Implementation of the sureties and guarantees for bank credits repayments granted by ARMA

In the period of 1996-2015, the Agency for Restructuring and Moderniza-tion of Agriculture accepted 337 applicaModerniza-tions for granting sureties with total value of more than PLN 104 million and 75 applications for granting bank cred-its repayment for the amount of more than PLN 32 million. Over the analysed period, the Agency granted 202 sureties and guarantees for the amount of more than PLN 52 million, including 188 sureties for the amount of more than PLN 4.9 million and 14 guarantees for the amount of PLN 3.7 million (Table 2.9).

The largest number of granted sureties and guarantees was recorded in the peri-od of 1994-2000. The ratio of the accepted applications for granting sureties in the period of 1994-2000 amounted to 55%. In turn, the ratio in the period of 2001-2015 was characterized by high volatility. Its value ranged from 0% to 100%. In the period of 2001-2015, the largest number of sureties was granted in 2011, namely 28 sureties in the amount of PLN 8.8 million, including 25 sure-ties for repayment of credit for purchases of shares granted under de minimis aid in the amount of PLN 7.3 million. The average value of granted sureties ranged from PLN 182,000 (2002) up to PLN 5.4 million (2005). In turn, the largest number of guarantees for the credit repayment was granted in the period of 1996-2000. From 2001 to 2015, the Agency did not grant guarantees, mainly due to the lack of applications in this respect (Table 2.12). In the studied period,

76 Ordinance of the Council of Ministers of 27 January 2015 on the detailed scope and methods of implementation of certain tasks of ARMA (Journal of Laws No. 187, as amended).

interest in sureties for bank credits repayment decreased on annual average by over 20%. In addition, each year the number of granted sureties for bank credits repayment decreased by 14.97%, with simultaneous average annual decrease of 19.72% of the value of granted sureties (Table 2.10 and Table 2.11). Together with the decreasing number and value of granted sureties, the value of the active sureties also decreased. It is the result of phasing out of a part of sureties granted in the previous years.

When comparing surety operations of ARMA with operations related to granting support in the form of contributions to interest rates of investment cred-its, it should be noted that it has marginal meaning. In the period of 1996-2014, the Agency granted 202 guarantees and 460,471 preferential investment cred-its⁷⁷. Therefore, a small percentage of credits has been granted with the use of support in the form of sureties and guarantees for the credit repayment (0.04%).

In the examined period, the value of granted sureties and guarantees amounted to PLN 55 million, which accounted for 2.83% of the value of granted preferen-tial investment credits.

77 More information on the implementation of national support programmes for agriculture and rural areas have been described in: B. Wieliczko, A. KurdyĞ-Kujawska, Mechanizmy i impulsy fiskalne oddziaáujące na rozwój wsi i rolnictwa (1), IERiGĩ-PIB, Monografie Programu Wieloletniego, Warsaw 2015, pp. 28-29.

Table 2.9. Implementation of the sureties for investment credits under ARMA’s operations Specification Years 1994- -2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 the number of submitted sureties 240 25 18 6 7 0 3 0 1 5 1 29 0 1 1 0 of submitted sureties [in PLN thousand]63,580 8,714 9,019 3,345 3,456 0 1,772 0 287 1,947 1,0009,800 0 231 1,000 0 ue of granted sure- ties [in PLN thousand]30,830 3,225 731 3,745 500 541 1,122 0 287 841 1,4828,800 0 231 0 0 ue of active sureties [in PLN thousand]no datano datano datano datano data no data 12,900 9,700 7,275 7,320 7,42114,600 13,77311,6028,233 5,500 ber of active suretiesno datano datano datano datano data no data 4734 3129285351 463423 the number of granted sureties 132 7 4 6 1 1 2 0 1 3 2 28 0 1 0 0 average value of grant- ed sureties [in PLN thousand]233 460 182 624 5,000 5,410 561 0 287 280 741 314 0 231 0 0 number of claims under the performance bond 3 0 1 2 1 0 1 0 0 0 0 0 0 0 0 0 ue of claims under the performance bond 338 0 218 95 152 0 243 0 0 0 0 0 0 0 0 0 Source: prepared by the author on the basis of the ARMA data.

