Baltic Journal of Economic Studies

Vol. 2, No. 4, 2016

Corresponding author:
1 Department of Economic Cybernetics, Vasyl Stefanyk Precarpathian National University.
E-mail: dmytryshyn_l@hotmail.com
2 Department of Economic Cybernetics, Vasyl Stefanyk Precarpathian National University.
E-mail: bogdan.bc.2201@mail.ru

REGIONAL ASPECTS OF DEVELOPMENT
AND FINANCING PECULIARITIES

OF AGRICULTURE IN UKRAINE
Lesia DMYTRYSHYN1, Bohdan BRYNZEI2

Vasyl Stefanyk Precarpathian National University, Ukraine

Abstract. The aim of this work is the study and generalization of conceptual foundations, problematic and peculiarities
of functioning of agriculture in modern economic conditions, the conceptual foundations of state regulation at the
regional level and features of their financial providing. Methodology. Theoretical and methodological basis of the
research is the work of scientists on problems of financial providing of agriculture development. The authors used
the combination of the following methods in the process of scientific investigation: generalization and scientific
abstraction – to concretize the conceptual-categorical apparatus; monographic method – to present the views of
scientists on this problem; comparative analysis – to detect the features of agriculture development and to compare
instruments of its financial providing. Results. The functioning features of agricultural enterprises of the region
in current economic conditions have been researched, highlighting fundamental principles: the rational use of
resources; state regulation and state support; financial providing. The main purposes of state support of agriculture
were determined in the article: increase in production of high quality products with the aim of solution of the food
security problem; the increase of competitiveness of the agricultural sector to stimulate economic growth; the
intensification of research work that will create competitive advantage for domestic producers in the long term
perspective; development of rural areas; increase of rural employment and so on. Practical value. It was established
that a significant number of unresolved financial problems of this economic sector requires the development and
implementation of new, adequate to modern conditions, methodical approaches to financial and credit providing
of industry, in particular the expansion of the market of banking services (project financing and forward loans,
forfaiting, factoring); the widespread introduction of rural credit cooperation. The development of the national
agricultural enterprises in new economic conditions is impossible without their financial support at the expense of
investment resources. The optimal variant of financial policy of agricultural enterprises is the development of ways
of attracting and using of financial resources for the future to achieve strategic and tactical goals of the company. In
this case income must be generated and used in accordance with the scale of production and real tasks, taking into
account the dependence of receipts from the influence of external and internal factors; expenses should consider
their economic validity and the minimization, confirmed by the respective financial calculations, and differentiation
by their degree of importance and areas of use. The main problem of financial providing of agricultural enterprises
of the region at the present stage is the absence of a mechanism of integrated use of traditional and non-traditional
sources of financial resources for the national managing conditions. Originality. On the basis of this study the
authors proposed conceptual framework for financial support of agricultural enterprises that constitute the basis of
scientific research to establish an effective models of financing of agricultural producers.

Key words: agriculture, development, financial resources, state support, region.

JEL Classification: Q1, O13, G18, H1, H7

1. Introduction
Agriculture as one of the most promising sectors of

Ukrainian economy in modern conditions requires
the formation of measures to overcome the decline
in production, strengthening of a financial state of

agricultural producers, the use of existing reserves, the
transition of agricultural production to the innovative
type of development. Under these conditions the role
of the state in supporting of the agricultural sector
is the most significant for the formation of effective

Baltic Journal of Economic Studies

Vol. 2, No. 4, 2016
organizational and economic mechanism of its
functioning.

Theoretical questions on the issues of state
regulation and features of financial providing of
agricultural producers were studied by the following
national scientists: M. Ya. Demianenko, O. Ye. Hudz,
P. A. Stetsyuk, V. P. Synchak, A. V. Chupis, V. A. Borysova,
S. M. Kvasha, Yu. O. Lupenko, O. O. Nepochatenko,
N. S. Prokopenko etc. However, despite the great
diversity of scientific issues and the depth of their
investigation in modern economic science, insufficient
attention is paid to methods and tools for additional
access to financial resources by agricultural enterprises.

The aim of the article is the study and generalization
of the conceptual foundations, problematic and
peculiarities of functioning of the rural sector in
the current economic environment, the conceptual
foundations of state regulation at the regional level and
peculiarities of their financial providing.

2. State financing of agriculture
In the conditions of transformation of Ukrainian

economy a balanced combination of state regulation of
agrarian sector with the mechanisms of the free market
is extremely important. In this case we should carefully
apply the measures of direct intervention in the market,
which has proved their low efficiency in most developed
countries, and we should give preference to measures
aimed at improving the efficiency and competitiveness
of agricultural production (Ivanko, 2006).

