First Home Programme For Farmers

Cătălin Deacu

Farmers will receive Government guarantees for taking a mortgage loan to buy a home within a programme similar to the recently introduced "First Home." To do so, farmers need to deposit their grains with an accredited depository in exchange for a certificate of deposit, which will be usable as guarantee before a bank. Certificates of deposit used as guarantee for a loan will be in turn guaranteed by the State via the National Agriculture Guarantee Fund, which will be capitalized with 10 million EUR.

The new programme is intended to vitalize lending to farmers and also to regulate the relationship between farmers and depository, which has already sparked countless controversies, especially in relation to the disappearance of various quantities of commodities deposited by farmers.

Finance Minister Gheorghe Pogea yesterday said he had agreed with Agriculture Minister Ilie Sarbu to commonly setup a database with all the grain silos in the country and start the procedure for licensing all depositories interested in joining the programme. According to Pogea, a legal change will be subsequently made to enable the National Agriculture Guarantee Fund to issue certificates of deposit.

"The farmer will receive a certificate of deposit guaranteed by the National Agriculture Guarantee Fund. He can take the certificate to the bank and receive his money. The programme is quite similar to First Home. We are trying to add agricultural production to the money flows, to quantify it, tax it and turn it into a basis that farmers can use in order to ensure their financing. They will take the certificate of deposit to the bank and receive their money. I also asked the banks if they subscribed and the attending ones - CEC, BRD, BCR, Raiffeisen etc - definitely did. We want to release this product as soon as possible to support farmers and bankers and also to quantify agricultural production, tax it and put a stop to unfair competition on the market, Finance Minister Pogea explained.

In turn, Agriculture Minister Ilie Sarbu yesterday assured a press conference that the was optimistic about the new programme, as the legal framework on certificates of deposit for grains had been in effect since 2004 but it had not been applied for various reasons. According to him, the interest rate to be charged within the programme would be decided by the banks, while the reference price of the grains would be set by the Board of the Fund subordinated to the Ministry of Agriculture. "We want this programme to be operational by the time wheat is harvested," Sarbu said, adding that the Guarantee Fund could be increased by 20 million EUR if everything went well.

According to Rompan President Aurel Popescu, the 10 million EUR to be injected into the Fund will be sufficient for approximately 2 million tonnes of wheat. "The money is sufficient, especially considering that it will probably be applied to only one million tonnes of wheat this year," he said. In his opinion, the programme is a good idea, but has two gaps.

The first is the quality of the grains. Specifically, farmers check in a quantify of grains of unspecified quality and later check out the same quantity of grains, but of possibly different quality. The second problem is related to the depository"s fees. According to him, it often happens that farers sign contracts with depositories and pay affordable fees at the beginning, but, if they refuse to sell their grains to the depository, the "rent" will go up and hidden fees may appear to force famers to sell their grains to the depository. If the farmer sells some or all of the grains based on which the certificate was issued and the mortgage loan was given, he will have to make a significant payment to the bank to compensate for the decrease in the value of the guarantee. If he does not, he may be chargeable with fraud.

As for the owners of the grains silos, they will have to start paying a tax of 0.05 EUR per tonne of stored grains to the Guarantee Fund.