The Hungarian agricultural sector needs development. Much of the country is suitable for farming, with good-quality, fertile soil and a decent climate. The country also has water resources which, with irrigation, provide adequate water production. 

Domestic food supply is largely met by production. The level of self-sufficiency in food supply for the country is above 80%. 

However, the sector faces a number of challenges to make the most of its assets. There is a general lack of resources. Investments are heavily dependent on subsidies and are typically financed by loans. 

External fundraising is needed for development. Production costs are high by EU standards and efficiency is below the EU average. Meanwhile, outdated techniques and technologies are hindering success in the industry and hampering compliance with regulations and social needs. 

Yet Attila Tóth, head of trade finance at Hungary’s CIB bank, is confident that finance can lead agriculture into a new era. “The capital needs of agricultural businesses are very high and therefore the sector has above-average financing needs,” he says.

“To achieve a unit of revenue, an agricultural enterprise needs between two and three times as much financing as other actors in the national economy.”

Transforming agriculture

Recognising the level of opportunity in the agricultural sector along with its unique financing needs, CIB bank has set up the Agricultural Competence Centre in the Corporate Division, which sits within the bank’s Trade Finance department.

Agriculture is a strategic priority for Hungary, particularly exports. “To support exports, we provide documentary operations services to our clients as well as export finance,” says Tóth.

“In addition, we also provide sales support and advice related to sustainable management.”

AI and precision technology is already transforming agriculture around the world. The job of the competence centre is to match Hungarian agricultural business with financial support so that businesses can grow, whether that is through installing irrigation systems or AI crop monitoring. Small businesses, for example, can accept payments through an app, with no point-of-sale device needed.

Among the services offered to small businesses is an online credit proposal platform, through which an agricultural company can discover their lending potential. It has also set up paperless lending, which guarantees agricultural businesses an answer within a day.

Most importantly, customers can benefit from a tailor-made finance service and speak to people who understand agriculture and its demands.

The centre is in direct contact with Hungary’s Product Councils, the Institute for Agricultural Economic Research, the Chamber of Agriculture, the Central Statistical Office, the National Food Chain Safety Office, the Ministry of Agriculture, the Banking Association, and the country’s largest agricultural university.

Sustainability and digitalisation

A drive for sustainability lies at the heart of CIB bank's agricultural service, aligning with Intesa Sanpaolo's business plan, which has a strong emphasis on a circular economy. The aim is to make farming resilient and outward facing.

The Hungarian Central Bank is offering green capital relief, an initiative that particularly important for the agricultural sector. As a result, CIB wants to support those customers that improve the energy-efficiency of their enterprises, as well as those interested in agri-digitalisation. 
“There is a lot of interest in agri-digitalisation among our customers,” says Tóth, “which is not surprising, as input material prices are highly volatile and also represent a significant cost.

“In addition, production itself has a climate-related risk.”

Hungary has recently seen drought devastate some farming communities. Food safety is consequently a key concern for the food industry and food-related product chains.

The income of the food industry is below average. Its pre-tax profit as a percentage of turnover is lower than the average for the national economy, despite improvements in recent years. 

“It is the close co-operation of many sectors within agriculture that ensures security of supply,” says Tóth.