To promote agricultural development government
must support productivity growth, improve food
security at household level and stabilize the market.
Innovative development of agricultural production and
processing, the creation of a modern national system of
industry informatization as close as possible to the needs
of the agrarian market subjects, ensuring of constructive
interaction between the state and agricultural business,
control over observance of requirements of ecological
safety of agricultural production and food quality
must become the main directions of state regulation
and support. Along with this, in the modern socio-
economic conditions, the effectiveness of state
economic regulation of the agro-industrial complex is
directly based on the rational combination of measures
at the central and regional levels, and it requires the
development of fundamentally new methodology of the
state regional agricultural policy.

During determining the development priorities, goals
and objectives of regional policy the main attention
should be paid not so much to the choice between the
principles of fairness and efficiency, but to the search
of their optimum ratio and also the proper distribution
of functions between the centre and the regions.
The economic basis for a modern agricultural policy
should be not only quantitative increase of agricultural

production and profitability of agricultural enterprises,
but also integrated satisfaction of the growing needs
of region subjects in terms of better living conditions,
environmental safety and social development.

Taking into account the specificity of regional agrarian
policy in Ukraine, regulatory support, administrating,
financial, economic and social regulation should be
its main methods at the present stage, which will
create a temporary favorable conditions mainly for
new, strategically important for regional agriculture
enterprises, providing their restructuring. In addition,
modern regional agricultural policy should take into
account structural, social and institutional factors
that will ensure not only the growth of agricultural
production, but also complex economic, environmental
and social development of the region.

Riabokon (Riabokon, 2001) indicated that in the
present circumstances of agricultural production in the
region we need active using of functional management
relations. The Ministry of agrarian policy of Ukraine
should be a key unit of the management institutions
which unites along with the state also professional,
cooperative and corporate associations of agricultural
producers, inter-professional associations of operators
of food markets, which have a part of the government
functions and are created on democratic principles. It
should be noted that in modern economic literature,
bipolarization is considered the most effective way of
formation and using of the operators of the grocery
market, which is achieved by the methods of vertical
production and marketing integration, where the
operator on the supply side acts as one integrated
manufacturer and on the demand side – as the end
consumer. In this case, the competition is moved to the
area of assessments of the end user, which determines
the matching measure of quality and prices of the
offered products to his requirements.

The authors (Lupenko, Mesel-Veseliak, 2012)
noted that in order to use the potential of agriculture
more fully a profitable environment should be created
primarily for the functioning of different organizational
and legal forms of management in agrarian sector on an
equal economic basis; for harmonization of interests
of owners, employees and rural communities; for the
formation of a competitive production structures
on internal and external markets; for provision of
profitability of agricultural enterprises at the level of
15 percent necessary norm to ensure the expanded
reproduction of the production.

This can be achieved through the continuation of
reforms in the country 's economy and its agricultural
sector towards the optimal combination of industrial
and agricultural production, the subordination of their
activities to the needs of internal and external markets
of agricultural products and foodstuffs, socio-economic
development of rural areas, the transition from sectoral
to territorial-self-governing management system of

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Vol. 2, No. 4, 2016
integrated development of agricultural production
and rural areas, the formation of an effective scientific-
technological, budgetary, tax, financial, credit and
pricing policy.

In this case, it is worth noting that according to the
report "Economic results of agricultural production
in 2014", the financial result from operating activities
of agricultural enterprises (except small) in 2014
amounted UAH 34.5 billion profit against UAH
12.3 billion in 2013; the income from production
of agricultural products and services in crop and
livestock production received 81.5% of enterprises,
profit amounted UAH 5,8 million in average for one
enterprise. In 2013 this indicator was respectively 64.3%
and UAH 3.2 million. Thus, the profitability of crop
production and production of agricultural products and
services decreased in 2013 against 2012 in almost two
times (The official website...).

State support of national agricultural producers, as it is
known, can be arranged not only through direct budget
payments, it may be arranged in the form of indirect
measures (purchase and commodity interventions
with grain, purchases of agricultural products and
foodstuffs for state needs etc.). It is also impossible
to agree with the conclusions: "government support
is a combination of various instruments and tools of
financing", "state support is a payment from the state
budget". Support is supplemented by such effective
measures of organizational-economic character of
the state as the organization of leasing operations,
debt re-structuring of agricultural organizations,
cancellation of penalty from enterprises, organization
of the system of credit cooperation, stimulating of
the creation of agricultural consumer, trade and
purchasing, processing and service cooperatives, the
introduction of the unified agricultural tax, etc.

