banks: “An agricultural development bank should be established to cover the financing needs of farmers.” He said commercial banks often refrain from lending farmers which they deem financially unsteady.
This program is part of an EU-funded four-year initiative, the 'Agriculture and Rural Development Programme' (ARDP) launched in 2011. The ARDP has a budget of $20 million.