The European Agricultural Fund for Rural Development

The European Agricultural Fund for Rural Development (EAFRD) is the funding instrument of the second pillar of the EU’s Common Agricultural Policy (CAP). It aims to reinforce the 'first pillar' of income supports and market measures by strengthening the social, environmental and economic sustainability of rural areas.

The EAFRD budget for 2021-27 amounts to EUR 95.5 billion, which includes an injection of  EUR 8.1 billion from the next generation EU recovery instrument to help address the challenges posed by the COVID-19 pandemic.

The rules for rural development spending during 2021-22 are laid out in the CAP transitional regulation, adopted on 23 December 2020. The regulation largely extends the existing rules (initially in place for the 2014-20 period), with some additional elements to ensure a smooth transition to the new CAP, which is due to begin in 2023.

From 2023 onwards, rural development actions will be included under the framework of national CAP strategic plans . Each EU country will design a CAP Strategic Plan, combining funding for income support, rural development, and market measures. When designing their strategic plans, EU countries will contribute to the nine specific objectives through a toolbox of broad policy measures provided by the Commission, which can be shaped around national needs and capabilities. Within this framework, the Commission aims to make rural development actions more responsive to current and future challenges such as climate change and generational renewal, while continuing to support European farmers in a sustainable and competitive agricultural sector.

Through financial instruments, the EAFRD acts as a source for loans, microcredit, guarantees and equities, available to recipients in agriculture, forestry and rural areas who are undertaking financially viable projects that support the priorities of the EAFRD. 

Financial instruments are expected to support the agriculture and agri-food sectors to make the progress needed for the European Green Deal and to achieve ambitious targets in line with the new Biodiversity and Farm to Fork strategies. They can also contribute to the new long-term vision for rural areas through helping rural non-agricultural SMEs start or develop their activities.

The recent fi-compass study reports on the financing needs of the agriculture and agri-food sectors in 24 Member States highlight the potential to use EAFRD resources to meet the financing gap and are a good starting point for any Member State willing to set up a new financial instrument in the 2021-2027 period. 

The CAP Strategic Plan regulation (EU) 2021/2115, together with the CAP Horizontal regulation (EU) 2021/2116 as well as the Common Provision regulation (EU) 2021/1060, create the legislative framework for financial instruments implemented with EAFRD resources. A number of flexibilities have been introduced compared to the previous programming period, allowing the financing of stand-alone working capital, broader eligibilities on investments, and different possibilities to combine grants and financial instruments support, such as capital rebates, interest rate and guarantee fee subsidies, as well as technical support for the benefit of the final recipients.

Information from fi-compass for EAFRD financial instruments

On this website, EAFRD stakeholders can find a lot of useful and interesting information to improve their decision-making about financial instruments.