Minimizing the consequences of credit risks for agricultural producers

Abstract

The article presents the results related to minimizing the consequences of risks for agricultural producers. It is established that the credit risk of agricultural enterprises should be considered as the probability of loss not only of mortgaged property, but also of future income. Its components are: systemic risks — arising in the external environment of participants in the credit process; collateral risks — related to the probable loss of mortgaged property or a decrease in its value; production risks — leading to losses in production activities. It is proved that one of the means of reducing credit risks is credit insurance, which should be considered as a set of types of insurance aimed at reducing credit risk at the level of the borrower and the lender. At the level of an agricultural enterprise, crop insurance, animal insurance, life insurance of the borrower, liability insurance for non-repayment of loans can be used. At the lender level, such insurance concerns the risk of non-repayment of loans and the risk of loss of property by the mortgagee. It was found out that a number of risks that lead to high loss-making of agricultural enterprises have a significant impact on the process of crediting agricultural enterprises. In particular, the combination of systemic risks, most of all price, inflation, and government regulation risk, reinforced by the complexity of the formation of market structures, leads to price disparity between products produced in agriculture and products consumed by them. It is determined that agricultural enterprises are not able to generate stable cash receipts, and the lack of an effective mechanism for the sale of agricultural products also does not contribute to increasing the profitability of enterprises in the industry.