ELANA Agrocredit signed an agreement with the European Bank for Reconstruction and Development (EBRD) for a EUR 5 mln. loan on 17th April 2014 to co-finance the development of Bulgaria’s agricultural land market.

EBRD said in a press release that agriculture remains an important sector of the Bulgarian economy, and its economic significance is growing: “The sector plays a key role in the development of rural areas, providing a source of income as well as investments along the value chain. However, only 23 per cent of arable land is currently owned by farmers. The remainder belongs to individuals, institutional investors, municipalities and the state. This structure is not conducive to the sustainable use of land and is holding back investments that would modernise the agricultural sector.”

Therefore EBRD found ELANA Agrocredit business model, spealised in helping farmers to buy their land through financial leasing contracts, can boost the process of modernization of the agricultural sector.

Daniel Berg, EBRD Director, Bulgaria, said: “This project addresses a key issue facing Bulgaria’s agriculture and will play an essential role in strengthening an important sector of the country’s economy. Overcoming land fragmentation and giving farmers greater opportunities to own and develop their own land helps stimulate long-term investments. This can help increase and improve agricultural output.”

Kamen Kolchev, the founder of Elana Agrocredit, noted: “We appreciate very much the EBRD’s support in such a key stage of local agricultural development. This loan comes with the right timing since land purchases from farmers are growing. We have the capacity to meet the farmers needs now.”

Terms of the loan

The EUR 5 mln. loan is planned for the term of 8 years and the interest rate is 3-month EURIBOR plus 5% at the payment date. In an year after showing good results, there might be opportunity for reduction of the terms to 3-month EURIBOR plus 4.75%.

The collateral for the loan is pledging of receivables from the financial leasing contracts of ELANA Agrocredit.

ELANA Agrocredit plans

For a period of 1 year ELANA Agrocredit has provided funding for farmers of over BGN 4.2 mln., which was used for purchasing over 550 ha farmland (data as of 31 March 2014). The company expects to invest all its capital of BGN 5.2 mln. in land purchase based on the existing leasing contracts.

ELANA Agrocredit plans to invest the loan from EBRD in land purchases by mid-summer 2014. Meanwhile the company is also planning to launch a secondary public offering on the Bulgarian Stock Exchange.