So, according to most scientists, the main objectives
of the state support of agriculture are increasing of
production volumes of high-quality products with
the aim of solution of food security problem; the
competitiveness of agrarian sector of economy for
stimulation of economic growth; intensification of
research work that will create competitive advantage
for national producers in long term perspective; the
development of rural areas; increasing of employment
of the rural population (Hudz, 2007; Luzan, 2008;
Oliynyk, 2009; Vasylchak, 2009).

3. Credit-investment and insurance
instruments of financing

Development of the national agrarian enterprises in
new economic conditions is not possible without their
financial support at the expense of investment resources.
The crisis in the global and national economies led to
the reduction of investment pro-grams of national
and foreign investors in the agricultural sector of

Ukraine. The modern character of Ukrainian economy
determines the need for national agricultural enterprises
in the investment support, which will promote not only
the maintenance but also the development of industry
(Liashenko, 2014).

The intention of agricultural enterprises to
development, innovation, effective activity in conditions
of constant shortage of financial resources causes the
constant need for borrowing. The use of borrowed
capital provides the opportunity to expand the scope
of investment activities of enterprises, to provide
more effective use of private capital, to accelerate the
formation of various trust funds and eventually increase
the market value of the enterprise.

Credit resources play a crucial role in the development
of agriculture. This is due to the seasonal gap between
the investments and continuity of the reproduction
processes. Significant requirement in working capital
with insufficiency of own funds transforms loan into
significant source of formation of financial resources
and necessitates a search of ways of credit support.
However, loan obtaining by enterprises of the agrarian
sector remains problematic. This is largely due to
(Oliynyk, 2013) a decrease in state support for villages;
inaccessibility of credit resources for rural entities
because of high interest rates; disregard of seasonal
work during crediting. Further development of market
relations has caused the dependence of the agriculture
functioning from the financial-credit system.

We should emphasize that regardless of the amount
of loans granted to rural agriculture, only this region
achieved the highest growth of gross output compared
with other sectors of the economy that largely reflects
the effective use of financial resources. The trend
of crediting is due to both subjective and objective
factors. It is known that one of the conditions for credit
receiving is the creditworthiness of the borrower,
that is a guarantee of repayment. In conditions of low
profitability and often unprofitableness, low liquidity
of the assets, the agricultural enterprises are often not
creditworthy. The result is a vicious circle: the lack of
financial re-sources is the reason for the low efficiency
of agricultural production, which in its turn makes it
impossible to obtain credit. In these circumstances,
we need a development and implementation of new,
adequate to modern conditions, methodical approaches
to financial and credit providing.

The main tasks for improving of crediting of
agricultural enterprises are: the expansion of the
market of banking services (introduction of non-
traditional ways of crediting by Ukrainian banks, which
are widespread in Europe, – project financing, forward
crediting, forfaiting, factoring); an enlargement of
possibilities and the promotion of alternative financial
institutions; the development and application of
all possible sources for capital attraction during
crediting of rural agriculture (rational use of budgetary

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Vol. 2, No. 4, 2016
funds, increase of assignations from the state for
crediting, attraction of foreign credits, the creation of
mechanisms of public, banking or mixed crediting);
resolution of property and land issues; the solution of
the problems of old debts.

According to (Oliynyk, 2013), the key foundation
of the system of financial providing of agricultural
enterprises are financial resources that can be
generated from own, borrowed and non-repayable
sources. And their main problem is a rational use of
the use, the accumulation and formation of financial
resources in the process of economic activities that
form the basis of the effective financial policy of the
enterprise. The optimal variant of financial policy of
agricultural enterprises is the development of ways
of attracting and using of financial resources for the
future to achieve strategic and tactical goals of the
company. In this case income must be generated and
used in accordance with the scale of production and
actual tasks, taking into account the dependence

of financial revenues from the influence of external
and internal factors; expenses should analyze their
economic validity and the minimization, confirmed by
the relevant financial calculations, and differentiation
by a degree of their importance and directions of using.

The main problem of financial providing of agricultural
enterprises of the region at the present stage is the
absence of a mechanism of integrated use of traditional
and non-traditional sources of financial resources for
the national managing conditions. Another direction
of improvement of financial provision of agricultural
enterprises is the conclusion of forward contracts,
which will give the opportunity to replenish their
financial resources on an interest free basis. Advantages
of forward contracts for agricultural enterprises are the
following: the flow of financial resources at key stages of
production, high purchase prices for the products and
their guaranteed sales, way of insuring of price risks.

