IPARD and the Albanian Agribusiness Support Facility (AASF) – an opportunity for agribusiness development

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The Instrument for Pre-Accession Assistance for Rural Development (IPARD) has the specific long-term objective to prepare the Albanian agribusiness sector in meeting the requirements of the acquis communitaire, and ensure efficient program implementation and use of European Union funds.

At the moment, the agricultural and rural sector in Albania is facing significant challenges related to the overall need for economic development and job creation in rural areas. In addition, Albanian agribusinesses have to deal with stronger regional and international competition and incresing quality requirements. In this process it is necessary and important to mobilize all relevant actors, directly or indirectly affecting the agricultural and rural sector.

The IPARD Fund, as part of the IPA instrument, is dedicated to the candidate countries for equal membership in the European Union, as well as their preparation for the use of pre-accession programs for agricultural and rural development.

  1. What does co-financing in agriculture mean and how does this relate to grants?

Albania has received the right to access IPARD grants, a program initiated in December 2018 with a funding value of about 17 million Euros per year (including the contribution of the Albanian Government). The intensity of grants for the Agribusiness sector ranges from 50-70% of the project contracted by the Agency for Agricultural and Rural Development. This grant financial support for each public call consists of 75% funding provided by the instrument for rural pre-accession assistance in the European Union and 25% funding provided by the budget of the Republic of Albania, as part of the agreement of SAA.

The support of the agricultural sector with grants has a feature related to the inadmissibility of advance payments for the implementation of contracted investment plans. This necessarily requires for most beneficiaries the need for support from the banking system or microfinance institutions.

  1. What does the IPARD-3 grant scheme for Albanian Agribusiness contain?

The Albanian Agricultural and Rural Development Agency announces the Third Call for the submission of applications under the IPARD II Program by the Instrument for Pre-Accession Assistance for Rural Development (IPARD) for the purpose of developing the Agri-Food Sector.

The Third Call for applications is open to all persons (natural and legal persons), whose work and activity takes place within the territory of the Republic of Albania in the fields of agricultural and / or agro-processing and rural production in the following measures:

Measure 1: “Investments in physical assets on agricultural farms” in the following sectors:

→ Milk

→ Meat

→ Fruits – Vegetables

→ Vineyard

The total budget of measure 1 is 21.5 million EURO.

Eligible costs for measure 1 will be in the minimum and maximum limits as follows:

– Minimum amount of total eligible costs: 10,000 EURO;

– Maximum amount of total eligible costs: 500,000 EURO;

The percentage of public support (grant) varies from:

  • up to 60% of total eligible investment costs;
  • up to 65% if the investment is made by a younger farmer (under 40 years old on the date of the decision to provide support);
  • up to 70% for investments in mountainous areas, where 100% of the investment must be in a mountainous area even in cases where the applicant is under 40 years old.

Measure 3: “Investments in physical assets for processing and trading of agricultural and fishery products” will be only in the following sector:

→ Processing of fruits and vegetables

The total budget of measure 3 will be in the amount of 7.6 million EURO.

Eligible costs for measure 3 will be in the minimum and maximum limits as follows:

– Minimum amount of total eligible costs: 25,000 EURO;

– Maximum amount of total eligible costs: 2,000,000 EURO;

The percentage of public funding support is 50% of the total eligible investment costs.

The eligibility criteria applicable to all measures are:

  1. i) construction or improvement of real estate, up to the extent of the market value of the property;
  2. ii) the purchase of new machinery and equipment, including software, to the extent of the market value of the property;

iii) general costs related to investment expenditures (i) and (ii), e.g. Consulting fees such as those for architects, engineers, etc., feasibility studies, business plan preparation, will be eligible to be reimbursed up to a ceiling of 12% of the costs set out in points (i) and (ii) . The maximum cost for the preparation of the business plan should be 4% of the costs mentioned in points (i) and (ii) without exceeding the value equal to 5,000 Euros.

  1. iv) General costs are considered eligible if the project to which they belong is selected and contracted by ARDA. The applicant must prove ownership of the land / building or buildings related to the investment or the right of use for a period of at least 10 years from the date of submission of the application. In the case of investments in real estate, irrigation, or perennials, the applicant must prove ownership of the land / buildings related to the investment or the right to use them for a period of at least 10 years from the date of submission of the application.
  • Applications start on December 10, 2020 and the deadline for submission of applications is January 25, 2021.
  1. What is the AASF program and how does this program relate to grants?

The Albania Agribusiness Support Facility (AASF) is a financing framework developed by European Bank for Reconstruction and Development (EBRD) in cooperation and with support from the Government of Albania, which started its activity in 2016.

The objective of the facility is to motivate Albanian financial institutions to support a vital sector of the Albanian economy with widely untapped potential –agriculture and agribusinesses.

AASF comprises of two elements from which financial institutions will benefit:

  • Financial support
  • Technical support

AASF provides access to finance for the agribusiness sector in two ways: senior loans and/or portfolio risk sharing to both MFIs and banks. The institutions benefit from a first loss risk cover that is made available by the Government of Albania. AASF represents an innovative financial instrument to encourage lending by financial institutions to the whole agribusiness value chain.

The business financing process is made through AASF Partner Financial Institutions with short, medium and long term products. Their financing can be integrated under the AASF program, thus providing the opportunity for pre-planned investments by businesses to benefit from favorable financing provided through Partner Financial Institutions and by covering the risk of collateral insufficiency, which is one of the most common problems frequently faced by this sector. AASF Partner Financial Institutions are: Raiffeisen Bank, IntesaSanpaolo Bank, OTP Bank, ProCredit Bank and Fondi Besa.

The final beneficiaries of AASF are farmers, entrepreneurs and companies that are engaged in primary agriculture, agricultural equipment production and trade, logistics, agribusiness service providers, agricultural processing, wholesale as well as retail traders. Agribusinesses may also benefit from the EBRD Advice for Small Businesses programme, which provides consultancy on strategy development, marketing, technical restructuring and other key institutional development areas by international and local experts.

In order for businesses to benefit from the IPARD program and similar grant schemes by the Albanian Government, it is necessary to realize the planned investment in advance. In order to realize the investment, it is necessary for businesses to access loans from the financial system for financing their investment. In this regard, accessing loans at beneficial conditions through AASF, can allow agribusinesses to take the action required to be eligible for an IPARD grant. Hence, AASF, IPARD and National grant schemes can work complementary and create strong synergies for Albanien agribusinesses.

Partner Financial Institutions of the AASF program which provide loans to businesses through medium to long term products are as follows:

For more information about them go to the link: