ag leasing in russia – advancements and remaining challenges stephanie charitonenko chemonics...
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Ag Leasing in Russia – Advancements and Remaining Challenges
Stephanie Charitonenko
Chemonics International, Inc.
EastAgri Annual Meeting
May 4-5, 2006
Berlin, Germany
Creating an Enabling Environment for Leasing
Situation Pre-1998 1998 Federal “Law on Leasing” Improvements to the Tax Code 2002 Amendments to the Law on Leasing and
the Tax Code
Development and Growth of Leasing Companies in Russia
Before 1998 – few leasing companies
2001 benchmark – more leasing companies, but virtually no interest in ag leasing
2005 benchmark – ag leasing emerges
Advancement of Ag Leasing in Russia
Dominance of the state-owned ag leasing company, Rosagroleasing
Growth of private ag lessors through donor technical assistance and investments
Remaining Challenges of Agricultural Leasing in Russia
Macro - regulatory and tax issues
Meso and micro - industry and firm-level issues
Lessons Learned from Development of Agricultural Leasing in Russia (Top 5)
1. Establishment of an adequate legal/ regulatory and tax policy environment is prerequisite
2. Socially responsible investors and financial institutions demonstrate the viability of leasing as a financing option by investing in leasing companies that develop the industry (use of partial guarantees may be helpful)
Lessons Learned from Development of Agricultural Leasing in Russia (Top 5)
3. Donor interventions in the leasing industry should entail a combination of investment and technical assistance
4. Encourage portfolio diversification as an effective risk mitigation tool for leasing companies to safeguard against defaults
Lessons Learned from Development of Agricultural Leasing in Russia (Top 5)
5. Assist in developing a national leasing association, which can evolve from a strong leasing development facility. This facility can continue to function as both advocate for key stakeholders in leasing policy and legislation and provide training services to industry players and the public.
Use of USAID’s DCA to Expand Access to Ag Credit in Moldova
Stephanie CharitonenkoChemonics International, Inc.
EastAgri Annual MeetingMay 4-5, 2006Berlin, Germany
Reasons for Using Guarantees and Associated Challenges Reasons for using guarantees
Weak legal/judicial environment Attractiveness of bank investment in government
debt rather than in ag enterprises High degree of asymmetric information Lack of experience and risk mitigation mechanisms
Challenges Additionality, moral hazard, sustainability
(demonstration effect)
What is the DCA?
USAID’s Development Credit Authority is a partial guarantee program
There are four types of DCA guarantees
Agricultural lending constraints it addresses
Successful Use of the DCA in Moldova Program background
Objectives Participating financial institutions
Program achievements Increased number and amount of ag loans Reduced collateral requirements Development of new products
Lessons Learned from Successful Use of DCA in Moldova Design is key:
Degree of guarantee coverage Targeted participants, beneficiaries, or sectors Fees Links between DCA and other program components and
other donor projects Parallel work on improving the legal/judicial
environment is important (for sustainability) DCA must be complemented with TA and training to
participating financial institutions (to help overcome market failures)
DCA Global ReachAs of October, 2004
Latin America & Caribbean (31) Ecuador (3) Guatemala (3) Honduras (2) Jamaica (2) Mexico (2) Nicaragua (3) Peru (6) Haiti (2) Panama Regional (7)
Africa (26)Ghana (1)Kenya (4)Mali (1)South Africa (6)Uganda (7)Zambia (4)Ethiopia (2)Rwanda
Europe & Eurasia (36)Armenia (4) Kazakhstan (2)Bosnia (4) RomaniaBulgaria (7) Russia (3)Croatia (2) Ukraine (5)Moldova (6) KyrgyzstanGeorgia
Asia & Near East (21)Bangladesh (2)Egypt (2)India (2)Morocco (10)Philippines (2)Vietnam (3)
Global (2)
HEALTH, 1%
EDUCATION, 1% ENVIRONMENT, 3%ENERGY, 5%
WATER, 8%
SME, 14%HOUSING, 17%
AGRICULTURE,16%INFRASTRUCTURE,
16%
MICROFINANCE,18%