European Union and World Bank Support Ukraine’s Small Farmers via a Stronger Partial Credit Guarantee Fund in Agriculture (PCGF)
KYIV — The European Union and the World Bank Group, together with the Government of Ukraine, launched today the Partial Credit Guarantee Fund in Agriculture (PCGF) – an initiative designed to support small farmers who cultivate land up to 500 hectares. The launch of PCGF marks a major milestone and a key pillar of the second stage of the land reform that kicked off on January 1, 2024.
Designed to bolster the agricultural sector, the PCGF offers guarantees to Ukrainian banks, covering up to 50 percent of a borrower’s obligations, for both investment and working capital loans, with the aim to support small farmers who own or use up to 500 hectares of agricultural land. Eligible borrowers can receive loans for up to three years for working capital, up to seven years for investment financing, and up to 10 years for the purchase of land, with a maximum loan amount equivalent to $800,000 per borrower. Small farmers who are registered in the State Agrarian Registry will be able to access the Fund guarantees and benefit from other state programs. These include, for example, affordable loans, like the ongoing 5-7-9 Loan Program for agricultural production and food processing.
“By establishing the Partial Credit Guarantee Fund, the World Bank Group and the European Union are reinforcing their strong commitment to Ukraine’s agricultural long-term prosperity. To solve the broad financial needs of small farmers amidst Russia’s invasion of Ukraine, the Fund is going to address crucial issues such as agricultural land acquisition, agriculture machinery and equipment financing, and operational needs of small farms,” said Gevorg Sargsyan, World Bank Country Manager for Ukraine.
The PCGF’s mission not only includes providing much-needed support to small farmers from various businesses like crop, livestock, horticulture production, but also encouraging the Ukrainian banks to diversify their agricultural portfolios.
Thanks to a EUR10 million grant, provided by the European Union to PCGF via the World Bank’s Strengthening the Partial Credit Guarantee Fund for Small Farmers in Ukraine and a similar matching contribution provided by the World Bank via the Accelerating Private Investments in Agriculture Program, the Fund will be sufficiently capitalized for its initial stage of operations.
“The European Union has been supporting the development of a comprehensive and inclusive land reform for Ukraine over the last eight years. Now, in the face of the significant damage Russia is inflicting on Ukraine’s agriculture, an improved access to finance for small farmers is essential for the country’s economic resilience and global food security. What is more, this approach is fully aligned with EU’s Common Agriculture Policy and also allows Ukraine to prepare its accession to the EU,” said Alberto Fernández-Díez, Head of the Trade and Economic Section at the EU Delegation to Ukraine
As part of the program, IFC – a member of the World Bank Group – will launch a nationwide awareness campaign to equip small farmers with the necessary knowledge on the program, including information related to the application process and financial products of the banks participating in the PCGF. IFC will also work with the financial institutions to introduce new and adjust existing financial products backed by PCGF guarantees for land, equipment and working capital finance for small farmers.
The World Bank Group (WBG) has played a crucial role in supporting Ukraine following Russia’s invasion, with more than 15 million Ukrainians benefitting from WBG initiatives that are helping businesses to stay afloat and enabling the Government of Ukraine to provide essential services, pay wages, keep schools and hospitals open, and make critical repairs. The WBG has facilitated more than $41 billion in emergency financing, including commitments and pledges from donors.