Bishkek, April 14, 2021. / Kabar /. In Bishkek, on April 14, 2021, the Agricultural Projects Implementation Unit of the Ministry of Agriculture, Water Resources and Regional Development of the Kyrgyz Republic held the Grant Agreements signing ceremony with the Union of Banks of Kyrgyzstan and Aiyl Bank, the winners of the competitive bidding for the development of digital innovative financial products for agriculture of the Access to Markets Project.
The representatives of UNIFAD, IFC, RKDF, National Bank of the Kyrgyz Republic, commercial banks, microcredit companies, the Ministry of Finance, the Ministry of Agriculture, Water Resources and Regional Development, various associations of financial institutions and unions participated in the Grant Agreementssigning ceremony.
The funds allocated by the Access to Markets Project will be used to partially finance the development of banking digital financial products that stimulate the development of electronic relationships with representatives of the agro-industrial complex.
According to the agreements signed, KGS4 226 061 will be allocated to the Union of Banks of Kyrgyzstan to develop the project totaling toKGS8 459009, Aiyl Bank will be provided with KGS4 250000 to prepare an electronic financial product at the cost ofKGS14 875000.
The proposal of the Union of Banks of Kyrgyzstan entitled“Warehouse Receipt Financing” is an instrument for producers, traders, processors and exporters of agricultural products to obtain a loan upon the security of warehouse stocks. When accepting goods for storage, the warehouse operator issues a certificate that can be used as security when obtaining a loan.
The Aiyl Bank's proposal entitled “Online trade-logistics platform for value chain entities” is aimed to develop the largest agricultural fair trade platform on the local market, connect farmers to industrial and commercial enterprises throughout the country, the EAEU space and the countries of near and far abroad that have close trade relations with the Kyrgyz Republic.
According to the agreement signed with the Union of Banks of Kyrgyzstan,the maximum period for development of an innovative product is 11 months, i.e., the grant recipient should submit a new banking product no later than March 14, 2022, and Aiyl Bank - within six months or until October 14, 2021.
“The Access to Markets Project” is interested in involving financial service providers in the development of the agro-industrial complex in connection with the need to expand the possibilities of credit financing for agricultural entrepreneurs, to modernize the relationship between banks and borrowers, to improve and simplify the process of providing financial services, to come closer to modern technologies used in digital agriculture in advanced economies”.
This aspect of the project is aimed at attracting commercial banks, credit unions, insurance companies and other financial institutions to develop such digital financial products in agriculture whichwerenot previously present in the Kyrgyz Republic, and would be innovative by nature. The competitive bidding provides grants in the amount of 50% of the cost of the grant proposal, but not more than US$50 thousand.
The proposals of the financial service provider may include, but not limited to:
- Financing based on warehouse receipts (goods receipts) allowing smallholders to use the stored products as a guarantee for obtaining a loan from financial institutions and the ability to choose the best market or anticipation of rising prices;
- Using digital instruments to improve access to finance in a product value chain:
- digitizing relationships between manufacturers and buyers;
- digitizing broader relationships, both financial and non-financial (for example, relationships between producers, buyers, resource providers, and financial service providers);
- using digital instruments to gradually introduce displaced smallholders into value chains (for example, technologies that help smallholders improve quality and reliabilityof products, facilitate communication with a buyer, and use these linkages to improve access to a wider range of financial services);
- Other innovative digital financial products that enable farmers to have more access to financial resources, for example,financial literacyprograms.
12 proposals were received from 8 companies of the financial sector during thefirst stage of the program announced in July 2019. The second stage of the competitive bidding was announced on October 29, 2020, and 12 proposals have already been received from 11 financial service providers; the results of the latter will be made public after a certain time. The third stage is published today, April 14, 2021, at the current event.
About the Access to Markets Project
The Access to Markets Project is implemented in the Kyrgyz Republic between 2018 and 2023 and financed by IFAD - International Fund for Agricultural Development, a specialized agency of the United Nations.
The project consists of three components:
Component 1. LivestockValue Chains Development
The objective of the component is to support efficient linkages and partnerships amongst livestock value chain actors, improved access to modern technology and good agricultural practices with a specific focus on cold chain management and traceability.
Component 2: Livestock Value Chains Financing
The objective of the component is to enable livestock value chain actors increase their investment in profitable value chains through linking them with credit lines, and development of financial products.
Component 3:Upgrading the Kyrgyz Livestock Sanitary System.
The objective of the component is to strengthen both key public and private sector arms of the Kyrgyz livestock sanitary system, which facilitate livestock commodity trade and safe food in accordance with the technical regulations of the Customs Union.
The Competitive Grants Program for the Development of Innovative Financial Products is being implemented under the Component 2 of the Access to Markets Project.
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