The Asian Development Bank will provide Kyrgyzstan with $40 million (half as a loan and the other half as a grant) for the implementation of the project "Development of Climate-Resilient Value Chains in Agriculture." The agreement was reviewed by the Committee on International Affairs, Defense, Security, and Migration of the Jogorku Kenesh.
According to the agreement, the government must co-finance the project and allocate $850,000 for its implementation. $36 million of the credit and grant funds will go towards financing agribusinesses. Trade and logistics centers, warehouse owners, primary processors, aggregators, logistics companies, and other entities in the fruit and vegetable production and supply chains can obtain loans up to $5 million for 10 years at an 8% annual interest rate.
Additionally, the Ministry of Finance will receive funds for 32 years at 1% during an 8-year grace period, and then at a 1.5% interest rate. Commercial banks will distribute these funds at 3% per annum.
It is worth noting that so far, only OJSC "Ail Bank" has passed the Asian Development Bank's verification and can participate in this project.
The remaining $4 million will be allocated for project management, training, and support for 500 farmers, 40% of whom should be women. The project will also involve training bank employees in new financial products and sustainable agricultural financing methods (upon request by banks) over five years. The project is set to be completed in 2028.
In response to a question from Deputy Kubanychbek Samakov about why the government receives a loan at 1% per annum while the end consumers, namely farmers and processors, get loans at 8%, Deputy Minister of Finance Ruslan Tatikov explained that the state will distribute the money to banks at 3% as they plan to use the funds for servicing external debt.
When asked why banks will earn 5% on loans, Ruslan Tatikov explained that the expenses of "Ail Bank" for salaries and other operational costs amount to 3.5%, while 1.5% is reserved to cover potential losses and deficits.
"Ail Bank" has a very extensive branch network. There are branches in all rural districts. Other commercial banks do not have as many branches.
Lawmakers were informed during the session that it is not possible to reduce the interest rate that banks will receive. As a result, the draft law was approved by the committee in the second reading.
