From the Editorial Board
Banking system of Georgia does not issue loans for funding of agro-business projects.
The main reasons of this are risks presented in agrarian sector. The main among other risk factors is that insurance companies decline to insure harvest.
nsurance of harvest against natural disasters is an essential necessity for many peasants and farmers. Insurance companies have sceptic attitude toward this product. This on the one hand is caused by small market and absence of experience on the other. For instance, in case if wheat harvest will be destroyed by hail or drought farmer will have to cover full losses. Under such circumstances, naturally, it will be difficult for an entrepreneur to pay bank credit that is another reason of bank’s distrust.
Consequently, it might be said without exaggeration that agribusiness in Georgia is mainly developing at the expense of grants received from donor organization.
One of the new programs in this direction is funded by US Agency for International Development (USAID). U.S. Ambassador to Georgia John R. Bass joined Deputy Minister of Agriculture Malkhaz Akishbaia at a press conference and reception to mark the launch of USAID Access to Mechanization Project. The press conference was held on Dec-2009 at the Expo Georgia.
The Access to Mechanization Project is a $5.1 million program that addresses the shortage of agricultural machinery, particularly among Georgia’s small farmers. Small farmers’ inability to acquire machinery is noted as a serious constraint to agricultural development.
Over the next 30 months, the project will use a combination of matching grants, leveraged commercial finance, business and extension training and volunteer technical assistance to establish 25-30 machinery service centers. These will be private businesses that will provide fee-based custom machinery services to at least 12,500 small farmers.
The Access to Mechanization Project is funded as part of the U.S. Government’s $1 billion pledge to assist the people of Georgia following the August conflict. As part of this commitment, machinery service centers established through the program will provide discounted machinery services for 2010 crop production to approximately 2,000 families displaced by the conflict and reintegrated into new durable settlements.
The U.S. Government estimates that the project will help to create up to 225 new jobs and generate over $5.8 million in revenues for the new centers. In addition, the mechanization will help farmers cultivate more land and increase productivity, which will lead to higher incomes.