Flexible financial products for the agricultural sector in the EU

21 December 2018

EU farmers face economic challenges during times of price volatility, such as unexpected changes in market conditions creating uncertainty, which increases the risks both for farmers seeking finance and for financial institutions providing such finance. These circumstances may lead to sub-optimal investment decisions in agriculture, which suggests that EAFRD support through financial instruments for new flexi products could help. For this reason, DG AGRI and the European Investment Bank in the context of fi-compass, initiated a study to investigate the feasibility, possible value added and scope of flexible financial instruments responsive to market fluctuations, to address sub-optimal investment conditions and contribute to rural development policy implementation.

The feasibility work undertaken under this study was conducted in two consecutive phases including:

Initial phase – Work focused on analysis of the dairy sector in three Member States (France, Ireland and Italy), showing that interest in market responsive financial products seems to have already translated into practice. The study (Initial phase) is available for downloading the fi-compass website’s library - Agri-focused EAFRD FI providing market-responsive financial products.

Second phase - Review of the use of and interest in financial products with flexible repayment schedules (defined in this report as ‘flexi’ products) for agricultural enterprises in the EU. The work extended the initial analysis by screening 216 financial intermediaries in the EU and focusing on the lending behaviour and schemes of 43 of them with a strong interest in financing agriculture, in 16 Member States.

This study assesses in particular the ‘flexi’ products for agricultural sectors across the EU and presents the results of the work conducted in the second phase. It reviews their key characteristics, as well as investigates the need and interest for these products among EU financial intermediaries and evaluates the potential for EAFRD financial instruments to support such products.

Methodological approach used for the analysis is based on desk analysis of current financial products for agriculture through the screening of financial intermediaries’ websites, structured interviews with selected financial intermediaries from the desk research and elaboration of product fiches for identified ‘flexi’ products, based on desk analysis and interviews conducted.