The European Commission and the European Investment Bank (EIB) yesterday (23 March) presented a model guarantee instrument for the agricultural sector. The instrument has been developed in the framework of the Memorandum of Understanding (MoU) as its first product. The memorandum on co-operation in agriculture and rural development within the EU was signed by both institutions in July last year.
The new instrument seeks to help facilitate the access to finance for farmers and other rural businesses. EU Member States and regions can customize the product and use it to set up financial instruments funded by their rural development programs (RDPs) under the European Agricultural Fund for Rural Development (EAFRD) in order to get loans for investments in farm performance, processing and various business-related areas such as marketing or operations.
In addition to the instrument, a new work program was also presented yesterday outlining details of the cooperation between the Commission and the EIB. Moreover, the EIB will be also more involved in providing advice to Member States and regions regarding the possibilities of financial instruments. Phil Hogan, European Commissioner for Agriculture and Rural Development, commented that “financial instruments could help us to get even more value out of rural development policy, the second pillar of the Common Agricultural Policy.”
According to the EAFRD, EU Member States and regions have the option to include financial instruments (for example guarantee funds, revolving funds and equity funds) in their seven-year RDPs when their usefulness is demonstrated in advance. However, most regional and national authorities have tended to avoid including financial instruments in their RDPs, which could likely be explained by a lack of familiarity with them. RDPs that did not incorporate financial instruments at the beginning may still do so at a later stage.