Cofinancing, collaterals, and the exchange rate prevent farmers from accessing EU funds

According to Agency officials, of the more than 3,000 contracts approved through the European Agricultural Fund for Rural Development (EAFRD), 51 were terminated, for financial or administrative reasons.

The reluctance of banks to grant loans for ensuring cofinancing, high interest rates, collaterals demanded by lenders, most of the time even larger than the value of the projects, and the volatility of the exchange rate are the main reasons for which applicants for structural funds decided to terminate their contracts with APDRP.

“So far, 53 beneficiaries of the European Agricultural Fund for Rural Development (EAFRD) have requested APDRP to terminate their contracts,” agency officials told Business Standard. The value of the terminated contracts is €18.2 million, of which the European Union’s contribution amounts to €14.6 mln.

Verginia Tudor applied for non-refundable EU funds to acquire equipment and machinery for working some 400 hectares of farm land in Ialomita County. Even though the agency approved her project, the contract was terminated. The applicant complained about the difference in the exchange rate from the moment the project was designed and that when the money came in, as the rate fluctuated from RON 3.7/€1 to RON 4.3/€1. Moreover, bank rates soared, up to 24 percent from 9-11 percent.

In the case of another applicant, Costica Clipa of Bacau County, who was planning to build a refrigeration warehouse, the non-refundable value was of over €1.4 mln. “I had no financing to finalize the project, I contacted 7-8 banks, and none of them wanted to give me the money. They needed collateral,” Clipa said. And the requested collateral was worth 20 percent more than the project. He not only gave up the project, but lost some €150,000 in consultancy fees.

EAFRD grants non-reimbursable funds in the amount of 50-70 percent of the project’s total eligible value. Through EAFRD, Romania has access to funds worth some €7.5 billion for the 2007-2013 period. A mere €870 mln have been obtained to date.