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IFC providing $16.4m loan to Romanian agri lender

The one-year, senior loan with two one-year extension options will be disbursed in local currency to support the company’s short term loans to small and medium enterprise (SME) farmers.

The International Finance Corporation of the World Bank Group has lined up a RON70 million ($16.4 million; €15.5 million) loan for Agricover Credit IFN (IFN), the only Romanian financial institution specialized in financing the agricultural sector.

The one-year, senior loan with two one-year extension options will be disbursed in local currency to support the company’s short term loans to small and medium enterprise (SME) farmers in Romania, according to an IFC investment proposal document.

Bucharest, Romania-based IFN is part of the Agricover Group, one of the largest agri traders in the country whose main operations include grain sourcing, trading and logistics services; distribution of agricultural inputs to farmers; provision of financing to farmers; fuel distribution to agriculture; and trading of meat and livestock, according to the documents.

The company’s financing arm offers short-term working capital financing and medium-term investment loans to farmers in the vegetal, animal breeding, milk production, and processing sectors.

“By directly financing the short-term needs of the Company to support the agribusiness sector, small and medium-sized farmers whom IFC cannot finance directly will have increased access to financing and, therefore, a positive impact on economic activity in Romania’s agricultural regions,” according to the documents.

“[The investment] will aim to strengthen the value chain and increase capacity by allowing producers and processors to extend or have several production cycles through additional working capital. This will enable a better competitive position for the SME farmers in the local and regional markets.”

The IFC noted that the key challenges to the investment are the environmental and social management (E&S) risks associated with IFN’s borrowers, though previous IFC investments into the parent company established a system in line with IFC requirements that is “applicable to the majority of the portfolio.”

“The highest exposure in the company’s eligible portfolio is to crop production with potential limited adverse environmental or social risks or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures,” according to the documents.

The new investment is pending approval until a 30 March board meeting.