Financial support of small and medium businesses activities in the agrarian sphere of economy

Abstract

The development of agriculture of Ukraine in the conditions of market transformation can be provided on condition of the effective functioning of entrepreneurship in rural areas. The growth of its profitability depends on adequate financial provision for their activities, which is an important prerequisite for the development of agricultural production.

The most problematic issue of financial security is the limited access to credit resources of small and medium businesses, while their role is quite important and crucial for the development of agricultural production regions. The reasons of bank lending curbing from the position of a creditor are defined. They are the high interest rates, ineffective credit policy, comparatively limited range of banking credit services, the availability of a limited number of credit programs for small and medium business, the neglect of the specifics of the industry, the low level of capitalization, a loss of liquidity in the banking system, operational risks in banks and in cooperation with enterprises of the agrarian sector and the borrower's position. Among the mentioned risks we can single out the unstable financial position of agricultural enterprises, the absence of liquid collateral from the borrowers, the reluctance of rural population to perceive the practice of lending to other financial institutions.

To solve the problems of adequate financial support for the activities of small and medium business we have developed the three-tier system of agricultural credit cooperatives on the condition of a mutually agreed coordinated policy. The aim of this policy is the efficient operation of all levels of credit cooperation on the basis of the Central cooperative Bank, which should figure prominently in the banking system of Ukraine as a second-tier Bank and in credit cooperation system as a first-tier Bank that will specialize in lending the enterprises of small and average business that are the most restricted ones in the access to credit.