The proposed project is for 5 years and is based on ownership-based commodity financing for Russian agribusiness enterprises, typically processing companies, in which Rabo Invest and the EBRD would share the risks of the ultimate clients. The project aims to promote a secure approach to agricultural commodity financing in Russia. It would be a new phase in the development of ownership-based commodity lending, which began with Rabo Invest two years ago. It is aimed to be extended to other commodities and potential clients, providing a model for potential financiers.
The transition impact of the project is considered to be strong. The participation of the EBRD in the project has several benefits for the Russian agribusiness sector: (i) it enables continued provision of working capital financing to Russian SMEs, who otherwise could not receive financing in the absence of a properly functioning warehouse receipt (WHR) system; (ii) by setting up procedures of licensing of selected warehouses and asset-backed lending to local SMEs, it prepares the ground for WHR financing in Russia; (iii) by adding credibility to Rabo’s operations, it provides a demonstration effect for other potential financiers in the Russian agricommodities market; and (iv) by off-loading part of the risks, it enables Rabo to build a strong and diversified (in terms of commodities) portfolio of transactions, and extend financing to new clients.
The EBRD's nominal client will be Rabo Invest. However, the main beneficiaries of the financing will be Russian agribusiness SMEs, typically processing companies. Rabo Invest is a 100 per cent-owned subsidiary of Rabobank in Russia. Its main operational focus is to provide standard banking products adapted to the present Russian environment, as well as structured trade finance products to Russian food and agriculture processing and trading companies.
The EBRD approved a loan of up to US$ 100 million (€112 million) to Rabo Invest for financing of Russian SMEs. Rabo and the EBRD share the risks of the ultimate clients in each of the sub-projects. The financing was increased to US$ 140 million in January 2003 and the current proposal is for an increase of US$ 10 million.
Total project investments are estimated at US$ 430 million (€365 million), subject to adjustment depending on the market needs in the relevant agricultural seasons.
Rabo Invest will require that borrowers are compliant with applicable national standards for environment, health and safety and ensure that borrowers are not engaged in activities listed on the Bank’s Environmental Exclusion List.
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