The aim of this paper is to describe the role of credit as a source financing agriculture in the Republic of Serbia in the recent period, and to determine the advantages and disadvantages of the use of this financial instrument for financing agricultural production. Agriculture, given its specific production is not capable self-financing. And that they it needs to be informed by proper financing models. In the Republic of Serbia in the recent period there was not an adequate funding model was used, and the problem of financing agricultural production is still very actual. This is the most serious and complex problem of domestic agriculture and agricultural policy. Main obstacle to a higher use of loan funds in Serbian agricultural economy are: the instability and uncertainty of the agricultural and food production, unsafe placement of unknown prices of agricultural crops in the torque delivery and inconsistent agricultural policy measures. Ese factors add to the limiting factor for greater investments in agriculture and a low rate of return of agricultural production, which is limited by low yields, low productivity, and price disparity. On the other hand, there are few banks in the reporting period, as part of their loans, and investments have directed towards agriculture. The reasons are the high risks of agricultural production, its dependence on weather conditions, the risk of disease outbreaks and large-scale as well as large fluctuations in prices of agricultural products. Risk adverse banks generates a high degree of dispersion of demand for financial services, high costs of obtaining information and performing financial transactions for farmers, and the lack of quality of loan collateral, due to unregulated or poorly regulated property rights. The demand for agricultural credit is not evenly distributed throughout the year, but is significantly higher in the sowing period, which requires a larger book of business assets of banks in this period, and thus the inability to qualify it in profitable economic activities and in the short term. Farmers have limited confidence in the banking sector, and they lack experience in dealing with the banks. Based on the research it can be concluded that loans are not performing source of funding in agriculture. In order to provide more favorable bank loans for agricultural development in the Republic of Serbia, autonomous involvement of commercial banks is not sufficient. It is necessary to introduce coordinated activities of all state bodies, which would allow the reduction of the political, institutional and financial risk in these economic conditions.


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