Investment Activity in SME, Farm Sector Continues to Grow


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Almost half of larger SMEs have made significant investments worth at least HUF 10 million in the last two years, according to a study by Magyar Bankholding. The survey suggests that investment sentiment remains high, with more than a quarter of responding businesses saying they also plan to invest next year.

The latest market research conducted for Magyar Bankholding by NMS Hungary examined the development of realized and planned investments at SMEs with an annual turnover of at least HUF 300 million.

Some 47% of respondents said they had implemented an investment worth at least HUF 10 mln, while 14% said they had made several investments. Sixty-six percent of companies said they were implementing some form of modernization.

The latest data builds on the Agricultural Economy Index survey conducted in the spring of 2021 by Budapest Bank (part of Magyar Bankholding), which found that 60% of agricultural companies had implemented developments in the past year.

Magyar Bankholding says the surveys show the Ministry for Innovation and Technology’s strategy to strengthen Hungarian micro-, small, and medium-sized enterprises is leading to productivity improving rapidly. However, it is still not yet half of the EU average.

Business leaders say they are aware of the importance of increasing their competitiveness, so various technological developments have been a priority in recent years: the most popular investment goals among respondents were capacity expansion, equipment and machine replacement, building renovations and technology development.

Businesses were not deterred by the pandemic either, with three-quarters of respondents saying that COVID had no effect on their investments and that 10% of them brought it forward, possibly at a higher value, and had even developed more than was previously planned.


Two-thirds of the implemented investments were below the HUF 100 mln mark, which in most cases (82%) were financed with equity, but 23% also utilized state-subsidized loans and 22% tender funds. The most critical factor in deciding about borrowing was the interest rate of the loan, while the quality of service, personal contact, and fees and costs were the most important aspects when choosing a bank.

“The hit product which has financed investments in recent years was the FGS Go! Program, but its budget is exhausted,” noted Levente Szabó, deputy chief business officer of individual services at Magyar Bankholding.

Other products are now available to domestic SMEs, such as the Széchenyi GO! family and EXIM bank and Hungarian Development Bank (MFB) programs, and there are also significant funding opportunities in the EU’s new seven-year cycle, Szabó points out.

“As the ceilings for each of them were lower than for the FGS Go!, it is important to choose a financial partner to support a development who not only offers loans, but is also an expert in finding the best combinations,” he added.

The results of the research conducted in the spring of 2021 for the Agricultural Economy Index make it clear that the agricultural sector, too, is prepared to invest: 60% of the farmers participating in the research said they implemented some development in their businesses. To preserve liquidity, the average amount invested was somewhat less than the SMEs, but more than HUF 90 mln was still spent on modernization on average.

Improving the competitiveness of production was the primary goal of the agricultural investments. Half of those surveyed said they would not cut spending, and 32% planned to spend more than they did last year. Two-thirds of them would finance investments from their own resources and bank loans, while the use of state subsidies more than doubled to 15% and EU subsidies to 8%.

Magyar Bankholding Backstory

Hungarian Bankholding Ltd. is a domestically owned financial holding company, which will implement the bringing together of Budapest Bank Zrt., MKB Bank Nyrt., and Takarék Group. The company started its effective operations on Dec. 15, 2020, after the National Bank of Hungary approved the merger.

The member banks say they collectively form the second-largest market participant in terms of aggregate balance sheet total in Hungary, with the aggregate loan portfolio of Budapest Bank, MKB Bank and Takarékbank amounting to HUF 3.951 trillion. Of that, the aggregate agri-food loan portfolio comes to HUF 473 bln, covering a quarter of the market. The banking group aims to be a market leader in areas like lending to corporate clients, the micro-, small- and medium-sized enterprise sector, and the leasing market.

Through its member banks, the group currently provides state schemes to more than 322,000 corporate customers, about 41,000 of which are from the agricultural sector. The financial institutions belonging to Magyar Bankholding say they have provided HUF 355 bln to enterprises through nearly 14,000 loan transactions within the framework of the Széchenyi Card GO! program, available since July 1, 2021; while in the EXIM Compensation Program, which promotes exports, more than HUF 90 bln was allocated.

The Agricultural Banking Index

An external research firm commissioned by Budapest Bank has been examining the expectations of SMEs in the agricultural sector since 2015. The value of the Agricultural Economy Index is set between -100 and +100, where a value of 0 is neutral, a value below it is negative, and a value above is positive. The research examines the financial expectations of agricultural enterprises, the development of their investments, the assessment of the market environment, the critical elements related to the labor market and financing possibilities. Based on these, three sub-indices are defined within the main index: success, investment, and demand. The nationally representative research is conducted by interviewing agricultural enterprises with a turnover of more than HUF 50 mln on a sample of 400. The last survey was conducted by NRC Marketing Research and Consulting Ltd. between May 11 and July 8, 2021.

This article was first published in the Budapest Business Journal print issue of January 28, 2022.

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