LOAN HARVEST Tabără: Demand for loans in the agricultural sector has increased over 8 times

• "The criticism against the banking system, at least since I was appointed minister, is unjustified", minister Valeriu Tabără says

Demand for loans in the agricultural sector has increased eight times in the past few years, Agriculture minister Valeriu Tabără claims.

The minister considers that the relationship between agricultural producers and banks is improving: "Important steps have been taken towards helping the relationship between banks and the agricultural sector grow. We are seeing a positive evolution, and over the last three-four years, demand for loans increased over eight times. Agriculture, food industry and rural development are areas that have a huge potential for business, and anyone who invests in these sectors will see real profits".

Valeriu Tabără also claims that most of the issues in the agricultural sector are precisely due to the lack of relationships between farmers and the banking system. In his opinion, the criticism that banks have been enduring lately is unjustified: "The crisis of Romania"s agriculture is partly due to the lack of cooperation and relationships with banks. At least for the time that passed since I"ve been appointed as minister, the criticism against the banking sector is unjustified".

The minister"s statement comes as most farmers, as well as high officials from the Ministry of Agriculture have repeatedly accused banks of not lending to agricultural businesses. Farmers also complained that even when they were successful in securing bank loans, the terms of the lenders were hard to bear, with the interest rates being set as high as 20%. Bankers repeatedly claimed that they are taking on a major risk when lending to agricultural businesses, since the sector is far too dependent on climatic risks.

The minister also claimed that in order to become more efficient, small and medium farmers should set up partnerships and run farms of up to 100 hectares. "Our goal is to have more 100 hectare farms, like there are in the Western Countries", the minister said.

Veronica Toncea, the president of the Rural Credit Guarantee Fund (FGCR) considers that the agricultural sector is becoming more attractive to banks, as the spring harvest is getting closer. "Of the loans worth 160 million Euros that we are guaranteeing, we estimate an increase of the portfolio in the near future, as the spring harvest is getting closer", says Toncea.

The president of the FCGR also said that so far, the risk of default was on average 0.5%.

Bankers themselves admit that they are attracted by the potential of agriculture. Robert Rekkers, the managing director of Banca Transilvania, yesterday said, on the occasion of the launch of loans for farmers: "We believe in the potential of agriculture to grow. Just like the Arabs have oil, we have the agricultural sector. Let"s help it grow".

There are voices that claim that banks are becoming increasingly interested in funding the agricultural sector because, on a global level, a food crisis is expected, since demand is beginning to exceed supply.

According to the Food and Agriculture Organization of the United Nations (FAO), prices of agricultural levels have reached record levels, and the only solution to avoid prices spiraling out of control would be to increase agricultural output in the states which have high agricultural potential, such as Romania, which, according to specialists could feed up to 80 million inhabitants.