Home Marketing Food Security and Sustainability: Investment and Financing along Agro-Food Chains
The Benefits Created by the Implementation of the CFP
Benefits for both producers and enterprises are significant and more complex than just gaining access to liquidity. The producer, above all, secures the disposal of the production through the contract from the beginning of the farming period and can cover his needs for farming/breeding through the ensured financing of CFP At the same time, the producer receives funds from the bank without additional collateral apart from the contract signed with the enterprise. Moreover, he knows the quantity that he can dispose of and the price that he will be paid upon signing the contract. Thus, he may achieve better income through better financial planning. Finally, the repayment of his loan obligations to the bank and third parties, as well as his net income, is secured through the program.
The enterprise, on the other side, is guaranteed of stable suppliers of raw material; therefore, it can plan its production. The relationship with the producers becomes more stable, resulting in their ability to intervene for ensuring the production of the local product. The bank’s program ensures the necessary liquidity for the repayment of suppliers. The enterprise can also plan cash flow more efficiently from the beginning due to the availability of quantities, prices and estimated time of delivery. Liquidity is released and is thus used for other needs.
Even the bank gains benefits as it achieves high levels of customer satisfaction from the participants. Farmers manage to obtain access to liquidity required for their cultivation, secure the disposal of and payoff for their production, perform proper resource planning, improve product quality and build stable cooperation with involved parties. Enterprises manage to find financial support in a difficult economic period, follow an accurate cash flow programming and act with reliability and extroversion. The bank also achieves high levels of customer experience through the implementation of the customized cards mechanism and, moreover, supports the national economy by providing liquidity to the entire agrifood value chain.
The uniqueness of the Contract Farming Financial Plan originates from the following aspects:
Through CFP, Piraeus Bank mediates between partners, providing coordination, controlled funding and a broad network of appropriately equipped agri-retailers forming in this way the appropriate conditions for the sustainable development of both the agricultural sector and the Greek economy as a whole.
• The provision by the bank to CFP participants of a customized bank credit card enables farmers to make their purchases from certain retailers in a convenient and secure way, monitoring their expenses and planning for their future liquidity needs. In parallel, the card serves as a control mechanism in that it is credited with a certain credit line per customer per period, which is securely and fully repaid upon payoff of the farmer’s production by the contract partner’s working capital.
The greatest implementation challenge for the bank is to establish a thorough understanding of the program idea by both enterprises and farmers, providing them with the necessary information. Other issues faced during the development process are related to the coordination of all business areas involved and the minimization of time required between the application of an enterprise to participate in the program and the final approval and shipment of the CFP cards.
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