Cost Efficiency of Applying Trade Finance for Agricultural Supply Chains

Abstract

Agricultural enterprises are active participants of the trade finance market, especially in terms of the acquisition of plant protection products. Financial agents offer to take advantage of credit or provide services for promissory bill. Choosing the best proposals is connected with clearly understanding of interaction scheme between the participants, the cost services and other parameters of transaction. The aim of the research – to construct patterns interaction of the entities and explore the cost effectiveness calculation of alternative transaction. The schemes of interaction between agricultural producer, distributor and guarantor bank, using promissory and exchange bill, is investigated. It is proved that a promissory bill provides additional income, exchange bill increases the number of customers by granting a deferment. The financial scheme for producers without direct banking borrowing is proposed.

Keywords: agricultural supply chain, cost efficiency, effective interest rate, surety for bill of exchange, promissory note, trade finance

JEL Classification: G21, G23, Q14