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Innovative Agri-Food Value Chain Financing in Greece

loannis E. Chaniotakis

Introduction

Globalization has increased the role of internationally traded agricultural commodities in the world food economy. In addition, increased international awareness is observed regarding the importance of agriculture as a generator of income, employment, foreign exchange, tax revenues, as well as for poverty reduction and preservation of natural resources (see, e.g., Ahmed et al. 2012) . Further, the increasing commercialization of agriculture, i.e., the production by agricultural households of food and raw material for the market rather than for their own consumption, links poor agricultural household to markets and increases their need for finance and credit, implying an increasing requirement for agricultural finance as a facilitator of economic development. Furthermore, consumers of agricultural

I.E. Chaniotakis (h)

Agricultural Sector Operations Development, Piraeus Bank,

Athens, 105 64, Greece

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G. Mergos, M. Papanastassiou (eds.), Food Security and Sustainability, DOI 10.1007/978-3-319-40790-6_8

products demand information not only on the availability of a food product but also about the characteristics of its production and processing activities. Therefore, the entire agri-food supply chain has become important because there is increasing public awareness and concern about the availability and safety of the food being consumed (Handayati et al. 2015). As a result, agricultural finance is related to a number of issues, including the production of agricultural commodities for the market, poverty reduction, and preservation of natural resources, food security and sustainability (Echeverria and Beintema 2009).

Access to agricultural finance differs from market to market because the situation on the ground in each market is different. For this reason, a successful agricultural finance innovation in one country may not be suitable in another. For example, constraints on access to agricultural financing are related to factors that vary from one country to another (Gashayie and Singh 2015) . It is argued that although most agricultural finance constraints are common in almost all countries and have been identified by international research (operational, capacity, vulnerability and politico-legal), their importance in different countries in slowing down the availability of agricultural finance may be quite different, depending on the specific country characteristics. To alleviate such country-specific constraints, agricultural financing innovations are evolving with each country facing different challenges in implementing such innovations (Gashayie and Singh 2015). For this reason, before discussing the implementation of agricultural finance innovations, it is important to discuss the importance of the characteristics of each market, related to conditions not only of the value chain but also of the country and the entire banking system.

The main body of literature on these subjects refers to developing countries, with particular emphasis on African and Asian countries. It is interesting, however, to examine the case of an innovation introduced in the financing of Greek agriculture and its possible wider application. It is claimed that innovation in agricultural finance should be identified in more complex solutions than by the traditional banking loan characteristics (e.g., duration, grace period and repayment schedule). It seems that agricultural finance should be considered in the context of its total effect, not only on the borrower but also on the whole value chain in which the borrower participates, and even on the local economy. Thus, in the first section, in a brief literature review, the main terms and methodologies of agricultural finance are presented. Next, the particularities of the Greek agri-food sector are briefly summarized and their importance for agricultural finance is highlighted. The following section illustrates the innovative agricultural financing model applied in the Greek agricultural market, based on the value chain finance approach, with particular attention to the “Contract Farming Financial Program,” offered since 2013 by Piraeus Bank.

 
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