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

Conclusion and looking ahead to the future

The public and private sources must be mobilized, the lending techniques must be developed and it must be achieved that the banking sector (public and private) and other financial intermediaries get involved to a greater extent into the rural development in order to reduce the financial disadvantages of the SMEs, to stimulate the productive investments and to develop the rural economy versatile.

The expansion points (compared with their weak position in the present agricultural financing) of the credit supply of Hungarian agricultural sector, which has fragmented ownership structure and management system, can be the savings cooperatives with increased, to the EU norms fitting capital stock, after a significant concentration process, because on the one hand geographically, on the other hand in mentality, based on their attitude to agricultural activity, these institutions are closest to the establishment of agricultural enterprises. This requires that they can raise their future liabilities and rationalize the operation.
It would be advantageous to encourage verticum financing. During the verticum financing credit institutions finance

the whole agriculture. For a credit institutions the most safety and the most comfortable method is to finance the whole verticum by the integrator, which produces the final product and it is usually creditable. This integrator is generally not only organizes financial processes, but also has real economic activity: organizes the circle of the suppliers, determines the quality and provides advice.

Based on the above, verticum financing seems to be appropriate to finance the domestic agricultural sector, if the circle of integrators – which is in the substantial number of cases a foreign company - makes appropriate connections with the circle of domestic producers and doesn’t prefer its own, external suppliers. This idea is reflected in the suppliers program of the Hungarian Foundation for Enterprise Development as well, and also during the efforts on the developments of the supply companies’ quality management systems.
A further advantage of the integration construction: it can eliminate the financial irregularities occurred by seasonality of agriculture, because the integrator is usually independent from the seasonality of agriculture and weather. This follows on the one hand from the multifaceted activities of the integrators, from their diversified structure of production and sales, on the other hand from the multi-annual, agricultural season-border contracting possibilities, The benefits of the verticum financing should be supported in Hungary in any case in addition to the existing efforts, even if it goes together with the potential rise of the smaller agricultural enterprises’ vulnerability.