Development of circular agricultural economy: potential sources of financing innovative projects

Purpose. The purpose of this paper was to highlight the results of the study of potential sources of financing the circular economy in the agricultural sector and modeling the factors influencing the formation of financial support (with own resources) for the implementation of innovative circular projects of agricultural enterprises. Methodology / approach. This study uses the following methods: bibliometric (to determine the state of the problem under study based on the Scopus and Web of Science databases); correlation analysis (to identify and assess the close relationship between the factors influencing the formation of financial support (with own resources) for the implementation of innovative projects of agricultural enterprises); econometric modeling (to build a mathematical model of the dependence of the investment profit of agricultural enterprises of the Kharkiv oblast on production costs per 1 ha of agricultural lands and their areas); graphical (for building three-dimensional graph and visual representation of the revealed dependencies); monographic and abstract-logical (for generalization of the research results). The empirical part of the study was performed on the example of data from 506 agricultural enterprises of Kharkiv oblast in 2019. Results. European practices of financing circular projects are summarized. The results of a correlation analysis of the impact on the formation of financial support (with own resources) for the implementation of innovative projects of agrarian enterprises of the following factors are presented: staff motivation, concentration, intensity of land use, intensification, specialization, diversification, outsourcing. It is established that the fundamental basis for obtaining high indicators of income, marginal income, cash flow and investment profit is the formation of the appropriate amount of production costs per hectare. For example, an increase in the size of production costs by 1 thsd. UAH/ha of agricultural land contributed to an increase in the total amount of investment profit by 0.3199 mln UAH, an increase in the area of agricultural land per 1 ha – an increase in this profit by 0.0037 mln UAH. Originality / scientific novelty. For the first time, one- and two-factor linear econometric models were developed, which made it possible to carry out quantitative assessment of the impact of the intensification of production and land concentration on the formation of the investment profit of agrarian enterprises as the main potential source of self-financing of innovative projects. The provision on the formation of financial support for the implementation of circular projects in the agricultural sector, was further developed. Practical value / implications. The main results of the study can be used for (i) improving the policy of financial support for the implementation of circular projects in the agricultural sector; (ii) assessment and forecasting of the impact of factors on the investment profit of agricultural enterprises as a potential source of self-financing of innovation circular projects; (iii) management of identified factors from the standpoint of maximizing the formation of own cash flow as a potential source of self-financing of innovation circular projects.