The development of the agricultural business and capital structure, and the need for managing its specific features

Spilákné Kertész, Márta

Keywords: agricultural investment, credit portfolio, mortgage bond financing, capital structure, capital endowment, capital intensity

In Hungary agriculture is a sector of strategic importance. The competitiveness and market-oriented operation of the agricultural sector also assume an adequate level of capital endowment. Agricultural financing is widely known to have several sectoral and national characteristics. Consequently, the related strategies may only be developed with a view to these specific features. Investment based development is essential for the implementation of viable strategies. This study analyses the changes in the investment volumes, capital endowment and funding structure of agriculture during the past decade, and the solutions that could be considered as realistic alternatives in order to accommodate the identified characteristics.
Our results suggest that future development to enhance the competitiveness of the agricultural sector will require an investment activity that is more intensive than in earlier years, and that it will require more new capital than ever. The required capital cannot be provided from own sources alone, external sources of credit must also be tapped. This capital, however, can only be accessed through special solutions and operations in the financial market owing to the sectoral characteristics. The demand induced by the potential credit requirement of agricultural businesses can give a major stimulus to the development of both the financial and the agricultural sectors. The research findings explicitly confirm these statements.

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