So, at the present stage of development of the
agrarian economy there is a necessity of organization

Self-financing Revenues; agricultural receipts

Crediting Bank credit; accounts payable; credits of credit
unions; credits of cooperative banks; credits of the
agricultural fund

Insurance Insurance reimbursement

State financing
Programs of reducing of credit interest rates;
programs of compensation of insurance rates;
compensation by environmental programs;
compensation by leasing operations; tax benefits

Investment Issue of securities and access to financial markets

External factors of influence: state financial
support; depreciation policy; industry; tax
policy; interest rates on loans; the
development of the financial market and its
infrastructure; inflation

Internal factors of influence: form of ownership;
organizational and legal structure; the creditworthiness
of the enterprise; internal financial policy of the
enterprise; the purpose and objectives of financial and
economic activities during certain period of time;
increase of accounts payable; increase in revenue

SOURCES OF FINANCIAL RESOURCES OF
AGRICULTURAL ENTERPRISES

Key issues: insufficient
government financial support;
low level of development of
insurance coverage; the lack of
an effective mechanism of
mortgage lending; low level of
development of rural credit
cooperation

Fig. 1. Conceptual framework of financial support of agriculture

Baltic Journal of Economic Studies

Vol. 2, No. 4, 2016
of widely available credit network for rural entities
by means of combining and enhancing of the existing
rural financial resources. In Ukraine today, credit
cooperatives are represented by credit unions,
which unfortunately have not the possibility of legal
crediting of subjects of entrepreneurial activity.
Consequently, it is advisably to develop the system
of rural credit cooperation based on the experience
of foreign countries.

Rural credit cooperatives are self-regulated
organizations, controlled by their members; their
rights and obligations differ in the following ways:
making deposits, obtaining loans, participating in the
work of the cooperative (Oliynyk, 2013). According
to the data (The official website...), 01.01.2015
in Ukraine there were 613 agricultural service
cooperatives, among them 147 – cooperatives of
cultivation and harvesting, 179 – dairy, 34 – grain,
163 – processing and marketing of meat, 66 – fruits
and vegetables, 171 – cooperatives of another
specialization. This fact indicates about high potential
of development in this area, because the need for
financial mechanism is not actually implemented
through the national banking system.

The scientist (Hudz, 2007) proposes to group
financial resources by the fol-lowing classification
criteria, taking into account new economic conditions
of management of agricultural enterprises: variation
level of income, planning methods, forms of usage,
risks of invested financial resources, form of
exposure, level of exposure, form of establishment,
membership in the economic process, method of
accumulation, the purpose, the stage of movement.
The mechanism of ensuring of the financial resources
for enterprises is shown as a set of interrelated
economic relations, which appears during search,
formation, accumulation, using and ensuring of
financial resources in accordance with objectives.
The defining characteristic of this mechanism is the
movement of financial resources.

4. Conceptualization of the study
On the basis of this study the following conceptual

framework of financial providing of agricultural
enterprises has been proposed (Fig. 1).

5. Conclusions
Consequently, the development of agricultural

production in the regional aspect should be based on
the effective mechanism of state support, as improving
the effi-ciency of agricultural production is hampered
by the lack of financial resources in the industry. This
requires the improvement of crediting of agricultural
enterprises, that is the expansion of the market of
banking services; empowerment and promotion of
the development of alternative financial institutions;
development and application of all possible sources to
raise capital during agriculture crediting; solution of
property and land issues; the solution of the problems of
old debts, as well as the implementation of appropriate
investment programs.

One of the possible solutions of improvement of the
financial state of agricultural enterprises in the region
can be the creation of appropriate credit cooperatives,
which will contribute to improvement of the state
of agriculture in the region; increase of employment
and income of the rural population; development of
rural areas; middle-class formation and the solution
of social problems of rural communities; expanding
access to credits for small businesses in rural areas and
other categories of borrowers. Taking into account the
importance of creation in Ukraine of the cooperative
credit system, especially for financial and credit services
to rural areas, the government should support this
process.

Researched and analyzed conceptual features of the
functioning and financial security of agriculture in the
current economic conditions will form the basis of
future research on the formation of an effective model
of financing of agricultural producers.

