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According to the statement of the Minister of Economy and Sustainable Development of Georgia, Dimitri Kumsishvili, the Preferential Agro-credit project, issuing loans for agricultural businesses, increased the loan portfolio in commercial banks from GEL 60 million to GEL 800 million.

FactCheck

verified the accuracy of the statement.

The Government of Georgia initiated the Preferential Agro-credit project in 2013 as a means of making financial resources more accessible. The programme envisages giving loans to small, medium and large enterprises operating in the field of agriculture. The amounts and interest rates for the loans depend upon the size of the enterprise and the type of funding. Additionally, a portion of the interest rates is reimbursed by the state itself.

The Preferential Agro-credit project was launched on 27 March 2013. According to the data of the National Bank of Georgia, the amount of loans issued for agricultural businesses amounted to GEL 56 million as of 1 April 2013 whilst this number increased 6.4-fold as of September 2015 and reached GEL 358 million.

In spite of the fact that more than GEL 800 million had in fact been issued as loans within the activities of the Preferential Agro-credit project in 2013-2015, this does not mean that the loan portfolio of the country’s commercial banks exceeds GEL 800 million. Therefore, we should compare GEL 60 million (the total volume of agricultural loans in 2013) to the amount which has been issued for the agricultural field as of today. As previously mentioned, the loan portfolio in commercial banks was GEL 358 million as of September 2015.

Graph 1:

 Total Annual Loans for the Agricultural Field (GEL Million)

image001 Source: National Bank of Georgia

The aim of the Preferential Agro-credit project is to increase production and employment in the field of agriculture. Of particular note is that some large loans were indeed issued within the project’s framework. However, in order to determine the extent to which the loans facilitated the growth of agriculture in Georgia, we need to first analyse the growth of production in the agricultural field.

According to the information of the National Statistics Office of Georgia, the volume of agricultural production increased by 3.2% in the first two quarters of 2015 as compared to the same period of the previous year and reached GEL 3,848 million. Of this amount, GEL 2,051 million is the value of the goods which were produced as a result of processing agricultural production. In regard to loans issued in the field of agriculture, the amount of these loans issued during the first two quarters of 2015 comprised GEL 125 million which is 47% more than the number in the same period of the previous year.

Graph 2:

 Loans Issued in the Field of Agriculture and Growth Rate of Agricultural Production

image002 Sources: National Bank of Georgia, National Statistics Office of Georgia

As illustrated in the graph, the production growth rate in the field of agriculture was higher in 2010-2011 as compared to 2013-2014 (when the Preferential Agro-credit project was launched). According to 2014 data, the production of agricultural goods increased by 21% as compared to 2012 and reached GEL 7,911 million. Of this amount, GEL 4,533 million is the value of the goods which were produced by processing agricultural products. The share of agriculture in the country’s Gross Domestic Product constitutes 9.2% whilst this number was 8.6% in 2012.

It has been two years since the Preferential Agro-credit project was launched. Therefore, in order to measure the project’s efficiency, we decided to compare the dynamics of agricultural production before and after its start within a two-year period.

Table 1:

Loans Issued for the Agricultural Sector and the Production of Agricultural Goods

2011-2012 2013-2014
Loans Issued for the Agricultural Sector (GEL Million) 141 438
1 1 1 1 1
Growth Absolute (GEL Million) % Absolute (GEL Million) %
Agricultural Production 565,4 25.2% 570,9 20.3%
Total Production of Goods Received After Processing Agricultural Products 788,5 26.8% 798,4 21.4%
Total Agro-business Production 1353,9 26.1% 1369,3 20.9%
Sources: National Statistics Office of Georgia, National Bank of Georgia

In 2013-2014, a total of GEL 438 million in loans was issued in the field of agriculture. In 2014, the production of agricultural goods increased by 21% as compared to 2012. In 2010-2012, GEL 178 million was issued in loans whilst the growth rate of agricultural production was 26% as compared to 2010. Additionally, if we compare the growth rate of the production of agricultural goods in absolute numbers, we shall see that there is no significant difference between the numbers of 2012 and 2014. Even though the volume of loans issued in the field of agriculture in 2013-2014 was three times more as compared to the agricultural loans issued in 2011-2012, the growth rate of agricultural production did not change considerably.

Conclusion

The Preferential Agro-credit project was launched in 2013 with the aim of providing agricultural companies with preferential loans in order to encourage the development of agriculture. As of April 2013, the total volume of loans issued in the field of agriculture was GEL 56 million whilst this amount increased 6.4-fold by the end of September 2015 and reached GEL 358 million.

Even though the volume of the loans issued in the field of agriculture increased, the growth rate of agricultural production was not very high. In 2013-2014, agricultural production grew by 21% which is almost the same growth rate as it was before the launch of the project.

Therefore, FactCheck concludes that Dimitri Kumsishvili’s statement is HALF TRUE.

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