It is a bitterly cold day in the town of Dedoplistsqaro, in eastern Georgia, but Pavle Khutsishvili doesn’t seem to notice. As on every morning, his cows Nicora and Maisa need to be milked, come rain, snow or shine, and that is all he has in mind as he puts his apron on and goes to fetch them from the small shed in his courtyard.
Nicora is pregnant so she has to be handled with extra care, which Pavle heartily provides, together with kind words for both his animals.
But unlike devotion to this daily routine, which after many years does not cost Pavle much, cattle feed, especially in winter, comes at a high price. It was thanks to a small loan from a subsidiary of TBC Bank, which participates in the EBRD’s Georgian Agricultural Financing Facility (GAFF), that Pavle could afford to buy enough fodder and continue to sell his cows’ milk to a local dairy company, Ecofood.
Tying the food value chain
By selling to an established business, he can secure an extra regular income for his family. Ecofood, in turn, is able to reach more smallholdings such as Pavle’s thanks to a GAFF loan used for working capital financing and to refurbish the milk collection warehouse in the Kakheti region, home to Nicora and Maisa.
With up to 20 tonnes of milk being collected here every day, Ecofood guarantees the ‘eco’ quality of its national cheese such as Sulguni and Imeruli and can also start introducing new dairy products.
One of the aims of GAFF, a €40 million credit line in Georgian currency that targets farmers and agribusinesses through local banks, is precisely to help develop this type of food value chain by improving coordination.
Georgian agriculture was able to provide around 10 per cent of the Soviet Union's food supplies but in the country’s effort to shift to an open market economy the sector has been neglected and today the potential of this fertile agricultural land is considerably untapped.
Encouraging agricultural lending
That is why the EBRD is working not only to make more financing available to the sector but also to encourage farmers and agricultural operators’ appetite for it. All GAFF borrowers, such as Pavle and Ecofood, for example, are able to repay their loan in Georgian lari, which means not having to worry about foreign exchange risk and being able to better manage their debt.
This is possible thanks to the EBRD’s Early Transition Countries (ETC) Local Currency Loan Programme supported by the donors to the ETC Fund, the Swiss State Secretariat for Economic Affairs (SECO) and the US government.
Moreover, under GAFF the Bank assists local banks in improving agri-lending and risk management skills as well as helping their clients develop value chain projects through technical cooperation projects funded by the EU Neighbourhood Investment Facility (NIF).
It helps diversifying their loan portfolio and boosts lending to an underserved segment of the real economy. GAFF also benefits from a first loss facility which effectively provides a “cushion” for banks encouraging them to take on more risk.
“It’s not just good for me. It’s good for all Georgian farmers,” says Pavle. Nicora and Maisa are back in the warmth of the shed. With spring around the corner, the days will get longer, the feed will get cheaper and the milk more abundant. Of course Nicora’s calf would need half of it. But that’s also good news to Pavle.