acknowledged leader in rural and agricultural finance agricultural value chain financing: a strategy...

Acknowledged leader in rural and agricultural finance Agricultural Value Chain Financing:

A strategy towards replacing OR

complementing conventional financing

Prasun Kumar DasAsia-Pacifi c Rural & Agricultural Credit Association (APRACA)BANGKOK, THAILAND

International Conference on Innovative Agricultural FinancingState Bank of Pakistan and FAOIslamabad, April 28-29. 2015

Acknowledged leader in rural and agricultural finance

1. Retailers/Wholesalers2. Community enterprises3. AMCs4. Supermarkets5. Exporters

PREOCESS FOLLOWED:1. Search for MAIN ACTIVITIES in the Up/Middle/Downstream2. Search for main actors of each activity in AgVCF3. Search for appropriate VCF Products (Savings, Credit, Insurance)4. Search for factors of success and failure to come up with correction and prevention measures

1. Community Enterprises2. Agri Coops (AMCs)3. Logistics4. Processors5. Buyers

1. Input Producers2. Input sellers3. Farmers/Growers

Upstream

actors

Middle stream

actors

Downstream

actors

• Savings Product• SMART FARMER Credit• Crop Insurance • Production Credit• Machinery Credit• Consumption Credit

• Entrepreneur Credit (Legal Entity)• Logistic/Warehouse Credit• Credit for Postponement of Sale of Produce• Investment Credit

• Packing Stock Credit• Credit for Export Business• Credit for gathering + buying of

produce• Credit for improvement, maintenance of

quality, environment overseeingAIM:1. Increase productivity& develop efficiency of the actors throughout the agriculture value chain.2. Supply premium grade commodities to the market3. Satisfaction of consumers for product and service4. To strengthen its role as a public bank to facilitate sustainable rural finance 5. Targeted disbursement

Integrated AgVCF Framework : BAAC, Thailand


Palm Oil Value Chain Finance: BAAC, Thailand

Palm Oil plantation

102,710 acresYield =522,000

MT

Thasae Land Settlement Cooperative with 3,700 Coop Members

Appropriate Farm

Practices

Scientific Harvesting & Collecting

Production loan and input supply by

Cooperative

Farm Practices

Supervision by coop

Farmer/Coop

collection center

Coop crude

Palm Oil extraction facility

Coop crude

Palm Oil marketin

g

Waste water

treatment

Private Refining Factory

Coop biogas power (1.82

KW/hr)

Provincial Electricity Authority Financial Support to coop for

on-lending (working capital and investment)

Capacity building of coop International banking services

CoopBAAC

Profit from CPO Business: US$3.7 million

Produce price gain to members US$1.6 million

Organic manure returned : US$0.8 million

Substantial return from electricity generation

Job creation: 218 employees Welfare measures for members


Kalasag Farmer’s Producers’ Cooperative: ASKI, Philippines

Small Onion Producing

Farmers (Luzon Province)

Jollibee Foods

Corporation

ASKI (MFI)

NLDC&

CRS

1. Strong Commitment of the Stakeholders

2. Capacity building of small farmers

3. Lending ++ approach

4. Linking with Institutional Market

1. High Risk financing by ASKI

2. Lack of Infrastructural facilities

3. Quality of produces

4. Sustainability of the collaboration


Alcoy Coffee Project: PhilippinesCHMI Agro-Forest

Development Corporation

Farmer Groups

Smal Coffee

Farmers

ALCOY Coffee Coop

Importers

Domestic Coffee Traders

Domestic Consumers

Overseas Consumers

Flow of Funds

Flow of Tech Assistance

Flow of Products

Commercial Banks


BRAC, Bangladesh

Contract farming with marginal farmers to grow

potato seeds

Technical support and working capital

POTATO SEED DEALERS

Grading, Packaging and

selling

Payment made directly

to BRAC

Payment made to farmers after deducting the cost

COMMERCIAL BANKS

Working capital loans

Direct Repayments

Buy back the seed produced

Facilitating Role in Potato Value Chain : BRAC, Bangladesh


Tea Processing company

YES Bank Ltd

Small Tea Growers

Bank provides loans (4)

Bank conduct due diligence (3)

Supply green tea leaves (5)

Pay rest of the money (8)

Provide information on due diligence (2)

Repayment of loans taken by small farmers are made based on their authorization (7)

Conduct due diligence (1)

Submit authorization(6)

Milk CompanyYES Bank Ltd

Milk Aggregators

Bank opens SB account with debit mandate(4)

Bank conduct due diligence(3)

Supply milk (6)

Pay rest of the money (8)

Recommends to the bank regarding credit worthiness(2)

Milk company deposit the value of milk supplied and the commission to savings account of aggregators (7)

Identify aggregators(1)

Bank provide loans and transfer to SB account (5)

Bank deduct loan amount from savings account of

aggregators (8)

Innovative Models of AgVCF: YES Bank Ltd., India

Customized financial product for milk aggregatorsFinancing models to Small Tea Leaf Growers


Small Ruminant Value Chain Finance: ADBL, Nepal

Input suppliers Goat Producers Traders Butchers/ Processors

ADBL ADBL

ADBL

3-Party agreement

RETAIL MARKRTA. Individual ConsumerB. Institutional Buyers (Hotels, Restaurants, Offices, Hostels etc)

EXPORT MARKETA. Processed meatB. Meat Products

A. KidsB. FeedsC. Fodder


Rural finance is unwieldy as long as value chains are weak. With weak value chains, rural finance cannot be viable or sustainable.

A value chain is only as strong as its weakest link. Even if there are many players, the weakest link determines the strength of the whole chain.

Moreover, a value chain can be enhanced or damaged by external environment whether natural or man-made. The effects of the environment are created by the players of the value chain.

Financial institutions must have a healthy risk appetite. Risk avoidance will not bring about any improvement

Lessons From the Experiences


Thanks for your patience listening!

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Time for Q & A??

acknowledged leader in rural and agricultural finance agricultural value chain financing: a strategy...

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