References
Demianenko, M.Ya., Ivanyna, F.V. (2008). State support as an ensuring factor of competitive agricultural production.
Ekonomika APK (Economics of agro-industrial complex), 9, рр. 3–10.
Hudz, O.Ye. (2007). Financial resources ensuring of the agricultural enterprises: dis. abstract. ... doctor of econ.
sciences: spec. 08.00.03 "Economy and management of enterprises (economics of agriculture and agro-industrial
complex)". National scientific center “Institute of Agrarian Economics” UAAS, 39 р.
Ivanko, A.V. (2006). Regulation of agricultural production of the region: dis. abstract ... cand. of econ. sciences:
spec. 08.07.02 "Economics of agriculture and agro-industrial complex". National Agricultural University, 31 р.
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Zaporizhzhia: KPU, 798 р.
Lupenko, Yu.O., Mesel-Veseliak, V.Ya. (2012). Strategic directions of development of agriculture of Ukraine for the
period until 2020. К.: NNTs «IAE», рр. 7-11.
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Oliynyk, K.A. (2013). Financial support of small agricultural enterprises: dis. abstract ... cand. of econ. sciences:
spec. 08.00.04 "Economy and management of enterprises (by economic activities)". Mykolaiv Nat. Agrarian
university, 23 р.
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conditions: dis. abstract. ... doctor of econ. sciences: spec. 08.07.02 "Economics of agriculture and agro-industrial
complex". Institute of Agrarian Economics of UAAS, 47 р.
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Леся ДМИТРИШИН, Богдан БРИНЗЕЙ
РЕГИОНАЛЬНЫЕ АСПЕКТЫ РАЗВИТИЯ И СПЕЦИФИКА ФИНАНСИРОВАНИЯ СЕЛЬСКОГО
ХОЗЯЙСТВА УКРАИНЫ
Аннотация. Целью работы является исследование и обобщение концептуальных основ, проблематики
и особенностей функционирования сельского хозяйства в современных экономических условиях,
концептуальных основ государственного регулирования на региональном уровне и особенностей
их финансового обеспечения. Методика. Теоретическую и методологическую основы исследования
составляют труды ученых по проблемам финансового обеспечения в сфере развития сельского хозяйства.
В процессе научного исследования использовалась совокупность следующих методов: обобщение и
научной абстракции – с целью конкретизации понятийно-категориального аппарата; монографический –
при освещении взглядов ученых на исследуемые проблемы; сравнительного анализа – при выявлении
особенностей развития сельского хозяйства и сопоставлении инструментов его финансового обеспечения.
Результаты. Исследованы особенности функционирования сельскохозяйственных предприятий региона
в современных экономических условиях с выделением принципиальных положений: рационального
использования ресурсов; государственного регулирования и государственной поддержки; финансового
обеспечения. Установлено, что основными целями государственной поддержки сельского хозяйства
являются увеличение объемов производства продукции высокого качества с целью решения проблемы
продовольственной безопасности; повышение конкурентоспособности аграрного сектора экономики,
что будет стимулировать рост экономики; активизация научно-исследовательской работы, что создаст
конкурентное преимущество национальных товаропроизводителей в долгосрочной перспективе; развитие
сельских территорий; повышение занятости сельского населения и тому подобное. Практическое значение.
Установлено, что значительное количество нерешенных финансовых проблем данной сферы хозяйствования
вызывает необходимость разработки и реализации новых, адекватных современным условиям методических
подходов к финансово-кредитному обеспечению отрасли, в частности расширение рынка банковских услуг
(проектное финансирование, форвардное кредитование, форфейтирование, факторинговые операции);
широкое внедрение сельской кредитной кооперации и тому подобное. Также развитие национальных
аграрных предприятий в новых экономических условиях невозможно без их финансовой поддержки за счет
инвестиционных ресурсов. При этом оптимальный вариант финансовой политики сельскохозяйственных
предприятий заключается в разработке направлений привлечения и использования финансовых ресурсов
на перспективу с целью достижения стратегических и тактических целей предприятия, при которых доходы
должны формироваться и использоваться в соответствии с масштабами производства и реально поставленных
задач, с учетом зависимости финансовых поступлений от влияния внешних и внутренних факторов; расходы
должны учитывать их экономическую обоснованность и минимизацию, подтвержденную соответствующими
финансовыми расчетами, и дифференциацию по степени их важности и направлениям использования.
Основной проблемой финансового обеспечения сельскохозяйственных предприятий региона на
современном этапе является отсутствие механизма комплексного использования как традиционных,
так и нетрадиционных для отечественных условий хозяйствования источников финансовых ресурсов.
Значение/оригинальность. На основе проведенного исследования предложены концептуальные основы
финансового обеспечения сельскохозяйственных предприятий, положенные в основу научных исследований
по формированию эффективной модели финансирования сельскохозяйственных производителей.