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Bailyk Finance launched a new scheme for financing farmers together with 2 dairy plants

The Bailyk Finance microcredit company, together with the Ak-Bulak and Ak-Zhalga dairy plants in the Issyk-Kul region, with the support of the International Finance Corporation (IFC), a member of the World Bank Group, launched a new program for financing agricultural value chains (CDS). In May 2019, Bailyk Finance began active financing of farmers for the purchase of dairy cows, equipment, construction and repair of cowsheds, and other operational needs related to milk production.

Under this project, each of the parties agreed to join their efforts to introduce comprehensive financing for all participants in the value chain – farmers, milk collectors, suppliers of cattle, feed, equipment, etc. To implement this program, funding is provided from two sources, depending on the amount of the loan:
1) the allocation of credit resources by the Kyrgyz-Russian Fund on preferential terms, the final interest rate of the loan in the national currency for farmers will be 14% per annum;
2) from the Company’s own funds – from 32% per annum in national currency.

According to farmers, due to insufficient collateral, they previously faced a lot of difficulties, including the lack of an established chain of cooperation and difficult access to preferential financial resources. Thanks to an innovative financing scheme, farmers will be able to receive the required loan amount on preferential terms with lightened collateral requirements. At the same time, the Ak-Bulak and Ak-Zhalga factories guarantee timely payment for milk supplied by farmers, which allows the financial institution to minimize credit risks associated with the repayment of credit debt and ensuring the targeted use of allocated loans. Such a condition will allow Bailyk Finance to significantly reduce the interest rate for a new loan product.

“The introduction of this innovative financing scheme (VCF) provides benefits to all parties: our Company – to reduce credit risks, increase the client base and strengthen the use of non-cash payments in remote regions; milk processing plants – to increase daily production volumes and provide themselves with constant suppliers of high-quality raw materials, which will allow entering new markets, including the EAEU countries, with a guaranteed volume of finished products. An improved raw material base will allow milk processors to meet the requirements of international certification that may be presented in the future (Global Gap, HACCP, ISO). The most important link in this chain is dairy farmers, “they receive timely financing with facilitated collateral conditions and the possibility of remote loan repayment,” said Chinara Moldazhanova, General Director of the Bailyk Finance microcredit company.

It should be noted that Bailyk Finance plans to expand the use of remote service channels by customers, including increasing the volume of loan repayments through electronic wallets, which they plan to install with milk collectors. Thus, farmers do not need to visit the company’s offices, and the milk collector will carry out the repayment of the loan for them. For customers in remote regions, this method of service will be very convenient, there will be no need to spend time and money on the road to visit the company’s office.

According to the director of the Ak-Zhalga dairy plant, Kuluypa Zhuzumaliyeva, it is expected that thanks to cooperation and this financing scheme, the production volumes at the plant will increase by 2 times, and the plant, in turn, will be able to establish close ties with local farmers.

Technical and advisory support is provided by IFC.
This support provides for the introduction of a new financial product that allows not only to simplify access to financing, but also to reduce customer service costs, respectively, the cost of borrowing resources for end customers – milk producers and processors.