Kyrylo Mukhomedzyanov, project lead of the IFC project «Expanding Ukraine’s agri-sector access to capital markets»

In less than a month, an innovative instrument — agrarian notes — will be introduced to the Ukrainian agri-financing market.
Since the adoption of the law on agrarian notes on February 22, 2024, the market has been actively preparing for the launch of the instrument. The IFC project team, in partnership with the Swiss Confederation and jointly with the market regulator, has been working on creating the necessary legal and regulatory framework, developing a specialized digital infrastructure based on the Central Depository, and conducting active information and awareness campaigns among agricultural producers and creditors.Let's discuss what drove the idea behind developing agrarian notes, what innovations they will introduce to the market, and how they will interact with the existing instrument of agrarian receipts.
Agrarian receipts: a proven tool that laid the foundation for change
Agrarian receipts have proven themselves as an effective financial instrument for the agricultural market, providing small and medium-sized producers with the opportunity to attract financing even without liquid assets for collateral. They provide prompt access to commodity and financial resources secured by future crops, which is especially relevant for small and medium-sized businesses. The flexibility of the receipts allows them to be adapted to the needs of farmers, offering a choice between commodity and financial formats. The simplicity of issuance, the transparent registration process, and the ability to attract financing from a wide range of creditors make this tool accessible and convenient for agricultural producers. Amid the economic instability caused by the war, agrarian receipts have become a crucial source of support for farmers, attracting up to $200 million annually into the agricultural sector. Overall, since 2015, agrarian receipts have helped attract more than $2.4 billion into the Ukrainian agri-sector.
Agrarian notes: a digital evolution in financing
The experience of using agrarian receipts created a new market need to modernize the instrument and defined the future direction of its evolution. The law on agrarian notes is a step forward toward the digital transformation of agri-financing.
The key changes brought about by the introduction of agrarian notes to the market include:● Acquiring the status of a security, which ensures the integration of Ukraine's agribusiness into capital markets and provides investors with a new, dynamic financial instrument to add to their portfolios.● Accounting in the Register of agrarian notes and the depository system, which ensures the convenience, reliability, and speed of operations with agrarian notes through electronic interaction with other public registers and the depository system.● Lower transaction costs thanks to the digitalization of the issuance, circulation, and execution processes, eliminating the need for notarization. This makes financing more accessible for small agricultural producers.● A broader range of users and agricultural sectors, secured at the legislative level. Agricultural cooperatives now have the ability to issue agrarian notes. Additionally, not only crops but also livestock and primary processing products can serve as collateral, making agrarian notes more inclusive.● Better protection of creditors' rights, which ensures faster decision-making and greater security, thereby strengthening creditor trust and increasing the volume of financing for the agricultural sector.
The introduction of agrarian notes, especially amid Russia's invasion of Ukraine, is a vital step toward the sector's transformation, as small and medium-sized agricultural producers and investors will now gain a transparent and accessible financing mechanism.
Both instruments will operate in the market in parallel starting January 1, 2025, giving creditors and agricultural producers the opportunity to choose the most convenient tool that best meets their specific needs. This truly marks a landmark stage in the transformation of the agri-financing market and opens up new opportunities for the Ukrainian agricultural sector, which continues to prove its resilience and adaptability every day, even under the difficult conditions of war.