Uzbekistan: loans help farmers sell more fruits and vegetables

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TASHKENT (TCA) — Agriculture plays a highly important role in Uzbekistan’s economy. In 2017, 49.4% of the population – around 16 million people – resided in rural areas. The agriculture sector, therefore, has a significant impact on rural livelihoods, jobs, and food security, accounting for about 17% of GDP, 15% of export revenues, and over one-third of employment in the country, the World Bank said in an article posted on its website.

Horticulture is a significant component of the agricultural sector in the country, although the sub-sector accounts for only about 16% of aggregate arable lands, in contrast to grains (47%) and cotton (37%). But, with a growing domestic and export market, the horticulture sub-sector is steadily increasing, primarily by displacing land used to grow cotton.

For the 4.7 million dehkan farmers who cultivate agricultural land plots of less than 0.5 hectares in rural and disproportionally poor communities, horticulture is an important source of income. Horticultural products are also grown by 21,000 larger private farms across the country. Evidence suggests that production of fruits and vegetables is among the most profitable activities for both dehkan and private farms. Indeed, horticultural export earnings have surged in recent years, growing from US$ 68.7 million in 2000 to US$ 1.35 billion in 2013. The economic impact of the sub-sector is therefore significant, accounting for 35% of agriculture export value.

Uzbekistan has become a major producer of horticultural products, with a global potential. In 2014, it was the largest producer of apricots, the eighth largest producer of cherries, and fifteenth in apple production. In 2016, the country exported 818,500 tons of fresh and processed fruits, vegetables and grapes to 43 countries. The country’s main export markets are its neighbors, in particular Russia and Kazakhstan, as well as some European and Asian countries.

The country has a comparative advantage in horticulture based on its natural endowments. Its agro-climatic conditions, which are similar to Chile, Turkey, and California in the United States, support many of the same crops grown in these countries. Favorable conditions also reduce problems related to pests and diseases. Farmers often use organic fertilizers, while the weather also allows high productivity without heavy use of pesticides. Such conditions give local farmers a unique opportunity to deliver high-quality fruit and vegetables to domestic and export markets.

The environmental and social benefits are also notable: as horticulture crops are less water intensive, they offer the highest potential for increasing incomes (their gross margins per hectare are up to five times higher compared to cotton and wheat), and they generate more all-season employment.

The Government’s reform and development agenda places increasing emphasis on horticulture, which is reflected in national strategies and investment priorities. The National Development Strategy for 2017-2021 recognizes the need for diversification out of cotton into high value-added and labor-intensive production and processing, including horticulture, which is expected to contribute to significant growth of rural jobs, food security and exports.

Although lending for agriculture has increased, the demand is considerably greater. It is estimated that the investment needs in the horticulture sector equate to more than US$1 billion. As such, one of the main goals of a horticulture development project (HDP) supported by the World Bank was to provide Uzbek farmers and agro-firms with access to finance. Sub-loans allocated by local banks have funded business activities across the country that affected a larger pool of horticultural producers and 12,000 farmers by providing improved access to services and facilities (cold storage, processing) or inputs such as seedlings, fruits and vegetables (through nurseries and orchards).

So far, a total of 223 sub-loans have been issued across all regions targeted by the project for a range of investments. It is estimated that these sub-loan investments will directly create 2,500 jobs in rural areas, of which around 750 would be for women. In addition to the sub-loans, the sub-borrowers have co-invested US$ 52.3 million equivalent of their own funds, bringing the total amount of investments in the agricultural sector to US$ 185 million.

Sergey Kwan

TCA