Macedonian Agricultural Capital Market and Supporting Mechanisms: An Overview

Abstract

The Macedonian agricultural capital market is not efficient enough, although there have been some improvements due to the established supporting mechanisms. This paper aims to identify current gaps between agricultural financial services' and mechanisms' supply and demand on the agricultural capital market. In this regard, literature and other available secondary sources have been reviewed. Additionally, focused discussions with different stakeholders in the agricultural capital market were conducted, including representatives from the capital demand side (farmers and their associations), and supply side (banks, saving houses, and their associations), as well as supporting institutions and intermediaries (government institutions and donor projects that work towards improvement of farmers' access to finance in the country). Crediting is one of the key drivers of agricultural and rural development. There are other external financial sources that should be considered, which could contribute in improved capital flow to the agricultural sector. The results revealed critical segments in the agricultural capital market based on the mismatches between the supply and demand for capital and supporting mechanisms, and suggest directions for further improvements of this market. The findings may serve as a baseline for future policy settings and enhancement of a more efficient development of the agricultural capital market in the country.

Credit Risk in Agriculture in North Macedonia: Macroeconomic Perspectives

“…In the literature, but also confirmed by domestic authors (Simonovska, 2014;Simonovska et al, 2014;Simonovska et al, 2019;Janeska Stamenkovska and Simonovska, 2021), agricultural companies do not differ from other enterprises in the economy in their hierarchical structure, nor in their access to capital and the way of making appropriate decisions. This means that the banking sector acts toward these customers in the same way as it would toward other customers from the wider industry.…”

“…The forms of credit risk depend on the nature of credit operations, the development of banking products, the development of the capital market, the development of the country, and the appropriate environment for the realization of credit activities, etc. Credit risk can also occur as a result of weak banks' risk diversification (Simonovska et al, 2019) i.e. if they finance only a few economic sectors only or by placing a large number of loans or large amounts of loans to a smaller number of users (Mažova, 2010).…”

“…Taking into account the importance of agriculture for the national economy, the improvement of crediting in agriculture emerges as one of the most important issues of national interest. In this regard, there are various studies by domestic authors that consider the issue of lending in agriculture (Simonovska et al, 2014;Simonovska et al, 2019;Janeska Stamenkovska and Simonovska, 2021), in which more attention is devoted to the perspective and challenges of farmers in the agricultural credit market. There is a lack of research that will provide insights from the banks' perspective regarding lending in agriculture.…”

Disrupted Market Relations in Agriculture in North Macedonia: the COVID-19 Crisis

“…the ability of the holdings to settle their current liabilities with current inflows, is one of the main risk factors. Farmers in North Macedonia are already experiencing difficulties with access to credit, where lack of trust and information, lack of education, lack of flexibility of banks and additional costs are especially a burden for the smallholders, resulting in low numbers of farmers using credits (Simonovska et al 2019). Therefore, a key factor in overcoming the crisis is improving the availability and accessibility of adequate sources of funding, especially for small producers who already face difficulty in accessing capital.…”