for their economic affairs. Since initial formation, the SGFFF has mediated credit to the
agricultural sector of approximately CZK 6.2 bil. and CZK 11 bil. for 1994 and 1995
respectively.
The adverse financial situation in agriculture not only affected producers, but
also many downstream industries, causing substantial delays in payment for produce.
These delays provided the downstream processors with the equivalent to an interest free
loan and greatly affected the producers cashflow and financial situation. To help
alleviate this situation the SGFFF began covering outstanding debt owed to agricultural
producers by downstream industries, it now has the ability to buy these debts and pay
60% to 80% of the value of the debt to the agricultural producer (Horcicova, 1997).
The state owned farms within the agriculture sector created many new bad debts
during the initial transitional period and at the beginning of 1994, almost all of the state
farms which had obtained government guarantees for their loans could not repay them.
Hence, the Czech Republic's Land Fund had to come up with more than CZK 1 billion
for the state farm arrears.
The use of input suppliers as an alternative source for credit to agriculture is
limited because many of unpaid debts, mainly from state farms. There are about 0.5
billion CZK of unrepaid loans from farmers to the Union of Agricultural Suppliers and
Purchasers. Future crops as collateral for these loans have less value than payments
required by input suppliers. A good example of the management results based on
different ownership is a comparison between losses in the private, co-operative and state
sector. The picture for the sectors is as follows: the losses in the state sector amount up
to CZK 8500 per hectare, CZK 1 051 per hectare in the co-operative sector, CZK 561
per hectare in private farm companies and CZK 157 per hectare in private farms.
Credit subsidies have been available for the Hungarian farmers since the
beginning of the reform. One of the governments early responses during the reforms was
the formation of the Hungarian Agricultural Development Fund (ADF) in 1992. Its goal
is to facilitate the ownership, structure and organisational transformation of agriculture
and forestry and is funded through state budgetary allocations and transfers from the
revenues of the state privatisation fund. The ADF is targeted at small and medium
farms with 60 or less employees providing subsidies or grants for investment in
production activities and farm infrastructure. There are two programs; 1) for production
assets, farmers receive either a 50 % subsidy on Development Fund loans which bare
zero interest and a seven year maturity or a 50 % interest subsidy on bank loans, and 2)
for infrasturctural projects (buildings and improvements), they receive a 40 %
development grant. Due to the collateral requirements for approximately 30% of the
loan (up to Ft 500 000) from the farmers who applied for preferential credits, the ADF
could not successfully supply loans for most of the agricultural producers. In 1993, only
Ft 1.1 billion of the Ft 4 billion available in the fund were allocated. Thus in early 1994
the government amended the ADF’s allocation rules and increased funding to Ft 12
billions. Due to these changes the number of applicants substantial increased from total
of 1600 in 1993 to 18,000 - 20,000 by the end of July 1994. This increase can be traced
to the 1994 removal of the requirements for the borrowers to obtain any commercial
bank financing for the project and the increase of government’s share of the tota