The Financing of the Agricultural Enterprises in Hungary Between 2008 and 2011

Million EUR
However, stock of the credits with market priced interest rates are decreased until 2012; in 2013 there was a little growing, probably because the Hungarian National Bank started a new loan program.

Fig. 1. Direct bank loan 2009-2013 (Million EUR) Source: AKI 2014.

3. Indirect bank financing

In 2008 the banking system performed 42% of the agricultural financing and in 2011 38% directly (AKI 2010), that’s why it’s necessary to examine the indirect methods of agricultural financing besides the direct financing channels. However, it should be noted that in this question is not easy to see clearly, because the banking system is not only lending the agricultural sector directly, but also through some intermediary channels. The reason is that there

is a customer base which has not direct connection with the banking system as a result of its size of management, financial risk and physical accessibility. This circle of farmers are not creditable for the banking system. For them other financing channels remain: the financing of integrators and the subordinated liabilities (member loan) play a highlighted role in the case of individual farms and the accounts payable is significant for joint ventures.

The subject of this section is therefore the analysis of the non-banking and the indirect banking channels, which mean a crucial part (about 62%) of the agricultural financing.

1. 
   Leasing financing
   

The leasing constructions in the agriculture have a role in investments, within this in machine leasing. From the financing opportunities for the relatively smaller agricultural producers it is an ideal solution for their problems of getting capital. The agricultural leading is basically viable on the market of agricultural machinery, because agricultural machines have a relatively well-operating secondary market, the ownership of the machine is almost in every cases enough collateral for the lessors. In the case of any possible payment difficulties the farmer lose its production tool, but he is still in an incomparable better situation as if the credit institution enforce its right to the mortgage on the property. Another advantage of the agricultural leasing is that the leasing companies take the sector specific seasonality into consideration (Lízingszövetség; 2015). The leasing stock compared to the total external liabilities was 11% in 2008 and 7% in 2011. We call attention to a downward trend from 2009 to 2013.


Table 2: The leasing-stock of agricultural enterprises
Leasing-stock (million EUR)

2007	281,49
2008	418,55
2009	397,00
2010	316,36
2011	276,14
2012	200,75
2013	174,80

Source: AKI

2. 
   Factoring
   

The role of factoring in the financing of agricultural enterprises has earlier a decreasing and later an increasing importance in connection with the crisis in 2008. Unfortunately within the turnover of the domestic factoring houses the factoring with agricultural aims produces a marginal turnover, it was 129 million EUR in 2011.
The role of factoring shows Figure 1., which contains the turnover of the Hungarian factoring houses between 2007 and 2011, within this the measure of the agricultural factoring is shown separately. Compared with 2007 a nominal decrease can be observed, but compared with 2010 the turnover of the agricultural factoring doubled in 2011.
Factoring is basically appropriate for the circle of agricultural entrepreneurs for whom on the one hand because of their size bigger sources cannot be granted to handle their trade debtors and on the other hand they cannot meet the requirements of the banks’ rigorous credit review. Both factors make factoring for an important financing tool for small enterprises.
The share of factoring is lower than the possible share of agriculture in the national economy because of the national economic average exceeding black economy in agriculture and of the more unpredictable duration. Mainly the factoring of government subsidies and investments are significant.