Table 2.10. Indexes and the average rate of changes of number and value of submitted sureties for investment credits 20012002 200320042005200620072008 2009201020112012201320142015 The number of submitted sureties it/o10072 242801204 2041160440 it/t-1 72 33.3116.70 0 5002029000 1000 yg-21.93 Value of submitted sureties it/o100103.5 38.3939.66020.3403.29 22.3411.48112.4602.6511.480 it/t-1 103.5 37.1103.30 0 678.451.49800 432.90 yg-26.1 Source: prepared by the author on the basis of the ARMA data. Table 2.11. Indexes and the average rate of changes of number and value of granted sureties for investment credits 20012002 200320042005200620072008 2009201020112012201320142015 The number of granted sureties it/o10057.14 85.7114.2914.2928.57014.29 42.8628.57400014.2900 it/t-1 57.14 15016.671002000 30066.6714000 0 yg-14.97 the value of granted sureties it/o10022.67 116.1215.516.7834.7908.9 26.0845.95272.8707.1600 it/t-1 22.67 512.3113.35108.2207.390 293.03176.22593.790 0 yg-19.72 Source: prepared by the author on the basis of the ARMA data.

Table 2.12. Implementation of investment credit guarantees under ARMA’s operations Specification Years 1994- -2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 the number of submitted guarantees 71 1000000 11010000 value of submitted guarantees [in PLN thousand] 30,122 340000000 38361807170000 the value of granted guar- antees [in PLN thousand]3,658 0000000 00000000 the number of granted guarantees 14 0000000 00000000 the average value of granted guarantees [in PLN thousand] 261.29 0000000 00000000 the number of claims under the performance bond 3 0000000 00000000 the value of claims under the performance bond 188 0000000 00000000 Source: prepared by the author on the basis of the ARMA data.

2.8. Summary

Analysis of the current opportunities to obtain sureties and guarantees for bank credit repayment by entities from the agricultural sector, allowed to deter-mine what is the availability and the importance of these support instruments.

Entities from the agricultural sector in Poland are entitled to use sureties and guarantees granted through the Agency for Restructuring and Modernization of Agriculture. Data relating to the farmers’ participation in the programme indi-cate that the demand for sureties and guarantees in the agricultural sector is non- -existent. A similar situation occurs with the use of sureties as part of local and regional surety funds operating in Poland. In 2014, the number of sureties granted by these institutions for entities from the agricultural sector amounted to 0.04%.

Poland, being a Member State of the European Union, has also the possi-bility to use this type of instruments under the Rural Areas Development Pro-gramme. Incorporation of financial instruments to the rural development pro-grammes yields many benefits for the institutions involved in the management and implementation of these programmes, inter alia:

x larger access to a broader spectrum of financial tools for implementation of policies,

x improvement in the commitment of the private sector, its expert knowledge and financial resources in implementation of policy,

x financial resources leverage, leading to the increased impact of the rural de-velopment programmes,

x the effectiveness and efficiency as a result of working capital nature of funds that remain in the field covered by the programme for future use for similar purposes,

x greater involvement of beneficiaries in the implementation of investment projects, since the support must be returned,

x simplified administrative requirements concerning financing of beneficiar-ies, which minimises the risk of errors⁷⁸.

However, as the analyses conducted in the 2007-2013 programming peri-od demonstrate, the guarantee instruments in the form of surety funds have been introduced only in a few countries. Whereas they have not brought the expected results. Such instruments have not been introduced in Poland. This results from a number of barriers, which include limited accessibility of staff with qualifica-tions for implementation of such instruments, low availability of the financial intermediaries, lack of stimuli ensuring optimization of intermediaries’

78 Financial Instruments: making funding go further 2015, Getting Rural Development Programmes Going, EU Rural Review, 30-35.

tions, availability of non-refundable support for implementation of the same ob-jectives, unfavourable financial situation of potential beneficiaries and limited knowledge about refundable financing⁷⁹.

Therefore, consideration should be given to whether the presently operat-ing surety schemes are the right solution for preventoperat-ing irregularities in is func-tioning of the credit market in the agricultural sector. Currently, there are hardly any information clearly confirming legitimacy of using credit guarantees. There is lack of research clearly indicating that guarantee schemes lead to growth in production, investment and employment in the agricultural sector. Determina-tion of the demand for this financial instrument is a difficult task. Therefore, fur-ther analyses are necessary in order to determine whefur-ther sureties and guaran-tees are a necessary instrument enabling access to bank credits, how they affect the behaviour of borrowers and whether they actually bring expected results.

79 J. Szucki, M. Gajewski, P. Tamowicz, M. Przybyáowski, R. Kubajek, P. Penszko, Ocena realizacji instrumentów inĪynierii finansowej w ramach NSRO 2007-2013. Raport koĔcowy, Warsaw 2013.

3. Implementation of the second pillar of the CAP in the 2014-2020