Key elements of financing the Hungarian agriculture in the first year of the financial crisis

Kemény, Gábor

Keywords: agriculture, financing, financial crisis, crisis management

The findings of our research show that the main channels of financing agriculture include direct and indirect bank financing. Indirect bank financing means that the bank provides loans to an intermediary organisation, and not directly to producers. Such intermediaries are most often leasing companies, factoring companies or integrators. Non-bank financing is provided by agricultural input material producers and suppliers, as major actors.
The financial crisis reached Hungary in the autumn of 2008 and made very different effects on the different channels of agricultural financing. While domestic banks in dominantly foreign ownership were willing to continue financing their direct clientele (under more rigorous terms, often replacing lost foreign funds with refinancing provided by the Hungarian Development Bank), companies involved in indirect financing (leasing companies, factoring companies and integrators) reduced their financing activities more heavily. It was particularly visible in the field of foreign exchange denominated financing. On the other hand, non-bank financiers, in particular suppliers, tended to be more willing to give discounts in order to preserve their market shares.
The crisis had the worst impact on small individual enterprises. Due to their size and form of business, the creditworthiness of these was relatively low already before the crisis, and therefore they could only raise funds through intermediaries (leasing companies, integrators), which were struck by the crisis heavier than other, less affected actors (banks, suppliers), which were not involved in financing these businesses.

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