Businesses in the Croatian agricultural-sector can apply for loans using commodities as collateral, thanks to a new €71 million (HRK 530 million) partnership between the European Bank for Reconstruction and Development and Zagrebacka banka (ZABA), the country's largest commercial bank.
Croatia is reviewing legislation that would allow farmers, processors and traders in the agribusiness sector to borrow working capital from local banks using grain and other commodities as collateral - a mechanism known as "warehouse receipt financing." The legislation will be vital to the agribusiness sector in Croatia. The joint EBRD/ZABA initiative will provide both parties useful working experience with the warehouse-receipt system. Both banks will share the risks associated with this type of financing.
Hans Christian Jacobsen, Director of the EBRD's Agribusiness team, said the EBRD has been assisting in the implementation of warehouse receipt financing since 1998 in 10 countries. This is the first time, he said, that the EBRD hais undertaken such a programme before laws are in place to protect the lender. The timing is particularly important because it will demonstrate that commodity-backed agricultural lending is commercially sound and further prepare the grounds for the law expected to be implemented next year.
Damir Odak, Member of the Management Board of ZABA, said the scheme will help smooth the further development of the Croatian agribusiness sector. He expressed hope that the EBRD's work with the Ministry of Agriculture will soon lead to the establishment of the legal and institutional framework enabling further expansion of lending against agricultural commodities.
The EBRD and ZABA have been working together since 1995, although this is the first collaboration in the agricultural sector. ZABA is owned by UniCredito and Allianz. It has over €6.5 billion worth of assets and is rated BB+ by Standard and Poors and Fitch. Its strong presence in the Croatian market has been built through prudent lending procedures and sound business judgement.
To date, the EBRD has signed 167 projects worth more than €2.8 billion to assist the agribusiness sector throughout the Bank's countries of operations.
