CNFA: Press Release

CNFA: Press Release

• 11.02.2010

 With CNFA support, a quick loan risk evaluation system was developed for the farms in the Republic of Moldova

CNFA experts have developed a quick loan risk evaluation system for the agricultural businesses in the Republic of Moldova. It allows the financing institutions to analyze the loan applications quickly, complexly and objectively. The system was developed in cooperation with the IFAD Program and is initially expected to be implemented by the institutions that provide agricultural businesses with financing. The system was developed in order to overcome the existing situation, where the banks are offering loans to large producers with significant payment history, but are yet reluctant when lending to small farms.

The quick agricultural loan risk evaluation system is based on eight components for analysis. They are as follows: cash flow, agricultural commodity price volatility, leverage, liquidity, profitability, loan to value ratio, payment history or length of banking relationship, and the management experience. The first seven elements of this risk evaluation system are based on the historical and projected financial performance of the applicant, while the last one assesses his management experience and moral character.

The system provides an easy mechanism for tracking the historical risk performance of the agricultural loan portfolio and is based on a standard and comprehensive consideration of the primary risk elements contained in any agricultural credit decision. In the same time, the system allows the financing institutions to increase their overall profitability, to strengthen national employment and stabilize the national economy, while maximizing the banks’ profit potential. The same system can be also used as a training tool for farmer applicants, who may be very familiar with farm production operations, but less familiar with business management practices. This system could be easily adapted for use in the industrial/commercial segments of Moldovan banks’ loan portfolios for making quick, sound, consistent credit decisions, and for managing the financing institutions’ collective loan portfolio.

For more details, please, acces http://www.cnfa.md/news/923/index.html or contact Nadejda MOCANU, "Farmer to Farmer" Program Coordinator (tel.: 240311, 069260005, nmocanu@moldova.cnfa.org)