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Article: EU agriculture faces €46 billion funding gap to address major challenges, research finds
17 June 2020
A new analysis from the European Investment Bank (EIB) looked at
how the financing needs of EU farmers and agri-food businesses are
supported by the European Agricultural Fund for Rural Development
(EAFRD).
The EIB conducted two EU-wide surveys focusing on the access to
finance of more than 7,600 farmers and 2,200 agri-food enterprises
and found a financing gap within the EAFRD of between €19-46
billion for agriculture and more than €12.8 billion for the
agri-food sector.
The EIB highlighted cash flow issues to cover operating costs,
lease land, invest in livestock, machinery and equipment, and align
to higher environmental and safety standards.
The EAFRD is the funding instrument of the second pillar of the
EU's Common Agricultural Policy (CAP), with the amount of money
available to farmers and agri-food businesses depending on the
region. Different authorities or financial institutions distribute
EAFRD financing in the shape of loans, guarantees and various
financial schemes.
The EIB analysed 24 member states, but also identified general
weaknesses that risk exasperating the impact of the financial gap,
which were low levels of farmers' financial literacy and a lack of
banks' knowledge on agriculture.
They also found that larger farms seem to have "a rather easy
access to finance", while young and new farmers often lack adequate
financing. They add that farms face significant difficulties in
terms of accessing investments due to a lack of assets to use as
guarantees and of necessary skills on how to prepare business
plans.
For the wider agri-food sector, there was a better financial
environment, but start-ups and innovative companies had the
greatest difficulties in finding the necessary capital to launch or
expand their operations
Andrew McDowell, EIB Vice-President, said financial instruments
co-funded by EAFRD are an efficient way to invest in the
sustainability of the sector, especially for young farmers
agri-food businesses, highlighting how this could also help the EU
to meet its "environmental and climate EU objectives".
The EIB recommends that the lessons learnt from their assessment
and consultation exercise should be taken into consideration in how
member states implement the next CAP on a national level.
Future focus
The European Commission is increasingly aware of the need for
money to help farmers deal with the sustainable transition as well
as the recovery from COVID-19's economic downturn. The EU
executive's latest proposal for the next EU budget has a potential
€391.4 billion for the next CAP, which includes €100.7 billion for
the EAFRD.
It includes an extra €16.5 billion for this second Pillar from
previous proposals, which is aimed at supporting rural areas
prepare for the future and adapt to the 'ambitious targets' of the
new Biodiversity and Farm to Fork strategies, the bloc's new plans
to improve sustainability in agri-food chains.
Some green group have raised fears that the wording of this
legislative proposal will see the money up being used more for a
'business-as-usual' approach rather than a sustainable food
transition. Some member states have also publicly come out against
the additional EAFRD financing, as well as the EU's increased
budget proposal, because of ambiguity on how the money will be
spent.
In response to EIB's report, European Commissioner for
Agriculture Janusz Wojciechowski said: "The transition towards
sustainable food systems will bring new opportunities for farmers
and operators across the food supply chain. However, to enable
this, access to finance and funding will be essential."